ABSTRACT

In today's world, insurance products emerge not only as a means of protection but also an important investment tool. This paper takes into consideration the endowment insurance policy, dividend transactions, used as an investment tool. Dividend transactions are an attractive product due to the fact that it provides a source of capital for the company's growth. It is assumed that policyholders participate the investment funds in dividend transactions. After expenses, amounts of damages to be obtained according to the type of insurance at maturity and the options are met by the premiums paid by policyholders; the remaining amount is valuated in the investment fund. Since insurance policies are long term contracts, they are strongly influenced by changes in interest rates.

The paper covers determining the force of mortality by using GompertzMakeham function parameter values and modeling two state time-continues Markov chain in which development of a single endowment insurance policy with a level premium payment is modeled as a alive and dead. The modeling process provides convenience in terms of density on calculations and gives more effective results than other methods in premium calculations, division of the reserves and determining the cost of risk.