FAM: Survival and discounting must both match the payment time
A life-contingent benefit requires a financial discount factor and a probability that the relevant condition is met. Survival at the beginning of a period differs from survival at its end. Label the benefit’s timing explicitly.
Worked example or practice scenario
A benefit of 1,000 is payable at time 2 only if a person survives. If annual survival probabilities are .98 then .97, and annual effective interest is 4%, EPV = 1,000×.98×.97/(1.04)² ≈ 878.88.
Try this next
Write the event indicator and discount term before multiplying. Then move the payment to time 1 and recompute. Do not add annual death probabilities when a product of conditional survival probabilities is required.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.
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