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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 with a sum assured of Rs 5,00,000 payable at the end of the policy year of death. The policy reserve held at the end of the year for a surviving policyholder is Rs 1,80,000. What is the death strain at risk for this policy in that year?

The death strain at risk is Rs 3,20,000. It equals the death benefit of Rs 5,00,000 minus the year-end reserve of Rs 1,80,000, because the reserve no longer has to be held once the policyholder dies, so only the shortfall is the strain.

  1. ARs 1,80,000
  2. BRs 3,00,000
  3. CRs 3,20,000Correct
  4. DRs 5,00,000
  5. Rs 6,80,000

Explanation

Death strain at risk is the sum assured payable on death less the reserve that is released when the policy ends, so 5,00,000 - 1,80,000 = 3,20,000. Adding the reserve (6,80,000) is the wrong sign. Using the sum assured alone ignores the released reserve.

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