Chapter 9: Cashflows of simple products Flashcards
Cashflows
Sums of money that are paid or received at particular times
Cashflow projection
sets out the expected payments and receipts under a contract
Payments from the provider
- immediate annuity
Regular annuity payments
Payments from the provider
- Term assurance
Lump sum on death
Payments from the provider
- Endowment assurance
Lump sum on maturity or earlier death.
Possible lump sum on discontinuance.
Payments from the provider
- Interest-only loan
Loan amount
Payments from the provider
- Repayment load
Loan amount
Payments from the provider
- Motor insurance policy
Claim amounts
Amounts of payments known in advance?
- Immediate annuity
Yes - if level or fixed increases
No - if index-linked increases
Amounts of payments known in advance?
- Term assurance
Yes, unless sum assured is indexed
Amounts of payments known in advance?
- Endowment assurance
May be known if without-profit, unknown if unit-linked and partly known / unknown if with-profit.
Discontinuance payment may be unknown.
Timing of payments known in advance?
- Immediate annuity
Yes, but unknown number of payments.
Amounts of payments known in advance?
- Motor insurance policy
No, it depends on the size of the claim
Timing of payments known in advance?
- Motor insurance policy
No, it depends on when the claim occurs, is reported and on length of claim settlement.
