According the 2001 CSO mortality table,the yearly probability of dying for a 40 year-old man is .00165.The present value of $1 one year from today,assuming a 5.5 percent interest rate,is .9479.What is the net single premium per $1,000 for a one-year term insurance policy sold to a man at age 40 assuming a 5.5 percent interest rate? Assume the premium is paid at the start of the year and the death benefit is paid at the end of the year.

Question

Quizplus · Accepted Answer

The net single premium is calculated as the present value of the death benefit multiplied by the probability of death. Given a probability of death of .00165 and a present value factor of .9479, the net single premium per $1,000 of coverage is .00165 * $1,000 * .9479 = $1.564. Rounding to the nearest cent gives $1.56.

According the 2001 CSO Mortality Table,the Yearly Probability of Dying