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IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Death strain at risk, expected and actual death strain, mortality profit

A life office issues a policy paying a sum assured of Rs 5,00,000 at the end of the policy year of death. The reserve held at the end of the year for a surviving policy is Rs 1,20,000. The probability of death in the year is 0.004. What is the expected death strain for the year for this policy?

The expected death strain is Rs 1,520. The death strain at risk is the sum assured less the reserve released, which is Rs 3,80,000. Multiplying by the death probability of 0.004 gives the expected strain for the year.

  1. ARs 1,520Correct
  2. BRs 2,000
  3. CRs 480
  4. DRs 2,480
  5. Rs 3,80,000

Explanation

Death strain at risk = sum assured minus the reserve released = 5,00,000 - 1,20,000 = 3,80,000. Expected death strain = 0.004 x 3,80,000 = 1,520. Rs 2,000 ignores the reserve released on death, and Rs 480 uses the reserve instead of the strain at risk.

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