1

Chapter 5 – (Theoretical Part)

Multiple Choices
1. The portion of insurance contract that contains summary of the major promises of insurer
is called
a. The declarations c. The insuring agreement
b. The consideration d. The conditions
e. The exclusions
2. The portion of a property and liability insurance contract that contains information about
the property or life to be insured is called the
a. The declarations c. The insuring agreement
b. The consideration d. The conditions
e. The exclusions
3. Exclusions are used in insurance contracts for all of the following reasons , EXCEPT:
a. To provide a physical description of the property to be insured
b. To prevent moral hazard from occurring
c. To eliminate the duplication of coverage
d. To avoid coverage of insurable peril
4. One other Insurance provision assesses liability of an insurer in relation to the proportion
that the provisions Percentage participation
a. pro rata liability p c. Contribution by equal shares
b. Percentage participation d. Primary and excess.
m
5. What information is contained in the insuring agreement of an insurance policy?
ca

a. A description of the property or life to be insured

b. A summary of the major promises of the insurer
s
es

c. A summary of the obligations of the insured

d. A list of the property, losses, and perils that are excluded
Zn

6. The exclusion of flood in a homeowners policy is an example of an:

Bi

a. Excluded activity c. Excluded condition

b. Excluded property d. Excluded peril
7. Exclusion are used in insurance policies for all of the following reasons EXCEPT:
a. To reduce moral hazard
b. To waive policy conditions
c. To eliminate coverage for uninsurable perils
d. To eliminate coverage not needed by typical insured
8. The policy provision requiring the filing of proof of loss with the insurer is an example of
a(n):
a. Declaration c. Condition
b. Insuring agreement d. Miscellaneous provision
9. Which of the following statements about "all-risks" coverage is (are) true?
I. All losses are covered except those losses specifically excluded.
II. The burden of proof is on the insured to prove that a loss is covered.
a. I only c. II only
b. Both I & II d. Neither I nor II
10. Assume that a car has an actual cash value of 100000 and its owner had insured it for 80000,
then the insurance is
a. adequate insurance c. insufficient insurance
b. over insurance d. none of the above

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11. Insurance policies contain exclusions because:

a. Some perils are uninsurable.
b. Some coverage provided by other contracts.
c. Presence of extraordinary hazards.
d. Difficulty in determining and measuring the amount of loss.
e. All of the above.
12. ....are provisions inserted in the policy that qualify or place limitations on the insurers that
promise to perform.
a) Insuring Agreement
b) Declarations
c) Exclusions
d) Conditions
(11) The part of an insurance contract that can be written on a named-perils or all-risk basis is
the:
A. insuring agreement
B. conditions
C. exclusions
D. declarations
(12) A written provision that adds to, deletes from, or in some other way alters an insurance
contract is called a(n): p
A. deductible
m
B. endorsement or rider
ca

C. binder
D. coinsurance provision
s
es

(13) Which statement is true about the conditions section of an insurance policy?
I. It contains a description of the property or life that is insured.
Zn

II. It explains what types of perils, losses, and property are not covered under the contract.
Bi

A. I only
B. II only
C. both I and II
D. neither I nor II
(14) Bert purchased fire insurance on his dwelling. Shortly thereafter, he began to
manufacture fireworks in the basement, near the furnace. When a fire severely damaged his
home, the insurer denied liability because the policy stated, “we will not be liable for any
losses directly attributable to a material increase in hazard.” This clause is an example of a(n):
A. condition
B. declaration
C. definition
D. insuring agreement
(15) Exclusions are used in insurance contracts for all of the following reasons EXCEPT:
A. to provide a physical description of the property to be insured
B. to prevent moral hazard from occurring
C. to eliminate the duplication of coverage
D. to avoid coverage of uninsurable perils

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(16) One other-insurance provision assesses liability of an insurer in relation to the proportion
that the company’s insurance bears to the total amount of insurance in force. This other-
insurance provision is:
A. pro rata liability B. contribution by equal shares
C. percentage participation D. primary and excess
(17) Which statement is true with regard to endorsements?
I. If there is a conflict between the endorsement and the underlying contract, the
endorsement usually takes precedence.
II. An endorsement can be used to add coverage for additional perils.
A. I only B. II only
C. both I and II D. neither I nor II
(18) The portion of a property and liability insurance contract that contains information about
the property or activity to be insured is called the:
A. declarations.
B. conditions.
C. exclusions.
D. insuring agreement
(19) What information is contained in the insuring agreement of an insurance policy?
A. summary of the obligations of the insured
B. description of the property or life to be insured p
C. summary of the major promises of the insurer
m
D. list of the property, losses, and perils that are excluded
ca

(20) Which of the following statements about "all risks" coverage is (are) true?
I. All losses are covered except those losses specifically excluded.
s
es

II. The burden of proof is on the insured to prove that a loss is covered
A. I only
Zn

B. II only
Bi

C. both I and II
D. neither I nor II
(21) The exclusion of flood in a Homeowners policy is an example of an:
A. excluded property.
B. excluded peril.
C. excluded loss.
D. excluded condition
(22) Exclusions are used in insurance policies for all of the following reasons EXCEPT:
A. to waive policy conditions.
B. to eliminate coverage for uninsurable perils.
C. to reduce moral hazard.
D. to eliminate coverage not needed by typical insureds.
(23) The policy provision requiring the filing of proof of loss with the insurer is an example of
a(n):
A. miscellaneous provision.
B. insuring agreement.
C. declaration.
D. conditions

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TRUE OR FALSE
1. Information in declarations section is used for underwriting and rating purpose.
2. A declaration is the heart of insurance contract.
3. Under named-peril policy, if the peril is listed, it is not covered.
4. Only perils listed in the policy are covered, this is an example of all risks policy.
5. We have 3 exclusions under the exclusion part of policy.
6. Insurance agreements imposes duties on the insured if wishes to collect for a loss.
7. No obligations imposed upon insured after loss.
8. Subrogation & requirements should be included in the miscellaneous provisions.
9. Rider in the property insurance, adds to, deletes, or modifies the provisions in the
original contract.
10. Pro-rata supports the principle of indemnity.
11. Coinsurance clause and pro-rata clause can be applied for life insurance contract.
12. Coinsurance can be applied only if we have under insurance and total loss conditions.
13. The pro rata liability clause applies when more than one policy covers the same insurable
interest in the property.
14. Contribution means that the insurer gives the insured the chance to participate in its
profit.

p
m
ca

Solution
No Ans. No Ans. No Ans. No Ans.
s

T F 3 F 4 F
es

1 2 insurance covered named peril

Zn

agreement
F
Bi

5 T 6 7 F 8 T
Conditions
9 F 10 T 11 F 12 F
rider in life & not applied under
endorsement in in life insurance &
property partial loss
13 T 14 F
More than one
insurer for one
risk only

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 5

Chapter 5 – (Practical Part) - Indemnity, Coinsurance and Pro Rata

SUMMARY

There are 3 conditions to apply coinsurance clause as:

1. The coinsurance clause is present in the policy.
2. The loss is partial.
3. Insufficient insurance exists (Carried Amount < Required Amount).

If these conditions apply, the indemnity will be:

𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐜𝐚𝐫𝐫𝐢𝐞𝐝
𝐀𝐦𝐨𝐮𝐧𝐭 𝐩𝐚𝐢𝐝 = 𝐏𝐚𝐫𝐭𝐢𝐚𝐥 𝐋𝐨𝐬𝐬 ×
𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐝
𝐎𝐭𝐡𝐞𝐫𝐰𝐢𝐬𝐞, 𝐰𝐞 𝐰𝐢𝐥𝐥 𝐚𝐩𝐩𝐥𝐲 𝐢𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 𝐩𝐫𝐢𝐧𝐜𝐢𝐩𝐥𝐞.

1. The Carried Amount of insurance is the face amount determined in the policy and it
represents the maximum financial responsibility of the insurer in both partial and total loss.
This amount paid by the insurer after loss.

2. The Required Amount of insurance is the minimum amount of coverage is to be carried by

the insured or it is the actual cash value (ACV).
p
3. The Actual Cash Value (ACV) is the same in value as the value at risk (or the value exposed
m
to risk) or the value of the property at the time of loss not at the day of buying the insurance.
ca

Explanation of principle of indemnity:

s
es

It means that the insured does not collect more than the actual value of loss.
The applicability of this principle depends on the type of the insurance as:
Zn

1) In case of property Insurance:

Bi

Actual loss

Indemnity Face (Carried) amount of insurance Whatever Less

Cash actual value

In case of life insurance:

In life insurance, the principle of indemnity is not applied since the loss is always total. Life
insurance contract is a valued policy.

