Define and calculate payoffs under each of the following options embedded in insurance and annuity contracts: guaranteed minimum death benefit, guaranteed minimum maturity benefit, guaranteed minimum income benefit, and guaranteed minimum withdrawal benefit.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Embedded Options in Life Insurance and Annuity Products. 12 min read, ~1,729 words.
Every GMxB payoff is max(account value, guaranteed base); the insurer covers the shortfall, a put on the fund struck at the guaranteed base. GMDB pays on death, GMMB at maturity if alive, GMIB at annuitization, GMWB through scheduled withdrawals even after the fund hits zero. Four base mechanics: return of...
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- Example 1
- Example 2
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Learning objectives
- 7a
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