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Effect of Policy Term on Endowment Insurance Values

Abstract

The study examines the effect of policy term on endowment insurance values. Endowment insurance combines life insurance protection with a maturity benefit, making the duration of the policy an important consideration in actuarial valuation. The policy term determines the period over which premiums are paid, benefits are expected, and investment or discounting assumptions apply. Changes in policy duration can therefore influence the actuarial present value of benefits, premiums, and the overall value of an endowment insurance contract. The study will investigate how variations in policy term affect the actuarial values of endowment insurance policies. It will compare endowment insurance values across different policy durations while considering the same or appropriately adjusted benefit amounts, premium structures, mortality assumptions, and interest rate assumptions. The study will examine how shorter and longer policy terms influence maturity values, death benefits, premium requirements, and actuarial liabilities. The analysis will focus on policy duration, mortality and survival probabilities, benefit amounts, premium payments, interest rate assumptions, and discount factors. Actuarial valuation techniques will be used to estimate the present value of future benefits and premiums associated with endowment contracts. The study will compare the resulting actuarial values under alternative policy terms to determine the extent to which changes in duration affect the financial value of the policies. A quantitative research approach will be adopted for the study. Hypothetical or secondary life insurance data and relevant actuarial life tables will be used to construct endowment policy scenarios with varying terms. Actuarial present value calculations, mortality and survival probabilities, discounting techniques, and comparative analysis will be employed to determine the values associated with different policy durations. The results will be evaluated to identify differences in actuarial values across the selected policy terms. The study is expected to reveal that policy term has a measurable effect on endowment insurance values. Longer policy terms are expected to alter the timing and probability of maturity and death benefits and consequently affect their actuarial present values. The differences in valuation are also expected to vary according to mortality assumptions, interest rates, premium payment arrangements, and the level of benefits payable at maturity or death. The study will provide useful information for actuaries, life insurance companies, regulators, and researchers by demonstrating the valuation implications of different endowment policy durations. The findings may assist insurers in designing suitable policy terms, evaluating future liabilities, determining premium requirements, and assessing the financial implications of alternative endowment products. The study may also enhance understanding of the relationship between policy duration and actuarial valuation among students and practitioners of actuarial science. The study concludes that policy term is an important determinant of endowment insurance values because changes in the duration of coverage influence the timing and present value of future benefits and premiums. It is therefore recommended that insurers carefully incorporate policy duration into actuarial valuation models and review the effect of alternative terms on premium and reserve requirements. Appropriate actuarial assumptions and valuation techniques should be applied to ensure accurate assessment of endowment insurance values.

Keywords: Policy term, endowment insurance, insurance values, actuarial valuation, actuarial present value, policy duration, maturity benefits, death benefits, mortality probabilities, survival probabilities, premium valuation, actuarial reserves, discount factors, interest rate assumptions, life insurance valuation.