In exchange for monthly premiums, Sun Life makes monthly pension payments to the plan for the lifetime of the covered pensioners. The monthly premiums are locked in on the contract start date. If pensioners happen to live longer than expected, Sun Life’s monthly payments will cover the difference.
Misestimating longevity can result in a 3% to 4% increase to liabilities for each year the average plan member lives beyond expected*. Insuring against this risk can cost less.
* Sun Life estimates