Someone asked me how to calculate bonuses for participating life policies. I asked the individual to provide me with the latest benefit illustration. The policy was already in-force for some time already. I will use this policy as an example on how to calculate bonuses. Unfortunately, there was insufficient information to calculate bonuses for surrender values. So the illustration below is only for bonuses due to death claims.
The relevant information provided by the benefit illustration is shown below:
First, the benefit illustration clearly shows that the guaranteed death benefit at the end of year X is $87,420.17. This consists of two components, the sum assured of $50,000 and the accumulated attaching bonuses that were already previously declared amounting to $37,420.17. Sanctity check: 50000+37420.17 = $87,420.17.
To calculate the non-guaranteed death benefit at the end of year X, the following steps are required to be taken:
......