
Lecture 12
Life insurance and net premiums
In this lecture we begin a new topic: life insurance policies and annu-
ities. We will derive expressions for so called net premiums or pure
premiums. All of our equations will be based on the distribution func-
tion F of the duration of life; therefore, in practical situations, the cal-
culation of premiums considered below will use the estimates of F that
we have been studying in previous lectures.
Let us begin with insurance.
Whole life insurance. In the simplest possible life insurance con-
tract an individual A of age x purchases a life insurance policy, which
guarantees that the beneficiaries of the policy ...