CALCULATION OF N-YEAR TERM JOINT LIFE INSURANCE PREMIUM RESERVE USING GROSS PREMIUM VALUATION METHOD

Abstract

The premium reserve is important in the life insurance business since it reflects on the company’s liability to be paid to the insured. As a result, a sufficient amount of premium reserve is required while negative amount can be detrimental especially for newly developed company. In n-year term joint life insurance, the insured are two people that will obtain benefit only when the first person dies within the contract years. This study is aimed to focus on the calculation of premium reserve of n-year term joint life insurance and will be using Gross Premium Valuation method for calculating premium reserve. The annual premium to be paid for joint life insured aged 30 years male and 28-year-old female is Rp 871.146,00. While the premium reserve discovered no negative amount during the first few years of the contract and that the amount gradually increasing over the years until the contract ended at year 20 which resulted in Rp 21.174.747,95 for the final year. Additionally, the result of gross premium valuation and prospective reserve were found to be similar with only a little difference. The sensitivity towards adjustment on interest rate, initial fee, and maintenance fee also by no means has significant impact to the reserve value.