A Guide To Life Insurance - Premium Rates Increasing? ....

 

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Premium Rates Increasing?...

From this it might seem that non-participating (or non-profit) policyholders were getting a raw deal, but this is not the case.

The actuary's assumptions proved conservative on two accounts.

First, mortality declined.

It has done so fairly steadily for over a century, and, though we now know this has happened, actuaries cannot simply extrapolate and assume the trend will continue, since to do so would lead, among other things, to the conclusion that humans would all become close to immortal within a few hundred years.

Premium rates have therefore to be set on the basis of historical mortality statistics, so as mortality improves there is a tendency for each generation of policyholders to "subsidise" the next through the accumulation of surpluses due to greater longevity.

Secondly, the actuary may have regard to historical experience in assuming a future rate of interest to be earned on the funds.

So long as money values and interest rates are fairly stable, this presents no problem, but in the past 25 years, for example, the general trend in interest rates has been one way - up - so that interest-rate assumptions have in almost every case been proved very much lower than those actually achieved.

The funds have therefore earned far more than expected, and a larger surplus has accrued.


An Online Guide To Life Insurance - New for 2016 ....

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The effect of these factors emerges only over a long period, and is restricted to two types of policy: those that guarantee the payment of the sum assured at a specific date or on earlier death (endowment policies) and those that guarantee the payment of the sum assured on death whenever this occurs (whole-life policies).
Shorter-term protection policies (term assurances), where the sum assured is payable only on death within a specified period with no return to the policyholder on survival,........ see: click here for Premium Rates Continued


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