Actuarial & Insurance

Basic

Simple Term Insurance Cost

Expected one-year cost of a term policy.

Formula

C = q_x \times B

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Variables

CExpected cost

q_xMortality rate

BBenefit amount

Example

q_x=0.002, B=$200,000: C = $400

Did You Know?

This is why term life is cheap when young — the yearly probability of a claim is tiny.

actuarial term insurance cost

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More in Actuarial & Insurance

Pure Premium

Expected claim cost per policy: frequency times severity.

Gross Premium

Premium that covers claims plus an expense/profit load.

Loss Ratio

Claims paid divided by premiums earned.

Combined Ratio

Total cost ratio: losses plus expenses vs premium.

Expected Value of a Claim

Probability-weighted average of possible claim amounts.

Present Value of an Annuity

Value today of a stream of future payments.