Comparison of the determination of the net single premium of endowment life insurance using the continuous and discrete annuity approaches: a case study of select and ultimate tables

Abstract

This study compares the calculation of net single premium of endowment life insurance between discrete annuity and continuous annuity approaches using Select and Ultimate Table. Mortality data used is 2015 CSO Male Non-Smoker ANB (Age Nearest Birthday) which has gone through a pre-processing process, including the value of k?[x] for the entry age range of 20 to 50 years. Calculations are performed on four policy terms, namely 10, 15, 20, and 25 years, assuming a single interest rate i = 5% per year. The continuous approach uses the Uniform Distribution of Deaths (UDD) approximation. The results show that the average absolute difference between the two methods ranges from 0.000083 (n = 10) to 0.000559 (n = 25), while the average relative difference ranges from 0.0135% (n = 10) to 0.1804% (n = 25). The differences increase with increasing entry age and policy term, but all values ??are well below the 1% actuarial materiality threshold. This finding indicates that both approaches can be used interchangeably within the age and term ranges studied, with the caveat that generalizing the results beyond these parameters requires further study.