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Effect of Survival Probabilities on Endowment Policy Values

Abstract

Endowment insurance is a life assurance product that provides financial benefits based on specified life events, commonly including payment on survival to the end of the policy term or payment on earlier death. Survival probabilities are therefore an important actuarial component in determining the expected timing and value of benefits under endowment policies. Accurate survival estimates are essential for calculating actuarial present values and establishing appropriate policy values. The study examines the effect of survival probabilities on endowment policy values. It will assess how variations in the probability of policyholders surviving to different ages and policy maturity dates influence the actuarial value of endowment benefits. The study will focus on survival probabilities, policy duration, age at entry, maturity benefits, death benefits, and interest rate assumptions. The study will further analyse endowment policy values under alternative survival assumptions. Life table data will be used to estimate survival probabilities at different ages, while actuarial present value techniques will be applied to determine the expected value of maturity and death benefits. Sensitivity analysis will also be conducted to examine how changes in survival probabilities affect policy values across different policy durations and ages at entry. A quantitative research approach will be adopted for the study. Relevant mortality and survival data will be obtained from appropriate actuarial and demographic sources and applied to selected endowment policy valuation models. Descriptive statistics, life table techniques, actuarial present value calculations, comparative analysis, and sensitivity analysis will be used to evaluate the effect of survival probabilities on endowment policy values. The study is expected to reveal that variations in survival probabilities can significantly influence endowment policy values. Higher survival probabilities may increase the likelihood of maturity benefits being paid, while lower survival probabilities may increase the relative importance of death benefits occurring before maturity. The findings may also show that the effect of survival assumptions varies according to policy duration, age at entry, and the timing of contractual benefits. The study will provide useful information to actuaries, life insurance companies, pricing analysts, and financial planners involved in endowment policy valuation. The findings may support improved selection of survival assumptions, enhance the accuracy of policy value calculations, and assist insurers in developing appropriate premium and reserve estimates. The study may also contribute to better understanding of mortality and survival considerations in long-term endowment contracts. The study concludes that survival probabilities are an important determinant of endowment policy values because they influence the likelihood and timing of future maturity and death benefits. It is therefore recommended that insurers regularly review survival assumptions using relevant mortality experience and apply appropriate actuarial valuation techniques when determining endowment policy values. Accurate survival estimates may improve valuation reliability, premium determination, reserve estimation, and the financial management of endowment insurance products.

Keywords: Survival probabilities, endowment policy values, endowment insurance, actuarial valuation, life assurance, mortality rates, survival rates, maturity benefits, death benefits, actuarial present value, life tables, policy duration, age at entry, premium valuation, insurance reserves.