Indemnity Applied when: Coinsurance Applied when:

Carried Amount = Required Amount Carried Amount < Required Amount

(Sufficient insurance) (Under or Insufficient insurance)
Or +
Carried amount > required Amount Loss Is Partial
(Over insurance)
Or 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭
Insurer pays = loss ×
𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭
Loss is total (Loss = ACV)
Insured pays = loss - Amount paid

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1) Complete the following table if a coinsurance is present in all cases:

Case (A) (B)
Carried amount 100,000 100,000
ACV 100,000 100,000
Required amount
Actual loss 20,000 Total
Insurance condition
Insurer pays
Insured pays
Solution
Required amount = ACV
Case (A) (B)
Carried amount 100,000 100,000
ACV 100,000 100,000
Required amount 100,000 100,000
Actual loss 20,000 Total
Insurance condition Sufficient p Sufficient
Insurer pays 20,000 (Apply indemnity) 100,000 (Apply indemnity)
m
(No coinsurance) (No coinsurance)
ca

Insured pays 0 0
s
es

2) Complete the following table if a coinsurance is present in all cases:

Case (A) (B)
Zn

Carried amount 120,000 120,000

Bi

ACV 100,000 100,000

Required amount
Actual loss 20,000 Total
Insurance condition
Insurer pays
Insured pays
Solution
Required amount = ACV
Case (A) (B)
Carried amount 120,000 120,000
ACV 100,000 100,000
Required amount 100,000 100,000
Actual loss 20,000 Total
Insurance condition Over insurance Over insurance
Insurer pays 20,000 100,000
(Apply indemnity) (Apply indemnity)
(No coinsurance) (No coinsurance)
Insured pays 0 0

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3) Complete the following table if a coinsurance is present in all cases:

Case (A) (B)
Carried amount 70,000 70,000
ACV 100,000 100,000
Required amount
Actual loss 20,000 Total
Insurance condition
Insurer pays
Insured pays
Solution
Required amount = ACV
Case (A) (B)
Carried amount 70,000 70,000
ACV 100,000 100,000
Required amount 100,000 100,000
Actual loss 20,000 Total
Insurance condition Under insurance Under insurance
𝟕𝟎,𝟎𝟎𝟎
Insurer pays 𝟐𝟎, 𝟎𝟎𝟎 × = 14,000 70,000
𝟏𝟎𝟎,𝟎𝟎𝟎
(Apply indemnity)
(Coinsurance) p (No coinsurance)
Insured pays 20,000 – 14,000 = 6,000 100,000 – 70,000 = 30,000
m
4) Assume an insured owns an apartment house and he wishes to insure it for 50,000.Given
ca

the following table:

s

Insurer Carried Amount

es

A 15,000
Zn

B 25,000
C 10,000
Bi

If ACV = 50,000 and the coinsurance clause is present and loss occurred is 10,000. Determine
how much each company will pay.
Solution
Required amount = ACV = 50,000
Carried amount = 15,000 + 25,000 + 10,000 = 50,000
Carried amount = Required amount ………..This is sufficient insurance

Since it is sufficient insurance, we will apply principle of indemnity as follows:

Indemnity = less of (Loss, Carried, Required) = less of (10000, 50000 , 50000) = 10,000

𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫

𝐀𝐦𝐨𝐮𝐧𝐭 𝐏𝐚𝐢𝐝 𝐨𝐟 𝐢𝐧𝐬𝐮𝐫𝐞𝐫 = × 𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) 𝟏𝟓,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭𝐏𝐚𝐢𝐝𝐨𝐟𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) = = × 𝟏𝟎, 𝟎𝟎𝟎 = 𝟑, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟓𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝𝐀𝐦𝐨𝐮𝐧𝐭𝐨𝐟𝐭𝐡𝐞𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) 𝟐𝟓,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭𝐏𝐚𝐢𝐝𝐨𝐟𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) = = × 𝟏𝟎, 𝟎𝟎𝟎 = 𝟓, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟓𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝𝐀𝐦𝐨𝐮𝐧𝐭𝐨𝐟𝐭𝐡𝐞𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) 𝟏𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭𝐏𝐚𝐢𝐝𝐨𝐟𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐂) = = × 𝟏𝟎, 𝟎𝟎𝟎 = 𝟐, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟓𝟎,𝟎𝟎𝟎

Insured payment = 0.

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5) Assume an insured owns an apartment house and he wishes to insure it for 700,000. Given
the following table:
Insurer Carried Amount
A 250,000
B 250,000
C 200,000
If ACV = 800,000 loss occurred is 140,000. Determine how much each company will pay.
Solution
Required amount = ACV = 800,000
Carried amount = 250,000 + 250,000 + 200,000 = 700,000.
Carried amount < Required amount, this is under insurance (insufficient).
Since it is under insurance and loss is partial, we will apply “Coinsurance clause” as follows:
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎, 𝟎𝟎𝟎
𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 = 𝐥𝐨𝐬𝐬 × = 𝟏𝟒𝟎, 𝟎𝟎𝟎 × = 𝟏𝟐𝟐, 𝟓𝟎𝟎
𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟖𝟎𝟎, 𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) 𝟐𝟓𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭 𝐏𝐚𝐢𝐝 𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) = = × 𝟏𝟐𝟐, 𝟓𝟎𝟎 = 𝟒𝟑, 𝟕𝟓𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝𝐀𝐦𝐨𝐮𝐧𝐭𝐨𝐟𝐭𝐡𝐞𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) 𝟐𝟓𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭𝐏𝐚𝐢𝐝𝐨𝐟𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) = = × 𝟏𝟐𝟐, 𝟓𝟎𝟎 = 𝟒𝟑, 𝟕𝟓𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐂) 𝟐𝟎𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭 𝐏𝐚𝐢𝐝 𝐨𝐟 𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐂) = = × 𝟏𝟐𝟐, 𝟓𝟎𝟎 = 𝟑𝟓, 𝟎𝟎𝟎
p
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎
m
Insured payment = 140,000 – 122,500 = 7,500
ca
s

5) Assume an insured owns an apartment house and he wishes to insure it for 700,000.
es

Given the following table:

Zn

Insurer Carried Amount

A 250,000
Bi

B 250,000
C 200,000
If ACV = 500,000 loss occurred is 140,000. Determine how much each company will pay.
Solution
Required amount = ACV = 500,000
Carried amount = 250,000 + 250,000 + 200,000 = 700,000.
Carried amount > Required amount, this is over insurance.
Since it is over insurance and loss is partial, we will apply principle of indemnity as follows:
Indemnity = less of (Loss, Carried, Required) = less of (140000, 700000, 500000) = 140,000

𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 = 𝟏𝟒𝟎, 𝟎𝟎𝟎

𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) 𝟐𝟓𝟎,𝟎𝟎𝟎

𝐀𝐦𝐨𝐮𝐧𝐭 𝐏𝐚𝐢𝐝 𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐀) = = × 𝟏𝟒𝟎, 𝟎𝟎𝟎 = 𝟓𝟎, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝𝐀𝐦𝐨𝐮𝐧𝐭𝐨𝐟𝐭𝐡𝐞𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) 𝟐𝟓𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭𝐏𝐚𝐢𝐝𝐨𝐟𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐁) = = × 𝟏𝟒𝟎, 𝟎𝟎𝟎 = 𝟓𝟎, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐈𝐧𝐬𝐮𝐫𝐞𝐫(𝐂) 𝟐𝟎𝟎,𝟎𝟎𝟎
𝐀𝐦𝐨𝐮𝐧𝐭 𝐏𝐚𝐢𝐝 𝐨𝐟 𝐢𝐧𝐬𝐮𝐫𝐞𝐫(𝐂) = = × 𝟏𝟒𝟎, 𝟎𝟎𝟎 = 𝟒𝟎, 𝟎𝟎𝟎
𝐓𝐨𝐭𝐚𝐥 𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟕𝟎𝟎,𝟎𝟎𝟎

Insured payment = 0.

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❖ Contribution by Equal Shares ‫!!!!!!! تتذاكر من ورق المراجعة‬

If the contribution of equal shares is present in the policy, we can apply the following steps:
1- Apply indemnity principle or coinsurance clause (according to the condition of
insurance).
2- Distribute the first equal share as:
 lowest Face Amount or
 Indemnity divided by number of insurers whatever less.
3- Repeat step (2) if any Indemnity is not paid and we still have Face Amount.
Example (1):
Insurer Face Amount
A 100,000
B 200,00
C 300,00
If ACV = 600,000 and coinsurance clause and contribution by equal shares are present and loss
occurred is 150,000. Determine the contribution by equal shares.
Solution:
Required amount = ACV = 600,000 p
Face amount = 100,000 + 200,000 + 300,000 = 600,000
m
Face amount = Required amount ………..This is sufficient insurance
ca

Since it is sufficient insurance, we will apply principle of indemnity as follows:

s
es

Indemnity = less of (Loss, Carried, Required) = less of (150000, 600000 , 600000) = 150,000
Zn

Distribute the first equal share as:

Bi

 lowest Face Amount or

 Indemnity divided by number of insurers whatever less.
Lowest Face Amount of company A = 100,000
Indemnity / No. of insurers = 150,000 / 3 = 50,000 Whatever less = 50,000
First equal share = 50,000

Here, loss is covered by the 3 companies after distributing the first equal shares.

