Page 261 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Likewise the total number of deaths within five years is 732 + 737 + 743 + 749 + 756 or 3,716, and
the probability of dying within five years is thus 3716/81822.
Probabilities of survival can also be expressed by the table. The chance of living one year
following age 35 will be a fraction of which the denominator0 is 81,822 and the numerator will
be the number who have lived one year following the specified age. This is the number who are
living beginning age 36, or 81,090, and the probability of survival for one year is therefore
81090/81822. These illustrations furnish an opportunity for a proof of the law of certainty. The
chance of living one year following age 35 is 81090/81822 and the chance of dying within the
same period is 732/81822. The sum of these two fractions equals 81822/81822 or 1, which is
certainty, and certainty represents the sum of all separate probabilities in this case two, the
probability of death and the probability of survival. In like manner many more instructive
examples of the application of these laws to the mortality table could be made, but they need not
be carried further at this point, for the subject will be fully covered in the chapters on "Net
Premiums".

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Caution A life table is necessary to give a good estimate of life expectancy.

Notes Insurance is the best guard for an individual and his family.

Task What is a risk analyzer? Find out how a risk analyzer tool works.

Did u know? The crude death rate as defined above and applied to a whole population can
give a misleading impression.

Self Assessment

Fill in the blanks:
11. ........................... rate is a measure of the number of deaths (in general, or due to a specific
cause) in a population, scaled to the size of that population, per unit of time.
12. Mortality rate is typically expressed in units of deaths per ............................ individuals per
year;
13. A mortality rate of ......................... (out of 1000) in a population of 100,000 would mean
950 deaths per year in that entire population, or 0.95% out of the total.

14. A person makes his own personal financial plan and decides where he would like to invest
his ............................
15. The .............................. can have some social security schemes for the socially and
economically backward sections of the society i.e., for people below the poverty line.

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