Deferred Term Insurance EPV Calculator
Calculate the expected present value of an n-year term insurance whose coverage starts after the deferment period.
Description
Calculate the expected present value of a level term-insurance benefit that begins after a selected deferment period.
Deferred Term Insurance EPV helps you calculate the expected present value of a level term-insurance benefit that begins after a selected deferment period.
This calculator isolates the value of death cover that only operates after the insured survives a waiting period. It is useful for checking deferred riders, classroom exercises, and simplified comparisons between immediate and deferred protection.
When to use Deferred Term Insurance EPV
This calculator isolates the value of death cover that only operates after the insured survives a waiting period. It is useful for checking deferred riders, classroom exercises, and simplified comparisons between immediate and deferred protection.1
How the calculation works
The deferred contract equals an immediate term-insurance value at the end of the waiting period multiplied by the probability-discount factor for reaching that point. Deaths during the deferment produce no payment; covered deaths are assumed paid at the end of their policy year.
EPV = B × (vp)^m × vq × [1 − (vp)^n] / [1 − vp] 1Inputs and interpretation
Here B is the level benefit, m is the number of deferred years, n is the later coverage term, q is constant annual mortality, p = 1 − q, and v = 1 / (1 + i).
Assumptions and limitations
Constant mortality and annual end-of-year payments are simplifying assumptions. The tool does not model changing select or ultimate rates, lapses, expenses, premiums, multiple decrements, or a benefit payable immediately on death.
References
-
Supplementary Notes for Actuarial Mathematics for Life Contingent Risks — Society of Actuaries