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Financial advisory
RES5Financial Advisory Services✓Under a DB4 (higher of units or sum assured) ILP, the sum assured is S$100,000, the value of units is S$40,000, and the annual cost of life cover is S$3.00 per S$1,000. What is the monthly mortality charge?
For DB4, the charge applies only to the sum at risk (v - u) because the units already cover part of the benefit. Sum at risk = S$100,000 - S$40,000 = S$60,000. Monthly = (S$3.00 / S$1,000 / 12) x S$60,000 = S$180 / 12 = S$15.00.
Charging on the full sum assured of S$100,000 (a DB3 basis) gives S$25.00; under DB4 the mortality charge is only on the excess of the sum assured over the value of units.
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