Actuarial cost assumptions

Definition:

Actuarial cost assumption is an estimation done by the actuarial department of financial services. This estimation includes assumptions of uncertain variables in a life insurance policy. This addresses the purpose of calculating the cost of insurance, pension, and benefits. It is based on mathematical and statistical models that involve risk and probability evaluation for a particular event.

Description:

  • Actuarial Cost assumptions in a life insurance policy consider the cost of return on investments and the life expectancy of the pension holder
  • This helps figure out the present costs of the plan and its present or future benefits
  • Actuarial assumptions may turn out to be wrong sometimes which are further rectified by actuarial adjustments
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ADV/4/22-23/120