How Life Insurance Policies Are Priced. Whole Life Assurance Explained Conceptually.CM1 Actuarial Sc

DETAILED TIMESTAMPS

0:00 – Introduction and importance of CM1 Part 2
0:45 – Why pricing life insurance is different from Part 1
2:00 – Why age matters in premium calculation
3:30 – Introduction to mortality tables
5:00 – Meaning of AM92 mortality table
6:40 – Interpretation of qx values
8:30 – One-year term insurance intuition
10:30 – Expected payouts and averaging logic
12:30 – Why insurance works on large numbers
14:00 – Introduction to curtate lifetime Kx
15:40 – Timeline explanation of Kx
18:00 – Events Kx = 0, 1, 2 explained
20:30 – Survival and death probability structure
23:00 – Px and Qx notation explained
26:00 – Why death is restricted to one-year intervals
28:30 – Present value as a random variable
31:00 – Expected present value concept
33:30 – Derivation of Ax formula
36:00 – Equation of value intuition
39:00 – Whole life assurance assumptions
41:00 – Single premium pricing logic
43:00 – Numerical example solved
46:00 – Types of life insurance policies
49:00 – Term vs whole life vs endowment
52:00 – Why pure endowment is introduced
55:00 – Summary and next steps

This is Class 1 of Part 2 of CM1.
The session starts the core actuarial mathematics behind pricing life insurance policies.

This class builds intuition first, then slowly introduces notation, assumptions, and exam-ready structure. The focus is not memorization but understanding how insurance companies think when they price policies.

What you learn in this class

• Why life insurance pricing depends on age
• Why mortality matters along with interest
• How actuaries use mortality tables in practice
• How insurance companies know expected payouts in advance
• Why pricing works on an average basis

Foundation built from scratch

You start by understanding how a whole life policy works.
The benefit is paid whenever death occurs.
Age determines risk.
Higher age means higher premium.

You learn why insurers charge different premiums for different ages and how this is not arbitrary but driven by data.

Mortality tables explained intuitively

• Meaning of qx
• Probability of death within one year
• Difference between general population and assured lives
• Why AM92 table is used for life insurance pricing
• Role of Continuous Mortality Investigation

You learn how to interpret a mortality table without fear and without jumping into formulas.

Random variable of lifetime introduced properly

• Definition of curtate lifetime Kx
• Why Kx is a random variable
• Meaning of complete years survived
• Events Kx = 0, 1, 2, … explained using timelines
• Why death is always constrained to one-year intervals

This is the backbone of CM1 Part 2.

Probability structure made clear

• Meaning of Px and Qx
• Survival for k years and death in the next year
• Why probabilities are written as PxQx+k
• Why death is always modeled within one year

Expected present value explained naturally

• Present value of benefit as a random variable
• Why discounting depends on year of death
• Why EPV is used instead of deterministic values
• How summation naturally arises

You see where the famous Ax formula comes from instead of memorizing it.

Equation of value explained using business intuition

• Expected present value of income
• Expected present value of outgo
• Why pricing works on balance, not certainty
• How insurance companies survive long-term risks

Whole life assurance pricing done step by step

• Assumptions stated clearly
• Sum assured definition
• Benefit payable at end of year of death
• Single premium pricing logic
• Use of Ax values from tables

A full numerical example is solved to show how premiums are calculated in practice.

Types of life insurance policies introduced

• Whole life assurance
• Term assurance
• Pure endowment
• Endowment assurance

You understand how these policies differ conceptually and how their mathematics connects.

Who should watch this class

• CM1 students starting Part 2
• Students confused by mortality notation
• Students memorizing formulas without understanding
• Anyone interested in how insurers price life policies
• CS2 students revising mortality foundations

Teaching style

• Timeline-based explanation
• Slow and structured
• Concept before formula
• Business intuition linked to math
• Exam-oriented thinking

This class sets the foundation for all future CM1 pricing problems.
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