4. Life Contingencies

Net Premiums — Quiz

Test your understanding of net premiums with 5 practice questions.

Practice Questions

Question 1

For a whole life insurance policy with a death benefit of $B$ payable at the end of the year of death, what is the formula for the net single premium at age $x$?

Question 2

A 25-year-old purchases a 5-year endowment insurance policy with a death benefit of $50,000$. The death benefit is payable at the end of the year of death, and the endowment benefit is payable at the end of 5 years if the insured survives. The annual effective interest rate is $4\%$ and the following survival probabilities are given: $q_{25} = 0.001$, $q_{26} = 0.002$, $q_{27} = 0.003$, $q_{28} = 0.004$, $q_{29} = 0.005$. What is the net single premium for the pure endowment component of this policy?

Question 3

What is the primary difference between a net single premium and a net annual premium for a life insurance policy?

Question 4

If $A_x$ represents the net single premium for a whole life insurance of $1$ on a life aged $x$, and $a_x$ represents the net single premium for a whole life annuity due of $1$ per year on a life aged $x$, which of the following relationships is correct?

Question 5

A 60-year-old purchases a 10-year term life annuity due of $1,000$ per year. The annual effective interest rate is $3\%$. The probability of survival for $k$ years is denoted by $_{k}p_{60}$. What is the formula for the net single premium for this annuity?