As a person who wants to participate in insurance or is learning about life insurance, he would like to know how much his case pays. Usually, to know the premium rate, the customer must contact the consultant to ask them to run the illustration, then on the benefit illustration you will know how much you pay for this insurance package. How about insurance benefits? TuHowever, after knowing these 2 ways of calculating life insurance premiums, you can calculate by yourself how much the premium you have to pay when you join?
1- Formula and how to calculate life insurance premium according to premium rate
1.1- Formula for calculating premium according to the premium rate table
Life insurance premium = Face value * premium rate/1000 (because the premium rate table is calculated per 1000 VND of the insurance amount). In there:
- The face value/Insurance amount is the amount that the life insurance company accepts to cover and is stated on the certificate of insurance or the most recent contract modification confirmation letter (if any). The insurance amount is used as the basis for paying insurance benefits according to the contract terms.
- The premium rate is the calculated rate that is used to calculate the premium. Each product has a different premium rate table and is calculated by actuaries based on many different factors such as the mortality rate table (gender, age, etc.), premium payment term, contract duration, contract costs such as contract management fees, agency commissions, medical examination fees, etc.
1.2- Example of how life insurance premium is calculated according to the premium rate
Bright Futures - Prudential has the following premium rates for men:
Example: Calculate the life insurance premium of customer A, who is 35 years old this year, participating in Prudential's Active Life product with the insurance amount of 800 million.
Life insurance premium = face value * premium rate/1000 yen
In there:
- Insurance face value = 800 million VND
- Fee rate = 25.56 (customer A's fee rate: male gender, 35 years old)
Life insurance premium paid by customer A annually = 800,000,000 * 25.56/1000 = 20,448,000 VND
2- Formula and how to calculate life insurance premium according to the insurance coefficient
2.1 Formula for calculating premium according to the insurance coefficient table
Life insurance premium = Face value / Insurance coefficient
In there:
- Similar to the above formula, the face value/Insured Amount is the amount the life insurance company accepts to cover and is recorded on the most recent insurance certificate or policy modification confirmation letter ( if any). The insurance amount is used as the basis for paying insurance benefits according to the contract terms.
- Like the Premium Ratio, the Coverage Factor is a pre-calculated number that is used to calculate the premium. Some products are calculated according to the premium rate, but some products are calculated according to the insurance factor. Each product has a different table of insurance coefficients and is calculated by actuaries based on many different factors such as the death rate table (gender, age, etc.), premium payment term, and time. contract term, contract costs such as contract management fees, agency commissions, medical examination fees, etc.
2.2 How to calculate life insurance premium according to the insurance factor
AIA's Step To The Future product has the following premium multiplier table:
For example, Customer B is 20 years old, participates in AIA's Step To The Future product with an insurance amount of 500 million.
Life insurance premium = Face value / Insurance coefficient
Insurance face value = 500 million VND
The insurance factor can choose any coefficient from the minimum insurance factor of 60 to the maximum insurance factor of 90. For example, choose the insurance factor of 65.
Annual life insurance premium = 500,000,000/65 = 7,692,307 VND
Thus, based on the table of premium rates or the table of insurance coefficients, it is possible to quickly calculate the annual life insurance premiums payable for each customer.
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