BU483 Lecture Notes - Lecture 5: Payment, Life Insurance, York Region Transit
Document Summary
Clie(cid:374)t (cid:373)akes (cid:862)deposits(cid:863) rather tha(cid:374) pa(cid:455)i(cid:374)g pre(cid:373)iu(cid:373) Cost-of-insurance (coi) this determines how much you pay (usually per year: example, coi = /year for ,000 coverage. Insurer takes money out of the deposits to pay the coi: the build-up of deposits is the (cid:862)reser(cid:448)e(cid:863) If the reserve runs dry, the policy expires: can determine how much you want to deposit (can be by month or can dump a lump sum in) Two options with coi increasing schedule (yrt) yearly renewable term deposits increase each year level schedule (lcoi) level cost of insurance deposits remain the same over time: can switch between the two. When calculating coi, they will subtract reserve from coverage amount but max risk is ,000. With ulp, because they have to pay both they always calculate coi based on the amount of the death benefit (for example ,000) since that is minimum they are liable for.