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Example (2):
Insurer Face Amount
A 50,000
B 50,000
c 150,000
If ACV = 200,000 and coinsurance clause and contribution by equal shares are present and loss
occurred is 200,000. Determine contribution by equal shares.
Solution:
Required amount = ACV = 200,000
Face amount = 50,000 + 50,000 + 150,000 = 250,000
Face amount > Required amount ………..This is Over sufficient insurance

Since it is over sufficient insurance, we will apply principle of indemnity as follows:

Indemnity = less of (Loss, Carried, Required) = less of (200000, 250000 , 200000) = 200,000

Distribute the first equal share as:

 lowest Face Amount or
 Indemnity divided by number of insurers whatever less.
Lowest Face Amount (A or B) = 50,000
p
m
Indemnity / No. of insurers = 200,000 / 3 = 66,667 Whatever less
ca

First equal share = 50,000

s
es

Company (A) 50,000 (Finish its face amount)

Zn

Company (B) 50,000 (Finish its face amount)

Company (C) 50,000 (Still have 100,000 in face amount)
Bi

Here, we distributed 150,000 of loss but we want to distribute the remaining loss (200,000 –
150,000 = 50,000)

If any loss is not paid and we still have Face Amount.

Lowest remaining Face Amount of company C = 100,000
Remaining of Indemnity / Remaining No. of insurers = 50,000 / 1 = 50,000 Whatever less
Second equal share = 50,000 paid by insurer (C)

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Example (3):
Insurer Face Amount
A 100,000
B 200,00
c 300,00
If ACV = 800,000 and coinsurance clause and contribution by equal shares are present and loss
occurred is 500,000. Determine contribution by equal shares.
Solution:
Required amount = ACV = 800,000
Carried amount = 100,000 + 200,000 + 300,000 = 500,000.
Carried amount < Required amount, this is under insurance (insufficient).
Since it is under insurance and loss is partial, we will apply “Coinsurance clause” as follows:
𝐂𝐚𝐫𝐫𝐢𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟔𝟎𝟎, 𝟎𝟎𝟎
𝐈𝐧𝐝𝐞𝐦𝐧𝐢𝐭𝐲 = 𝐥𝐨𝐬𝐬 × = 𝟓𝟎𝟎, 𝟎𝟎𝟎 × = 𝟑𝟕𝟓, 𝟓𝟎𝟎
𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐀𝐦𝐨𝐮𝐧𝐭 𝟖𝟎𝟎, 𝟎𝟎𝟎
Distribute the first equal share as:
 lowest Face Amount or
 Indemnity divided by number of insurers whatever less.
p
m
Lowest Face Amount Of company A = 100,000
ca

Indemnity / No. of insurers = 375,000 / 3 = 125,000 Whatever less

First equal share = 100,000
s
es

Company (A) 100,000 (Finish its face amount)

Zn

Company (B) 100,000 (Still have 100,000 in face amount)

Bi

Company (C) 100,000 (Still have 200,000 in face amount)

Here, we distributed 300,000 of Indemnity but we want to distribute the remaining of
Indemnity (375,000 – 300,000 = 75,000)

If any loss is not paid and we still have Face Amount.

Lowest remaining Face Amount of company B = 100,000
Remaining Indemnity / Remaining No. of insurers = 75,000 / 2 = 37,500 Whatever less
Second equal share = 37,500 paid by each of insurer (B) and (C)

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Example (4):
Insurer Face Amount
A 50,000
B 200,00
c 300,00
If ACV = 240,000 and coinsurance clause and contribution by equal shares are present and loss
occurred is 200,000. Determine contribution by equal shares.
Solution:
Required amount = ACV = 240,000
Carried amount = 100,000 + 200,000 + 300,000 = 550,000.
Carried amount > Required amount, this is under insurance (Over sufficient).
Since it is over sufficient insurance, we will apply principle of indemnity as follows:
Indemnity = less of (Loss, Carried, Required) = less of (200000, 240000 , 200000) = 200,000
Distribute the first equal share as:
 lowest Face Amount or
 Indemnity divided by number of insurers whatever less.

Lowest Face Amount Of company A = 50,000 p

Indemnity / No. of insurers = 200,000 / 3 = 66,667 Whatever less
m
First equal share = 50,000
ca
s

Company (A) 50,000 (Finish its face amount)

es

Company (B) 50,000 (Still have 150,000 in face amount)

Zn

Company (C) 50,000 (Still have 250,000 in face amount)

Here, we distributed 150,000 of Indemnity but we want to distribute the remaining of
Bi

Indemnity (200,000 – 150,000 = 50,000)

If any loss is not paid and we still have Face Amount.

Lowest remaining Face Amount of company B = 150,000
Remaining Indemnity / Remaining No. of insurers = 50,000 / 2 = 25,000 Whatever less
Second equal share = 25,000 paid by each of insurer (B) and (C).

Insurer Face amount Contribution by Total payment

equal shares
A 50,000 50,000 50,000
B 200,000 50,000 + 25,000 75,000
C 300,000 50,000 + 25,000 75,000
Insurer payment 200,000
Insured payment 0

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Chapter 6 - Mortality Tables

Mortality table: is a table used to calculate the probability of life and death.
X = Certain age (X = 1, 2 , 3 , ………….99)
Radix: The first number of survivors in the table (the given table)
Omega: The last age of the table (the given table)
LX = Number of survivors (persons alive) at the beginning of age X.
dX = Number of deaths between age (x) and age (x+1)
qX = Probability that an individual aged (x) will die within one year.
PX = Probability that an individual aged (x) will live one year.
Term life probability (nPX) Probability that a person at age (X) will survive to reach age (X+n).
Term Death Probability (nqX) Probability that a person at age (X) will die before reaching age
(X+n) or within n years.
Deferred Death by m and term by n (m/nqX)
Probability that a person at age (X) will live to attain age (X+m) and die between age (X+m)
and age (X+m+n).
Rules
p
m
Rule Symbol First Equation Second Equation Third Equation
ca

No of Deaths
s

dX 𝐝𝐱 = 𝐋𝐗 − 𝐋𝐗+𝟏 𝐝 𝐱 = 𝐋𝐗 ∗ 𝐪 𝐱 -
es
Zn

𝐋𝐗 −𝐋𝐗+𝟏 𝐝𝐗
qx 𝟏 − 𝐩𝐱
Bi

𝐋𝐗 𝐋𝐗

𝐋𝐗 −𝐋𝐗+𝐧 𝐝𝐱 +𝐝𝐱+𝟏 +...+𝐝𝐱+𝐧−𝟏

n
qx 𝐋𝐗 𝐋𝐗
𝟏 − 𝐧𝐪 𝐱
Probability of
Death
m/ 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝟏 𝐝𝐗+𝐦
qx 𝐋𝐗 𝐋𝐗
-

m/n 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝐧 𝐝𝐗+𝐦 +𝐝𝐗+𝐦+𝟏+⋯....+𝐝𝐗+𝐦+𝐧−𝟏

qx 𝐋𝐗 𝐋𝐗
-

𝐋𝐗+𝟏
px 𝐋𝐗
𝟏 − 𝐪𝐱 -
Probability of Life
𝐋𝐗+𝐧
n
Px 𝐋𝐗
𝟏 − 𝐧𝐪 𝐱 -

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1) The probability that a person of exact age x will survive to attain exact age x+1 and usually
denoted by
a. Px b. qx
b. Lx+1 d. Dx
2) The symbol which means the probability that a person aged 61 will die before reaching age 64 is:
a. p64 b. 4p64
b. 3q61 d. 3/q61
3) Lx is
a. The number of deaths that occur at each age-that is between the attainment of the
indicated age and the attainment of the next succeeding age
b. The number of survivors at each age
c. The age x
d. The rate of mortality at age x
4) Use the Following Mortality Table to solve the following questions:
X LX dx qx PX
25 50,000 1000 0.0200 0.9800
26 49,000 2450 0.0500 0.9500
27 46,550 4655 0.1000 0.9000
28 41,895 5027
p 0.1200 0.8800
m
29 36,868 7374 0.2000 0.8000
ca

30 29,494 8258 0.2200 0.7200

s

(1) Probability that a person at age 27 lives to attain 29

es

(a) 0.792008 (b) 0.772008 (c) 0.752008 (d) 0.732008

Zn

𝐋𝐗+𝐧 𝐋𝟐𝟗 𝟑𝟔,𝟖𝟔𝟖

𝐧𝐩𝐱 = ∴ 𝟐𝐏𝟐𝟕 = = = 𝟎. 𝟕𝟗𝟐𝟎𝟎𝟖 (𝐚)
Bi

𝐋𝐗 𝐋𝟐𝟕 𝟒𝟔,𝟓𝟓𝟎

(2) Probability that a person at age 25 dies between 29 and 30

(a) 0.17448 (b) 0.18448 (c) 0.14748 (d) 0.12748
m = 4 and n = 1
𝐦/ 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝟏 𝟒/ 𝐋𝟐𝟗 −𝐋𝟑𝟎 𝟑𝟔,𝟖𝟔𝟖−𝟐𝟗,𝟒𝟗𝟒
𝐪𝐱 = ∴ 𝐪𝟐𝟓 = = = 𝟎. 𝟏𝟒𝟕𝟒𝟖(𝐂)
𝐋𝐗 𝐋𝟐𝟓 𝟓𝟎,𝟎𝟎𝟎

