Fund life & health insurance Explain carefully why this statement is false The “net rate” takes...

Fund life & health insurance

Explain carefully why this statement is false

The “net rate” takes into consideration of the probability of the insured event happening during the term of the insurance, and the expenses insured by the insurer in maintaining the policy.

Expert Solution

This statement is false.

The ''Net rate'' is calculated by deducting the expected PV of future premiums from the present value of benefits from an insurance policy. It does not take into consideration the future expenses by the insurer for maintaining the insurance policy.

It is the gross premium or gross rate which does take into account future expenses also. The difference between net premium and gross premium will be equal to the PV of expenses minus the PV of future expenses.

jeff jeffy answered 2 years ago

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Fund life & health insurance Explain carefully why this statement is false The “net rate” takes...

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