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Effect of Increasing Term Assurance Benefits on Premium Valuation

Abstract

The study examines the effect of increasing term assurance benefits on premium valuation, focusing on how a gradual increase in the insured benefit amount influences the actuarial value of premiums payable under life insurance contracts. Increasing term assurance provides death benefits that rise over the policy term, resulting in changing financial obligations for the insurer. The structure of these benefits is therefore an important consideration in determining the actuarial value of premiums and the overall cost of life insurance protection. The study will investigate how different increasing benefit structures affect premium valuation. It will assess how variations in the rate of benefit increase, policy duration, initial sum assured, and premium payment period influence the actuarial present value of expected death benefits and premiums. The study will also examine how mortality and interest rate assumptions affect premium values under increasing term assurance arrangements. The analysis will focus on increasing term assurance benefits, premium valuation, benefit growth rates, policy duration, sum assured, mortality rates, survival probabilities, interest rates, and actuarial present values. Actuarial valuation techniques will be applied to estimate the present value of future increasing death benefits and the corresponding premium requirements. Comparative and sensitivity analyses will be used to examine changes in premium values under alternative benefit growth structures. A quantitative research approach will be adopted for the study. Relevant mortality data and actuarial life table functions will be applied to calculate expected death benefits and premium values under different increasing benefit structures. Actuarial present value methods will be used to determine the financial value of future benefits and premiums, while sensitivity analysis will assess the effects of changes in benefit growth rates, policy terms, mortality assumptions, and interest rates on premium valuation. The study is expected to reveal that increasing term assurance benefits have a measurable effect on premium valuation. Higher rates of benefit increase may result in higher premium requirements because the expected value of future death benefits increases over the policy term. The magnitude of the effect is expected to depend on the rate of benefit growth, initial sum assured, policy duration, mortality experience, and interest rate assumptions. The findings are expected to provide useful information for actuaries and life insurance companies in designing increasing term assurance products and determining appropriate premium values. The study may support more accurate valuation of growing death benefits and improve the alignment between benefit structures and premium requirements. It may also help policyholders understand how increasing insurance benefits can influence the actuarial cost of life insurance protection. The study concludes that increasing term assurance benefit structures are important considerations in premium valuation. It is therefore recommended that insurers and actuaries apply appropriate actuarial valuation techniques and carefully assess benefit growth patterns, mortality assumptions, and interest rates when determining premium values for increasing term assurance contracts.

Keywords: Increasing term assurance, premium valuation, life insurance premiums, increasing benefits, benefit growth, death benefits, policy duration, sum assured, mortality rates, survival probabilities, actuarial present value, interest rates, actuarial valuation, life insurance pricing, actuarial premiums.