(3) Probability that a person at age 26 dies during 2 years

(a) 0.154 (b) 0.145 (c) 0.451 (d) 0.541
𝐋𝐗 −𝐋𝐗+𝐧 𝐋𝟐𝟔 −𝐋𝟐𝟖 𝟒𝟗,𝟎𝟎𝟎−𝟒𝟏,𝟖𝟗𝟓
∵ 𝐧𝐪𝐱 = ∴ 𝟐𝐪𝟐𝟔 = = = 𝟎. 𝟏𝟒𝟓 (b)
𝐋𝐗 𝐋𝟐𝟔 𝟒𝟗,𝟎𝟎𝟎

(4) Probability that a person at age 25 lives to attain 27 and then dies in the following 2 years
(a) 0.194364 (b) 0.914364 (c) 0.419364 (d) 0.491364
m=2&n=2
𝐦/𝐧 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝐧 𝟐/𝟐 𝐋𝟐𝟕 −𝐋𝟐𝟗 𝟒𝟔,𝟓𝟓𝟎−𝟑𝟔,𝟖𝟔𝟖
𝐪𝐱 = ∴ 𝐪𝟐𝟓 = = = 𝟎. 𝟏𝟗𝟒𝟑𝟔𝟒 (a)
𝐋𝐗 𝐋𝟐𝟓 𝟓𝟎,𝟎𝟎𝟎

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5) Use the Following Mortality Table to solve the following questions:

X LX dx qx PX
92 150
93 0.93333
94 220
95 330
96 310
97 350
98 450
99 1000 470
(1) The value of L92 is:
(a) 3500 (b) 3700 (c) 3100 (d) 3000
Solution:
∵ 𝐝𝐱 = 𝐋𝐗 − 𝐋𝐗+𝟏 ∴ 𝐋𝐗 = 𝐋𝐗+𝟏 + 𝐝𝐱
𝐋𝟗𝟖 = 𝐋𝟗𝟗 + 𝐝𝟗𝟖 = 𝟏𝟎𝟎𝟎 + 𝟒𝟓𝟎 = 𝟏, 𝟒𝟓𝟎
𝐋𝟗𝟕 = 𝐋𝟗𝟖 + 𝐝𝟗𝟕 = 𝟏, 𝟒𝟓𝟎 + 𝟑𝟓𝟎 = 𝟏, 𝟖𝟎𝟎
𝐋𝟗𝟔 = 𝐋𝟗𝟕 + 𝐝𝟗𝟔 = 𝟏, 𝟖𝟎𝟎 + 𝟑𝟏𝟎 = 𝟐, 𝟏𝟏𝟎
𝐋𝟗𝟓 = 𝐋𝟗𝟔 + 𝐝𝟗𝟓 = 𝟐, 𝟏𝟏𝟎 + 𝟑𝟑𝟎 = 𝟐, 𝟒𝟒𝟎
𝐋𝟗𝟒 = 𝐋𝟗𝟓 + 𝐝𝟗𝟒 = 𝟐, 𝟒𝟒𝟎 + 𝟐𝟐𝟎 = 𝟐, 𝟔𝟔𝟎
𝐋 𝐋 𝐋 𝟐,𝟔𝟔𝟎
∵ 𝐩𝐱 = 𝐗+𝟏 𝐩𝟗𝟑 = 𝟗𝟒 ∴ 𝐋𝟗𝟑 = 𝟗𝟒 = = 𝟐, 𝟖𝟓𝟎 p
𝐋𝐗 𝐋𝟗𝟑 𝐏𝟗𝟒 𝟎.𝟗𝟑𝟑𝟑𝟑
m
𝐋𝟗𝟐 = 𝐋𝟗𝟑 + 𝐝𝟗𝟐 = 𝟐, 𝟖𝟓𝟎 + 𝟏𝟓𝟎 = 𝟑, 𝟎𝟎𝟎 (𝐝)
ca

(2) The values of d93 and L100 are: (3) The values of q92 and p92 are:
(a) 190 & 530 respectively (a) 0.10 & 0.90 respectively
s
es

(b) 150 & 1200 respectively (b) 0.05 & 0.95 respectively
(c) 170 & 1300 respectively (c) 0.07 & 0.93 respectively
Zn

(d) 250 & 1000 respectively (d) 0.08 & 0.92 respectively
Bi

Solution: Solution:
𝐝𝐱 = 𝐋𝐗 − 𝐋𝐗+𝟏 𝐝
𝐪𝐱 = 𝐗
𝐋𝐗
𝐝𝟗𝟑 = 𝐋𝟗𝟑 − 𝐋𝟗𝟒 = 𝟐, 𝟖𝟓𝟎 − 𝟐, 𝟔𝟔𝟎 = 𝟏𝟗𝟎 𝐝 𝟏𝟓𝟎
𝐋𝟏𝟎𝟎 = 𝑳𝟗𝟗 − 𝐝𝟗𝟗 = 𝟏, 𝟎𝟎𝟎 − 𝟒𝟕𝟎 = 𝟓𝟑𝟎 (𝐚) 𝐪𝟗𝟐 = 𝟗𝟐 = = 𝟎. 𝟎𝟓
𝐋𝟗𝟐 𝟑𝟎𝟎𝟎
𝐩𝐱 = 𝟏 − 𝐪𝐱 = 1 – 0.05 = 0.95
(4) Probability that a person at age 93 dies between 95 and 98
(a) 0.43737 (b) 0.34737 (c) 0.73437 (d) 0.33477
Solution:
m = 2 and n = 3
𝐋 −𝐋 𝐋 −𝐋 𝟐𝟒𝟒𝟎−𝟏𝟒𝟓𝟎
∵ 𝐦/𝐧𝐪𝐱 = 𝐗+𝐦 𝐗+𝐦+𝐧 ∴ 𝟐/𝟑𝐪𝟗𝟑 = 𝟗𝟓 𝟗𝟖 = = 𝟎. 𝟑𝟒𝟕𝟑𝟕 (𝐛)
𝐋𝐗 𝐋𝟗𝟑 𝟐𝟖𝟓𝟎
(5) Probability that a person at age 92 lives to attain 97
(a) 0.5000 (b) 0.6000 (c) 0.7000 (d) 0.8000
Solution:
n=5
𝐋 𝐋 𝟏𝟖𝟎𝟎
∵ 𝐧𝐩𝐱 = 𝐗+𝐧 ∴ 𝟓𝐏𝟗𝟐 = 𝟗𝟕 = = 𝟎. 𝟔𝟎𝟎𝟎 (𝐛)
𝐋𝐗 𝐋𝟗𝟐 𝟑𝟎𝟎𝟎
(6) Number of deaths between 94 and 95
(a) 220 (b) 550 (c) 190
Solution:
L94 – L95 = 2660 – 2440 = 220 or d94 = 220

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6) Use the Following information to Solution: questions from 10 to 17:

With respect to a certain mortality table, Given That:
1. The first age is 0 and the last age is 101, where number of survivors at age 102 = 0
2. Number of deaths between age 0 and 30 = 4500 persons
3. Number of survivors at age 30 = 48,000 persons
4. Number of deaths between age 30 and 40 = 3000 persons
5. Number of survivors at age 70 = 19,200 persons
6. Number of lives at age 84 = 9800 and at age 85 = 9350 and at age 86 = 8850
7. Number of lives from age 71 to 101 = 282500 persons
(1) Number of survivors at age 0 (radix)
(a) 50,000 (b) 52,000 (c) 52,500 (d) 50,500
Solution:
𝐋𝟎 = 𝐋𝟑𝟎 + 𝐍𝐨. 𝐨𝐟 𝐝𝐞𝐚𝐭𝐡𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝟎 𝐚𝐧𝐝 𝟑𝟎 = 𝟒𝟖, 𝟎𝟎𝟎 + 𝟒𝟓𝟎𝟎 = 𝟓𝟐, 𝟓𝟎𝟎 (𝐜)
(2) The probability that a person aged 30 survives to attain the exact age of 70
(a) 0.4 (b) 0.38833 (c) 0.33833 (d) 0.55833
Solution:
𝐋𝐗+𝐧 𝐋𝟕𝟎 𝟏𝟗,𝟐𝟎𝟎
𝐧𝐩𝐱 = = 𝟒𝟎𝐩𝟑𝟎 = = = 𝟎. 𝟒 (𝐚)
𝐋𝐗 𝐋𝟑𝟎 𝟒𝟖,𝟎𝟎𝟎
(3) The probability that a person aged 30 will die within 40 years p
(a) 0.4000 (b) 0.5000 (c) 0.6000 (d) 0.7000
m
Solution:
ca

𝐋𝐗 −𝐋𝐗+𝐧 𝐋𝟑𝟎 −𝐋𝟕𝟎 𝟒𝟖,𝟎𝟎𝟎−𝟏𝟗,𝟐𝟎𝟎

𝐧𝐪𝐱 = = 𝟒𝟎𝐪𝟑𝟎 = = = 𝟎. 𝟔𝟎𝟎𝟎 (𝐂)
𝐋𝐗 𝐋𝟑𝟎 𝟒𝟖,𝟎𝟎𝟎
s

(4) The probability that a person aged 30 dies between ages 40 and 70
es

(a) 0.5575 (b) 0.3375 (c) 0.3575 (d) 0.5375

Zn

Solution:
𝐦/𝐧 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝐧 𝟏𝟎/𝟑𝟎 𝐋𝟒𝟎 −𝐋𝟕𝟎 𝟒𝟓,𝟎𝟎𝟎−𝟏𝟗,𝟐𝟎𝟎
𝐪𝐱 = = 𝐪𝟑𝟎 = = = 𝟎. 𝟓𝟑𝟕𝟓(𝐝)
Bi

