Dependence between times of death of coupled lives is said to be of a
short-term type if the probability of death of the bereaved life is highest in
the first period (six months or a year, say) after death of the partner. A
multiple state model is introduced, allowing for this type of dependence, which
is applied to a life annuity portfolio. The estimation results show that
short-term dependence is clearly present and that the bereaved lives feature an
excess mortality, when compared to lives whose partner is still alive.
Numerical illustrations involve the pricing, valuation and mortality profit
analysis of contingent insurance contracts (where a benefit is payable on death
of one particular person provided they die after their partner has already
passed away) and reversionary annuities (where the death of one life triggers
the payment of annuity benefits on the life of the surviving partner).