REU 2005 – Estimating the Cost of Extending a Term Insurance Policy

A term life insurance policy pays out a death benefit to its beneficiary provided that the insured individual dies within the term of the policy.. There are situations in which the insurance company may wish to extend the length of the term life insurance policy. Since such a contract extension increases the length of time that the individual is insured, there is an associated cost to the company. The focus of this project, proposed by John Hancock Life Insurance Company, is to use various mathematical and statistical tools to estimate this cost. The final product includes a Microsoft Visual Basic for Applications software tool, which actuaries at John Hancock can use to estimate the cost of extending any given term life insurance policy.