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Effect of Mortality Assumptions on Endowment Insurance Valuation

Abstract

The study examines the effect of mortality assumptions on endowment insurance valuation, focusing on how assumptions about mortality rates and survival probabilities influence the actuarial value of endowment insurance contracts. Endowment insurance combines protection against death during a specified policy period with a maturity benefit payable if the policyholder survives to the end of the term. Accurate mortality assumptions are therefore important for estimating the expected timing and value of future benefit payments. The study will investigate the effect of different mortality assumptions on the valuation of endowment insurance policies. It will examine how variations in mortality rates and survival probabilities affect the present value of death benefits and maturity benefits. The study will also assess the extent to which changes in mortality assumptions influence the overall actuarial value of endowment insurance contracts. The analysis will focus on mortality rates, survival probabilities, policy duration, age at entry, death benefits, maturity benefits, discount rates, and present values. Actuarial life tables and mortality-based valuation techniques will be applied to estimate the expected value of future benefits under alternative mortality assumptions. Comparative analysis will be used to examine differences in policy values resulting from changes in mortality assumptions. A quantitative research approach will be adopted for the study. Relevant mortality and endowment insurance data will be obtained from appropriate secondary sources. Actuarial life table methods, survival probability calculations, present value techniques, and sensitivity analysis will be employed to determine the effect of alternative mortality assumptions on endowment insurance values. The study is expected to reveal that changes in mortality assumptions produce measurable differences in endowment insurance valuation. Higher mortality assumptions may increase the expected present value of death benefits during the policy term, while lower mortality assumptions may increase the likelihood of maturity benefits being paid at the end of the contract. The findings may also show that the effect of mortality assumptions varies according to policy duration, age at entry, benefit structure, and applicable interest rate assumptions. The findings are expected to provide useful information for life insurers, actuaries, underwriters, and insurance analysts in evaluating endowment insurance contracts. Accurate mortality assumptions may support more reliable benefit valuation, premium calculation, liability estimation, and financial planning. The study may also assist insurers in assessing the sensitivity of endowment policy values to changes in mortality experience. The study concludes that mortality assumptions are an important determinant of endowment insurance valuation because they influence the probability and timing of death and survival benefits. It is therefore recommended that insurance companies regularly review mortality experience and apply appropriate actuarial mortality assumptions when valuing endowment policies to support accurate pricing, adequate reserves, and effective management of future insurance liabilities.

Keywords: Mortality assumptions, endowment insurance, insurance valuation, mortality rates, survival probabilities, actuarial valuation, death benefits, maturity benefits, policy duration, age at entry, present value, actuarial life tables, insurance liabilities, premium calculation, life insurance.