𝐋𝐗 𝐋𝟑𝟎 𝟒𝟖,𝟎𝟎𝟎
𝐋𝟒𝟎 = 𝐋𝟑𝟎 − 𝐍𝐨. 𝐨𝐟 𝐝𝐞𝐚𝐭𝐡𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝟑𝟎 𝐚𝐧𝐝 𝟒𝟎 = 𝟒𝟖, 𝟎𝟎𝟎 − 𝟑, 𝟎𝟎𝟎 = 𝟒𝟓, 𝟎𝟎𝟎
(5) Number of deaths between age 70 and 102
(a) 19,200 (b) 12,900 (c) 17,200 (d) 12,700
Solution:
𝐍𝐨. 𝐨𝐟 𝐝𝐞𝐚𝐭𝐡𝐬 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝟕𝟎 𝐚𝐧𝐝 𝟏𝟎𝟐 = 𝐋𝟕𝟎 − 𝐋𝟏𝟎𝟐 = 𝟏𝟗, 𝟐𝟎𝟎 − 𝟎 = 𝟏𝟗, 𝟐𝟎𝟎 (𝐚)
(6) The probability that a birth (new born) dies before reaching age 102
(a) 0% (b) 50% (c) 100% (d) None of the above
Solution:
𝐋 −𝐋 𝐋 −𝐋 𝟓𝟐,𝟓𝟎𝟎−𝟎
𝐧𝐪𝐱 = 𝐗 𝐗+𝐧 = 𝟏𝟎𝟐𝐪𝟎 = 𝟎 𝟏𝟎𝟐 = = 𝟏 = 𝟏𝟎𝟎% (𝐂)
𝐋𝐗 𝐋𝟎 𝟓𝟐,𝟓𝟎𝟎
(7) The probability that a birth dies before reaching age 40
(a) 0.142857 (b) 0.182857 (c) 0.16285 (d) None of the above
Solution:
𝐋 −𝐋 𝐋 −𝐋 𝟓𝟐,𝟓𝟎𝟎−𝟒𝟓,𝟎𝟎𝟎
𝐧𝐪𝐱 = 𝐗 𝐗+𝐧 = 𝟒𝟎𝐪𝟎 = 𝟎 𝟒𝟎 = = 𝟎. 𝟏𝟒𝟐𝟖𝟓𝟕 (𝐚)
𝐋𝐗 𝐋𝟎 𝟓𝟐,𝟓𝟎𝟎
(8) The probability that a birth dies after reaching age 40 but before age 102
(a) 0.587142 (b) 0.857142 (c) 0.758142 (d) None of the above
Solution:
𝐦/𝐧 𝐋𝐗+𝐦 −𝐋𝐗+𝐦+𝐧 𝟒𝟎/𝟔𝟐 𝐋𝟒𝟎 −𝐋𝟏𝟎𝟐 𝟒𝟓,𝟎𝟎𝟎−𝟎
𝐪𝐱 = = 𝐪𝟎 = = = 𝟎. 𝟖𝟓𝟕𝟏𝟒𝟐(𝐛)
𝐋𝐗 𝐋𝟎 𝟓𝟐,𝟓𝟎𝟎

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7) Complete the Following Mortality Table, then Solution: its following questions:
X LX dx qx PX
40 9241 0.00357
41
42 9173 0.00414
43 0.995512
44 9094 0.00494 0.995056
Explain the meaning and calculate the value of the following probabilities:
1. Probability that a person at age 40 will die within 4 years
2. Probability that a person at age 43 will survive to age 45
3. Probability that a person at age 40 will die between 42 and 45
4. Probability that a man aged 40 will die in the next 4 years following age 41
Solution
First: Complete the Table

At age 40
dx = Lx ∗ qx d40 = L40 ∗ q40 = 9241 ∗ 0.00357 = 33
Px = 1 – qx P40 = 1 – q40 = 1 − 0.00357 = 0.99643
At age 41
𝐋𝟒𝟏 = 𝐋𝟒𝟎 − 𝐝𝟒𝟎 = 𝟗𝟐𝟒𝟏 − 𝟑𝟑 = 𝟗𝟐𝟎𝟖 p
Or
m
𝐋
𝐏𝟒𝟎 = 𝟒𝟏 → 𝐋𝟒𝟏 = 𝐏𝟒𝟎 ∗ 𝐋𝟒𝟎 = 𝟎. 𝟗𝟗𝟔𝟒𝟑 ∗ 𝟗𝟐𝟒𝟏 = 𝟗𝟐𝟎𝟖
ca

𝐋𝟒𝟎
s

𝐋𝟒𝟐 𝟗𝟏𝟕𝟑
𝐏𝟒𝟏 = = = 𝟎. 𝟗𝟗𝟔𝟐
es

𝐋𝟒𝟏 𝟗𝟐𝟎𝟖
𝐪𝟒𝟏 = 𝟏 − 𝐏𝟒𝟏 = 𝟏 − 𝟎. 𝟗𝟗𝟔𝟐 = 𝟎. 𝟎𝟎𝟑𝟖
Zn

𝐝
𝐪𝟒𝟏 = 𝟒𝟏 → 𝐝𝟒𝟏 = 𝐋𝟒𝟏 ∗ 𝐪𝟒𝟏 = 𝟗𝟐𝟎𝟖 ∗ 𝟎. 𝟎𝟎𝟑𝟖 = 𝟑𝟓
𝐋𝟒𝟏
Bi

Or 𝐝𝟒𝟏 = 𝐋𝟒𝟎 − 𝐋𝟒𝟏 = 𝟗𝟐𝟒𝟏 − 𝟗𝟐𝟎𝟖 = 𝟑𝟓

At age 42
𝐝
𝐪𝟒𝟐 = 𝟒𝟐 → 𝐝𝟒𝟐 = 𝐋𝟒𝟐 ∗ 𝐪𝟒𝟐 = 𝟗𝟏𝟕𝟑 ∗ 𝟎. 𝟎𝟎𝟒𝟏𝟒 = 𝟑𝟖
𝐋𝟒𝟐
P42 = 1 – q42 = 1 − 0.00414 = 0.99586
At age 43
𝐋 𝐋 𝟗𝟎𝟗𝟒
𝐏𝟒𝟑 = 𝟒𝟒 → 𝐋𝟒𝟑 = 𝟒𝟒 = = 𝟗𝟏𝟑𝟓
𝐋𝟒𝟑 𝐏𝟒𝟑 𝟎.𝟗𝟗𝟓𝟓𝟏𝟐
d43 = L43 – L44 = 9135 − 9094 = 41
𝐪𝟒𝟑 = 𝟏 − 𝟎. 𝟗𝟗𝟓𝟓𝟏𝟐 = 𝟎. 𝟎𝟎𝟒𝟒𝟖𝟖
At age 44
𝐝
𝐪𝟒𝟒 = 𝟒𝟒 → d44 = L44 ∗ q44 = 9094 ∗ 0.004944 = 45
𝐋𝟒𝟒

Second: Calculating the probabilities

(1) Probability that a person at age 40 will die within 4 years (n = 4)

𝐋𝐗 − 𝐋𝐗+𝐧
∵ 𝐧𝐪𝐱 =
𝐋𝐗
𝐋𝟒𝟎 −𝐋𝟒𝟒 𝟗𝟐𝟒𝟏−𝟗𝟎𝟗𝟒
∴ 𝟒𝐪𝟒𝟎 = = = 𝟎. 𝟎𝟏𝟓𝟔𝟎𝟕
𝐋𝟒𝟎 𝟗𝟐𝟒𝟏

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(2) Probability that a person at age 43 will survive to age 45 (n = 2)

𝐋
∵ 𝐧𝐏𝐗 = 𝐗+𝐧
𝐋𝐗
𝐋𝟒𝟓 𝐋𝟒𝟒 −𝐝𝟒𝟒 𝟗𝟎𝟗𝟒−𝟒𝟓 𝟗𝟎𝟒𝟗
∴ 𝟐𝐏𝟒𝟑 = = = = = 𝟎. 𝟗𝟗𝟎𝟓𝟖𝟓𝟔
𝐋𝟒𝟑 𝐋𝟒𝟑 𝟗𝟏𝟑𝟓 𝟗𝟏𝟑𝟓
(3) Probability that a person at age 40 will die between 42 and 45 (m = 2, n = 3)
𝐋𝐗+𝐦 − 𝐋𝐗+𝐦+𝐧
∵ 𝐦/𝐧𝐪𝐱 =
𝐋𝐗
𝟐/𝟑 𝐋𝟒𝟐 −𝐋𝟒𝟓 𝟗𝟏𝟕𝟑−𝟗𝟎𝟒𝟗
∴ 𝐪𝟒𝟎 = = = 𝟎. 𝟎𝟏𝟑𝟒𝟏𝟖
𝐋𝟒𝟎 𝟗𝟐𝟒𝟏
(4) Probability that a man aged 40 will die in the next 4 years following age 41 (m=1, n=4)
𝟏/𝟒 𝐋 −𝐋 𝟗𝟐𝟎𝟖−𝟗𝟎𝟒𝟗
𝐪𝟒𝟎 = 𝟒𝟏 𝟒𝟓 = = 𝟎. 𝟎𝟏𝟕𝟐𝟎𝟔
𝐋𝟒𝟎 𝟗𝟐𝟒𝟏

