O'Reilly logo

Fundamentals of Actuarial Mathematics, 3rd Edition by S. David Promislow

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

*13 Specialized topics

For the concluding chapter in Part I of this book, we cover a few specialized topics in insurance and annuities that are of current importance. We will not go into any of these topics in depth, but rather provide an introduction to some of the major features. The material here is not needed for any other chapters of the book.

13.1 Universal life

13.1.1 Description of the contract

Universal life is a type of contract that began in the 1970s, and now accounts for a substantial portion of life insurance sales. Prior to that time, the mainstay of life insurance was for the most part whole life or endowment contracts. The origin of the change could well have been the advice given by some financial advisors that people should buy term insurance instead of those products, for a much smaller premium, and then invest the difference elsewhere. Now our analysis in Section 6.4.2 shows that this is exactly what happens within the policy itself when one purchases whole life or endowment insurance. The excess premiums, not needed to provide insurance in a particular year, are invested in the savings portion. Of course, the purchaser of endowment or whole life insurance has less flexibility than the term buyer, both with regards to the relative amounts going into the insurance and savings portion, and to the types of investments and rates of return. Universal life plans were developed to allow this flexibility within a single contract. The main features involve variable ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required