A life assurance company issued a contingent assurance policy to the twin brothers, Alex and John. The
Question:
A life assurance company issued a contingent assurance policy to the twin brothers, Alex and John. The policy provides £300, 000 immediately on the death of Alex, if John is alive at that date. The brothers are exactly 50 years old when the policy is signed. The insurer treats the lives of John and Alex as independent. Annual premiums are payable in advance until the first death. Commission is 20% of the premium in the first year and 5% of all premiums after the first year. We assume 4% per annum interest, and a¨50:50 = 17.688 and a¨60:60 = 14.090. It is now ten years since the issue date; both brothers are still alive and the due premium for the current year has not yet been paid. The brothers have agreed to offer the policy for surrender to the insurer.
Calculate the gross annual premium that the brothers accepted to pay when they took the contingent policy.
Business Law Principles for Today's Commercial Environment
ISBN: 978-1305575158
5th edition
Authors: David P. Twomey, Marianne M. Jennings, Stephanie M Greene