8) Rewrite and complete the following table:

X LX dx qx PX
40 55550
41 55352 0.003801
42
43 54913
44 0.995052
45 54396 289 p
m
Solution
ca
s

d40 = l40 – l41 = 55550 – 55350 = 198

es

q40 = d40 / l40 = 198 / 55550 = 0.003564

Zn

p40 = 1 – q40 = 1 – 0.003564 = 0.996436

Bi

d41 = l40 x q40 = 55352 x 0.003801 = 210

p41 = 1 – q40 = 1 – 0.003801 = 0.996199
p41 = l42 / l41 → l42 = l41 x p41 = 55352 x 0.996199 = 55142

d42 = l42 – l43 = 55142 – 54913 = 229

q42 = d42 / l42 = 229 / 55142 = 0.004153
p42 = 1 – q42 = 1 – 0.004153 = 0.995847

q45 = d45 / l45 = 289 / 54396 = 0.005313

p45 = 1 – q45 = 1 – 0.005313 = 0.994687

Since P44 = l45 / l44 → l44 = l45 / p44 = 54396 / 0.995052 = 54666
q44 = 1 – p44 = 1 – 0.995052 = 0.004948
d44 = l44 x q44 = 54666 x 0.004948 = 270
d43 = l43 – l44 = 54913 – 54666 = 247
q43 = d43 / l43 = 247 / 54913 = 0.004498
p43 = 1 – q43 = 1 – 0.004498 = 0.995502

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9) a) Rewrite the following statements by using symbols with respected to dx’s:

1. Number of deaths between ages x and x+n
2. The probability that a person aged x will survive n years
3. Number of deaths between ages x+m and x+m+1
4. The probability that a person aged x will die between ages x+m and x+m+1
5. Number of deaths between ages x+m and x+m+n
6. The probability that a person aged x will die within n years after reaching the exact age
x+m
(b) Given the following table:
X 18 19 20 21 22 23
dx 200 220 239 268 297 324
Assuming that L18 (Radix) = 100,000, x = 18, n = 4 and m = 2 to find the numerical value of the
previous numbers and probabilities required in (a).
Solution:
(a)
1. dx + dx+1 + dx+2 + …+ dx+n-1
𝐝 +𝐝 +𝐝 +...+𝐝 𝐱+𝐧−𝟏
2. 𝐧𝐏𝐗 = 𝟏 − 𝐧𝐪𝐱 = 𝟏 − 𝐱 𝐱+𝟏 𝐱+𝟐
𝐋𝐗
3. dx+m
𝐝
4. 𝐦/𝟏𝐪𝐱 = 𝐱+𝐦
𝐋𝐗 p
5. dx+m+ dx+m+1 +…. dx+m+n-1
m
𝐝 +𝐝 +𝐝 +...+𝐝𝐱+𝐦+𝐧−𝟏
6. 𝐦/𝐧𝐪𝐱 = 𝐱+𝐦 𝐱+𝐦+𝟏 𝐱+𝐦+𝟐
ca

𝐋𝐗
s

(b) L18 (Radix) = 100,000, x = 18, n = 4 and m = 2

es

X LX dx
Zn

18 100,000 200
99,800
Bi

19 220
(100,000-200)
99,580
20 239
(99,800-220)
99,341
21 268
(99,580-239)
99,073
22 297
(99,341-268)
98,776
23 324
(99,073-297)

(1) dx + dx+1 + dx+2 + …+ dx+n-1 = d18 + d19 + d20 + d21 = 200 + 220 + 239 + 268 = 927
𝟏𝟎𝟎,𝟎𝟎𝟎−𝟗𝟗𝟎𝟕𝟑
(𝟐) 𝐧𝐏𝐗 = 𝟒𝐏𝟏𝟖 = 𝟏 − 𝟒𝐪𝟏𝟖 = 𝟏 − = 𝟎. 𝟗𝟗
𝟏𝟎𝟎,𝟎𝟎𝟎
(3) dx+m = d18+2 = d20 = 239
𝐝𝟏𝟖+𝟐 𝟐𝟑𝟗
(𝟒) 𝐦/𝟏𝐪𝐱 = 𝟐/𝟏𝐪𝟏𝟖 = = = 𝟎. 𝟎𝟎𝟐𝟑𝟗
𝐋𝟏𝟖 𝟏𝟎𝟎, 𝟎𝟎𝟎
(5) dx+m + dx+m+1 +…. dx+m+n-1 = d20 + d21 + d22 + d23 = 239 + 268 + 297 + 324 = 1128
𝐝𝟐𝟎 +𝐝𝟐𝟏 +𝐝𝟐𝟐 +𝐝𝟐𝟑
(𝟔) 𝐦/𝐧𝐪𝐱 = 𝟐/𝟒
𝐪𝟏𝟖 = = 𝟎. 𝟎𝟏𝟏𝟑𝟐
𝐋𝟏𝟖

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10) True or false

1) Mortality tables are used to calculate the insurance premiums of property insurance.
False→Premiums of life insurance.

2) As age increases, the number of deaths decreases.

False→ the number of deaths increases.

3) As age increases, both probability of death and probability of life decrease.

False→ Probability of death increases, while life decreases.

4) There is a negative relationship between probability of death and probability of life.

True

5) We can conclude that 𝐋𝐗+𝟏 = 𝐋𝐗 + 𝐝𝐗

False
𝐝𝐱 = 𝐋𝐗 − 𝐋𝐗+𝟏
𝐋𝐗+𝟏 = 𝐋𝐗 − 𝐝𝐱

6) We can conclude that 𝐋𝐗+𝟏 = 𝐋𝐗 ∗ 𝐏𝐗 p

True
m
𝐋
𝐏𝐗 = 𝐗+𝟏
𝐋𝐗
ca

𝐋𝐗+𝟏 = 𝐋𝐗 ∗ 𝐏𝐗
s
es

7) 𝐋𝟒𝟎 − 𝐋𝟒𝟑 = 𝐝𝟒𝟎 + 𝐝𝟒𝟏 + 𝐝𝟒𝟐

True
Zn
Bi

8) 5𝐏30. 3𝐏35 = 5𝐏30 . 3𝐏30

𝐅𝐚𝐥𝐬𝐞
𝐋 𝐋 𝐋
5
𝐏30. 3𝐏35 = 𝟑𝟓 . 𝟑𝟖 = 𝟑𝟖
𝐋𝟑𝟎 𝐋𝟑𝟓 𝐋𝟑𝟎
𝐋 𝐋 𝐋𝟑𝟓 .𝐋𝟑𝟑
5
𝐏30 . 3𝐏30 = 𝟑𝟓 . 𝟑𝟑 =
𝐋𝟑𝟎 𝐋𝟑𝟎 𝐋𝟑𝟎

9) 10𝐏20. 5𝐪30 = 10/5𝐪20

𝐓𝐫𝐮𝐞
10 𝐋𝟑𝟎 𝐋𝟑𝟎 −𝐋𝟑𝟓 𝐋𝟑𝟎 −𝐋𝟑𝟓
𝐏20. 5𝐪30 = . =
𝐋𝟐𝟎 𝐋𝟑𝟎 𝐋𝟐𝟎
10/5 𝐋𝟑𝟎 −𝐋𝟑𝟓
𝐪20 = 𝐋𝟐𝟎

10) 10𝐏20. 5𝐪30 = 5/5𝐪20

𝐅𝐚𝐥𝐬𝐞
10 𝐋𝟑𝟎 𝐋𝟑𝟎 −𝐋𝟑𝟓 𝐋𝟑𝟎 −𝐋𝟑𝟓
𝐏20. 5𝐪30 = . =
𝐋𝟐𝟎 𝐋𝟑𝟎 𝐋𝟐𝟎
𝐋𝟐𝟓 −𝐋𝟑𝟎
𝟓/𝟓𝐪𝟐𝟎 =
𝐋𝟐𝟎

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Commutation Tables
Commutation Symbols There are 4 symbols used in calculating net premiums of life insurance
(arranged in a table called Commutation Table). This table is calculated based on:
1) The mortality tables
2) The present value table at 2.5% interest rate.
(1) DX : is used when the insured receives the indemnity ONCE if he survives to reach a certain
age
(2) NX :is used when the insured receives the indemnity as regular payments for the life of the
insured.
(3) CX: is used when the beneficiaries of the insured receive the indemnity ONCE if the insured
dies before reaching a certain age.
(4) MX: is used when the beneficiaries of the insured receive the indemnity as regular
payments if the insured dies before reaching a certain age.

