when calculating the net payment index, would a death benefit be incorporated as is done for the surrender cost index? i cannot find reference to this on pages 413-415 which cover this topic (vol 2).
No. How would you quantify mortality credit if you mean on this? There are pretty straightforward formulas for both methods. The only tricky part is switching from annuity due mode to ordinary annuity and back.
yes i agree they are very straightforward formulae for the calculations. the annuity-due vs ordinary-annuity switching is more likely to throw us under exam conditions. i figured out my issue in the mean time - face value seems to be a synonym for death benefit.
regarding mortality credits - aren’t these just important for the source of payouts from annuities?
Hi Beirut
Sorry about misunderstanding. You meant on insurance claim payout in the event of death of insured? Face value is claim policy amount which would be payout at the occurrence of insured case. Mortality credits as potential future benefits, is the specific feature which make the annuities (Life insurance) competitive related to some other investment and saving solutions as investing in mutual funds. I thought you asked if those credits are variable in formulae of NSI and NPCI.
the death benefit is included in the last step of the calculation, for both surrender cost index and net payment cost index.
thanks flashback for the clarification/definitions
No problem. I’m glad I could help.