Dread disease and cause specific mortality: exploring new forms of insured loans

The relevance of critical illness coverage and life insurance in cause specific mortality conditions is increasing in many industrialized countries. Specific conditions on the illness and on death event, providing cheapest premiums for the insureds and lower obligations for the insurers, constitute interesting products in an insurance market looking for offering appealing products. On the other hand the systematic improvement in longevity gives rise to a market with agents getting older and older and the insurer pays attention to this trend. There exist financial contracts joined with insurance coverage and this happens in particular in the case of the so called insured loan. Insured loans are financial contracts often proposed together with a term life insurance in order to cover the lender and the heirs against the borrower's death event within the loan duration. The paper explores new insurance products that, linked to an insured loan, are founded on specific illness hypotheses and/or cause specific mortality. The aim is to value how much the insurance costs lighten with respect to the traditional term insurance. The Authors project cause specific mortality rates and specific diagnosis rates, in this last case overcoming the discontinuities in the data. The new contractual schemes are priced. Numerical applications show, also by several graphs, the rates projection procedure and plenty of tables report the premiums in the new proposed contractual forms. The complete amortization schedule closes the work.