Rule Symbol First Equation Second Equation

DX 𝐕 𝐗. 𝐋𝐗 p (𝟏 + 𝐢)−𝐱 . 𝐋𝐗
m
NX 𝐃𝐗 + 𝐃𝐗+𝟏 +. . . +𝐃𝟗𝟗 𝐃𝐗 + 𝐍𝐗+𝟏
ca

CX 𝐕 𝐗+𝟏 𝐝𝐗 (𝟏 + 𝐢)−(𝐱+𝟏) . 𝐝𝐗
s

MX 𝐂𝐗 + 𝐂𝐗+𝟏 +. . . +𝐂𝟗𝟗 -
es

Symbols
Zn

VX = (1+2.5%)−𝒙
Bi

1) True or false
(1) 𝐃𝐗+𝐧 = 𝐕 𝐗+𝐧 𝐋𝐗
False
𝐃𝐗+𝐧 = 𝐕 𝐗+𝐧 𝐋𝐗+𝐧
(𝟐)𝐍𝐗+𝐧 = 𝐃𝐗+𝐧 + 𝐃𝐗+𝐧+𝟏 + 𝐃𝐗+𝐧+𝟐 +. . . +𝐃𝟗𝟗
True
(𝟑)𝐍𝐗+𝐦 = 𝐃𝐗+𝐦 + 𝐃𝐗+𝐦+𝟏 + 𝐃𝐗+𝐦+𝟐 +. . . +𝐃𝟗𝟗
True
(𝟒)𝐍𝐗 = 𝐃𝐗+𝟏 + 𝐍𝐗+𝟏
False
𝐍𝐗 = 𝐃𝐗 + 𝐍𝐗+𝟏
(5) 𝐍𝐗 − 𝐍𝐗+𝟏 = 𝐃𝐗 + 𝐃𝐗+𝟏 + 𝐃𝐗+𝟐 +. . . +𝐃𝐗+𝐧−𝟏
True

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2) Given the following table:

X LX dx Vx Dx Nx Cx Mx
94 142,191 45,026 0.09816500
95 97165 34,128 0.09577073
(1) A symbol is used when the insured receives the indemnity once if he survives to reach a
certain age:
a. Nx b Mx
b. Dx d. Cx
(2) The value of D94 is:
(a) 19358 (b) 13958 (c) 16358 (d) 13658

Solution:
𝐃 𝐱 = 𝐕 𝐗 𝐋𝐗
𝐃𝟗𝟒 = 𝐕 𝟗𝟒 𝐋𝟗𝟒 = 𝟎. 𝟎𝟗𝟖𝟏𝟔𝟓𝟎𝟎 ∗ 𝟏𝟒𝟐, 𝟏𝟗𝟏 = 𝟏𝟑𝟗𝟓𝟖 (b)
(3) If D95 = 9306, D96 = 5890, D97 = 3445, D98 = 1719 and D99 = 557, the value of N94 is:
(a) 34875 (b) 43875 (c) 83475 (d) 75834

Solution:
p
m
ca

𝐍𝐗 = 𝐃𝐗 + 𝐃𝐗+𝟏 + 𝐃𝐗+𝟐 +. . . +𝐃𝟗𝟗

𝐍𝟗𝟒 = 𝐃𝟗𝟒 + 𝐃𝟗𝟓 + 𝐃𝟗𝟔 + 𝐃𝟗𝟕 + 𝐃𝟗𝟖 + 𝐃𝟗𝟗 = 𝟏𝟑𝟗𝟓𝟖 + 𝟗𝟑𝟎𝟔 + 𝟓𝟖𝟗𝟎 + 𝟑𝟒𝟒𝟓 + 𝟏𝟕𝟏𝟗 + 𝟓𝟓𝟕
s
es

𝐍𝟗𝟒 = 𝟑𝟒𝟖𝟕𝟓 (a)

(4) The value of C94 is:
Zn

(a) 4012 (b) 4112 (c) 4212 (d) 4312

Bi

Solution:

𝐂𝐗 = 𝐕 𝐗+𝟏 𝐝𝐗
𝐂𝟗𝟒 = 𝐕 𝟗𝟓 𝐝𝟗𝟒 = 𝟎. 𝟎𝟗𝟓𝟕𝟕𝟎𝟕𝟑 ∗ 𝟒𝟓𝟎𝟐𝟔 = 𝟒𝟑𝟏𝟐 (𝐝)
(5) If C95 = 3189, C96 = 2302, C97 = 1641, C98 = 1207 and C99 = 543, the value of M94 is:
(a) 13190 (b) 13192 (c) 13194 (d) 13196

Solution:

𝐌𝐗 = 𝐂𝐗 + 𝐂𝐗+𝟏 + 𝐂𝐗+𝟐 +. . . +𝐂𝟗𝟗

𝐌𝟗𝟒 = 𝐂𝟗𝟒 + 𝐂𝟗𝟓 + 𝐂𝟗𝟔 + 𝐂𝟗𝟕 + 𝐂𝟗𝟖 + 𝐂𝟗𝟗 + 𝟒𝟑𝟏𝟐 + 𝟑𝟏𝟖𝟗 + 𝟐𝟑𝟎𝟐 + 𝟏𝟔𝟒𝟏 + 𝟏𝟐𝟎𝟕 + 𝟓𝟒𝟑
𝐌𝟗𝟒 = 𝟏𝟑𝟏𝟗𝟒 (c)
(6) The value of D96 is:
(a) 4875 (b) 3875 (c) 3475 (d) 5890
Solution:

𝐋𝟗𝟔 = 𝐋𝟗𝟓 − 𝐝𝟗𝟓 = 97,165 - 34,128 = 63,037

𝐃𝟗𝟔 = 𝐕 𝟗𝟔 . 𝐋𝟗𝟔 = (1 + 2.5%)−𝟗𝟔 . L96 = (1 + 2.5%)−𝟗𝟔 . 63,037 = 5890 (d)

Introduction to Risk and Insurance – Nirmeen Samy – Final Revision – 01003703872

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3) Complete the Following Table:

X LX dx Vx Dx Nx Cx Mx
94 45026 0.09816500
95 97165 0.09577073
96 63037 25250 0.09343486
97 18456 0.09115596
98 0.08893264
99 5415 6415 0.08676355
Solution
Lx and dx Columns Dx Column

L94 = L95 + d94 = 97165 + 45026 = 142,191 Dx = Vx Lx

d95 = L95 – L96 = 97,165 − 63037 = 34,128
L97 = L96 – d96 = 63037 − 25250 = 37787
L98 = L97 – d97 = 37787 − 18456 = 19,331
d98 = L98 – L99 = 19,331 − 5415 = 13,916
Nx Column
Nx = Dx + Dx+1 + Dx+2 + ⋯ + D99
D94 = V94 L94 = 0.09816500 ∗ 142,191 = 13958
D95 = V95 L95 = 0.09577073 ∗ 97165 = 9306
D96 = V96 L96 = 0.09343486 ∗ 63037 = 5890
D97 = V97 L97 = 0.09115596 ∗ 37787 = 3445
D98 = V98 L98 = 0.08893264 ∗ 19331 = 1719
D99 = V99 L99 = 0.08676355 ∗ 6415 = 557
p
m
ca

N94 = D94 + D95 + D96 + D97 + D98 + D99 = 13958 + 9306 + 5890 + 3445 + 1719 + 557 = 34875
N95 = D95 + D96 + D97 + D98 + D99 = 9306 + 5890 + 3445 + 1719 + 557 = 20917
s

N96 = D96 + D97 + D98 + D99 = 5890 + 3445 + 1719 + 557 = 11611
es

N97 = D97 + D98 + D99 = 3445 + 1719 + 557 = 5721

Zn

N98 = D98 + D99 = 1719 + 557 = 2276

N99 = D99 = 557
Bi

Cx Column
Cx = Vx+1 dx
C94 = V95 d94 = 0.09577073 ∗ 45026 = 4312
C95 = V96 d95 = 0.09343486 ∗ 34,128 = 3189
C96 = V97 d96 = 0.09115596 ∗ 25250 = 2302
C97 = V98 d97 = 0.08893264 ∗ 18456 = 1641
C98 = V99 d98 = 0.08676355 ∗ 13,916 = 1207
C99 = (𝟏 + 𝐢)−(𝐱+𝟏) . 𝐝𝐗 = V100 d99 = (1 + 2.5%)-100 ∗ 6415 = 0.084647368 ∗ 6415 = 543

Mx Column
Mx = Cx + Cx+1 + Cx+2 + ⋯ + C99
M94 = C94 + C95 + C96 + C97 + C98 + C99 = 4312 + 3189 + 2302 + 1641 + 1207 + 543 = 13194
M95 = C95 + C96 + C97 + C98 + C99 = 3189 + 2302 + 1641 + 1207 + 543 = 8882
M96 = C96 + C97 + C98 + C99 = 2302 + 1641 + 1207 + 543 = 5693
M97 = C97 + C98 + C99 = 1641 + 1207 + 543 = 3391
M98 = C98 + C99 = 1207 + 543 = 1750
M99 = C99 = 543

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4) 2018 Exam Exercise

X LX dx Vx Dx Nx Cx
30 67 52166 1769638 37 17641
31 68 51107 1717473 36 17604
32 71 50068 1666366 37 17568
33 74 49050 1616298 38 17530
34 78 48050 1567248 39 17492
35 94133 83 47069 1519198 41 17453

