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Calculate the life insurance gross premium

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Reference no: EM133174607

Calculate the life insurance gross premium for an insurance company, XYZ Life, under the following assumptions. Please round your answer to the nearest cent.

  • 1-year term insurance for a 30-year-old male
  • The death benefit is $1,000
  • The probability of death within one year given a male is 30 years old (q30) is 0.018
  • The interest rate is 0.02
  • All deaths occur uniformly, hence for simplicity, price the product assuming all deaths happen at the middle of the year
  • XYZ Life is looking for a 30% loading based on the pure premium (i.e. PV of expected loss)

(Hint: When loading λP, expressed as a percentage, is based on pure premium, Gross premium = Pure premium × [1 + λP])

Reference no: EM133174607

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