Tag: annuity
Introduction An annuity provides an individual or a household with insurance against living too long. In exchange for a one-time premium payment, the insurer agrees to make periodic payments to the insured for life. In theory, annuities seem like a valuable product for many retirees given an uncertain date of death. However, in practice, few…
Abstract Using the Lee-Carter mortality model, we quantify aggregate mortality risk, the risk that annuitants might live longer than predicted by the model. We calculate that a markup of 4.3 percent on an annuity premium, or else shareholders’ capital equal to 4.3 percent of the expected present value of annuity payments, would reduce the probability…