45 151 38166 1089860 61 16963

46 92892 160 37357 1051695 64 16902
47 172 36561 1014338 67 16838

50 92183 207 34249 906991 76 16628

51 91976 220 33502 872742 79 16552
55 91013 272 30626 743106 91 16215
p
From the table, compute the following:
m
ca

(1) Number of deaths between age 30 and 35

s

d30 + d31+ d32+d33+ d34 = 67 + 68 + 71 + 74 + 78 = 358

es

(2) L30
Zn

L30 = L35 + d30 + d31 + d32 + d33 + d34 = 94133 + 67 + 68 + 71 + 74 + 78 = 94491

Bi

(3) 10q35
𝐋𝟒𝟓 = 𝐋𝟒𝟔 + 𝐝𝟒𝟓 = 𝟗𝟐𝟖𝟗𝟐 + 𝟏𝟓𝟏 = 𝟗𝟑𝟎𝟒𝟑
𝐋𝟑𝟓 −𝐋𝟒𝟓 𝟗𝟒𝟏𝟑𝟑−𝟗𝟑𝟎𝟒𝟑
= = 𝟎. 𝟎𝟏𝟏𝟓𝟖
𝐋𝟑𝟓 𝟗𝟒𝟏𝟑𝟑

(4) 10/ q35

𝐋𝟒𝟓 −𝐋𝟒𝟔 𝟗𝟑𝟎𝟒𝟑 −𝟗𝟐𝟖𝟗𝟐
= = 𝟎. 𝟎𝟎𝟏𝟔
𝐋𝟑𝟓 𝟗𝟒𝟏𝟑𝟑

(5) 1/10q34
𝐋𝟑𝟒 = 𝐋𝟑𝟓 + 𝐝𝟑𝟒 = 𝟗𝟒𝟏𝟑𝟑 + 𝟕𝟖 = 𝟗𝟒𝟐𝟏𝟏
𝐋𝟑𝟓 −𝐋𝟒𝟓 𝟗𝟒𝟏𝟑𝟑−𝟗𝟑𝟎𝟒𝟑
= = 𝟎. 𝟎𝟏𝟏𝟓𝟔𝟗
𝐋𝟑𝟒 𝟗𝟒𝟐𝟏𝟏

6) 10/5q35
𝐋𝟒𝟓 −𝐋𝟓𝟎 𝟗𝟑𝟎𝟒𝟑 −𝟗𝟐𝟏𝟖𝟑
= = 0.00753
𝐋𝟑𝟓 𝟗𝟒𝟏𝟑𝟑

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5) Answer the following questions from 1 to 18.

15 5 10
1) If P30 = 0.6375 and P30 = 0.83, find P35 ?
𝟏𝟓
𝐋𝟒𝟓
𝐏𝟑𝟎 = = 𝟎. 𝟔𝟑𝟕𝟓 ∴ 𝐋𝟒𝟓 = 𝟎. 𝟔𝟑𝟕𝟓. 𝐋𝟑𝟎
𝐋𝟑𝟎
𝟏𝟓
𝐋𝟑𝟓
𝐏𝟑𝟎 = = 𝟎. 𝟖𝟑 ∴ 𝐋𝟑𝟓 = 𝟎. 𝟖𝟑. 𝐋𝟑𝟎
𝐋𝟑𝟎
𝐋𝟒𝟓 𝟎. 𝟔𝟑𝟕𝟓 . 𝐋𝟑𝟎
∴ 𝟏𝟎𝐏𝟑𝟓 = = = 𝟎. 𝟕𝟔𝟖𝟎
𝐋𝟑𝟓 𝟎. 𝟖𝟑 . 𝐋𝟑𝟎
2) L50 = 32000 , q50 = 0.04 , find d50 ?
𝐝𝟓𝟎 𝐝𝟓𝟎
𝐪𝟓𝟎 = ∴ 𝟎. 𝟎𝟒 = ∴ 𝐝𝟓𝟎 = 𝟎. 𝟎𝟒 × 𝟑𝟐𝟎𝟎𝟎 = 𝟏𝟐𝟖𝟎
𝐋𝟓𝟎 𝟑𝟐𝟎𝟎𝟎
3) Calculate D30 at 5% if L30 = 9480
𝐃𝟑𝟎 = 𝐕 𝟑𝟎 𝐋𝟑𝟎
𝐃𝟑𝟎 = (𝟏 + 𝟓%)−𝟑𝟎 (𝟗𝟒𝟖𝟎) = (𝟏. 𝟎𝟓)−𝟑𝟎 ∗ 𝟗𝟒𝟖𝟎 = 𝟐𝟏𝟗𝟑. 𝟒𝟔
4) what is the number of deaths between 40 & 45?
= L40 – L45 OR = d40 + d41+ d42+ d43 + d44
5) If you know that d40= 530 , d41= 555 , d42= 595 , find number of death between 40 and 42 ?
p
= d40 + d41= 530 + 555 = 1085
m
6) If you know that L30 = 40000 , L31 = 39720 then d30 = 280 (T or F)
ca

d30 = L30 – L31 = 40000 – 39720 = 280 (T)

s
es

7) If you know that L50 = 32000 , q50 = 0.04 then d50 =1280 (T or F)
𝐝𝟓𝟎 𝐝𝟓𝟎
Zn

𝐪𝟓𝟎 = → 𝟎. 𝟎𝟒 = ∴ 𝐝𝟓𝟎 = 𝟎. 𝟎𝟒 × 𝟑𝟐𝟎𝟎𝟎 = 𝟏𝟐𝟖𝟎 (T)

𝐋𝟓𝟎 𝟑𝟐𝟎𝟎𝟎
Bi

8) L20= 45000 , L30 = 40000 , the probability that a person aged 20 will reach 30 is ....
𝟏𝟎 𝐋𝟑𝟎 𝟒𝟎𝟎𝟎𝟎
𝐏𝟐𝟎 = = = 𝟎. 𝟖𝟖𝟗
𝐋𝟐𝟎 𝟒𝟓𝟎𝟎𝟎

9) The probability that a person of exact age (X) will survive to attain exact age (X+1) is usually
denoted by
a) Px b) qx c) Lx+1 d) Dx
10) The symbol which means the probability that a person aged 61 will die before reaching age
64 is
4 3 3
a) P64 b) P64 c) q64 d) q61
11) Lx is
a .The number of deaths that occur at each age-that is, between the attainment of the
indicated age and the attainment of the next succeeding age
b. The number of survivors at each age
c. The age x
d. The rate of mortality at age x

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12) To compute the net premium in life insurance we use:

a. Mortality. b. Interest.
c. Loading. d. a and b
13) To compute the office premium in life insurance we use
a. Mortality. b. Interest.
c. Loading. d. all the above
14) Mortality tables are used to calculate the insurance premium of property insurance, T or F?
False (life insurance)
15) As age increase, the number of deaths decrease, T or F?
False (increase)
16) We can conclude that Lx+1 = Lx +dx , T or F?
False

 Expectation of life ‫تتذاكر من ورق المراجعة‬

Means the average number of years to be lived in the future by a person now aged x.
There are 2 types of expectation:
p
Shortened expectation (ex) Curtate expectation (e’x) Complete expectation (𝒆𝟎𝒙 )
m
ca

It is the average number of It is the average number of It is the average number of

s

years to be lived in the future years to be lived in the future years to be lived in the future
es

by a person now aged x, by a person now aged x, by a person now aged x,

Zn

assuming death happens at assuming death happens at assuming death happens

Bi

the beginning of each year. the end of each year. during (throughout) the year.
𝐋𝐱+𝟏 +𝐋𝐱+𝟐 +⋯+𝐋𝟗𝟗 𝐋𝐱 +𝐋𝐱+𝟏 +𝐋𝐱+𝟐 +⋯+𝐋𝟗𝟗 𝐞𝐱 +𝐞′𝐱
ex =
𝐋𝐱
e'x =
𝐋𝐱
= 1 + ex 𝐞𝟎𝐱 = = 0.5 + ex = e’x – 0.5
𝟐

Example:
X 97 98 99
Lx 37,787 19,331 6,415
1) The expectation of life for a person aged 97:
𝑳𝟗𝟖 +𝑳𝟗𝟗 𝟏𝟗𝟑𝟑𝟏+𝟔𝟒𝟏𝟓
e97 = = = 𝟎. 𝟔𝟖𝟏𝟑
𝑳𝟗𝟕 𝟑𝟕𝟕𝟖𝟕

2) The curtate expectation of life for a person aged 97:

e'97 = 1 + e97 = 1 + 𝟎. 𝟔𝟖𝟏𝟑 = 1.6813

3) The complete expectation of life for a person aged 97:

𝒆𝟎𝟗𝟕 = 0.5 + e97 = 0.5 + 𝟎. 𝟔𝟖𝟏𝟑 = 1.1813
Or 𝒆𝟎𝟗𝟕 = e'97 – 0.5 = 1.6813 – 0.5 = 1.1813

Introduction to Risk and Insurance – Nirmeen Samy – Final Revision – 01003703872