Net Level Premium Reserve
Definition of "Net level premium reserve"
Fund that comes into existence because premiums for ordinary life insurance policies in their early years are higher than necessary for the pure cost of protection. These excess premiums, plus the interest credited, create the net level reserve. When an insured dies, the reserve comprises part of the death benefit. The net premium is calculated according to this fundamental actuarial equation: present value of future premiums = present value of future benefits.
This relationship holds only at the point of issue of a life insurance policy. Thereafter, future benefits will exceed future premiums because fewer premiums are left to be paid and benefits are coming closer to being due. The reserve makes up the difference between the future benefits and future premiums at any point. This reserve can be calculated on either a prospective or retrospective basis, but it is important to note that the various state minimum reserve valuation laws are stated in terms of the prospective basis.
Popular Insurance Terms
Deleveraging of the insurance company's balance sheet. ...
Policy that generates a savings element. Cash values are critical to a permanent life insurance policy. The size of a cash value buildup differs substantially from company to company. In ...
transfer of money from or an employer-sponsored pension or other qualified plan into an INDIVIDUAL RETIREMENT ACCOUNT (IRA) with out paying tax on the distribution. transfer of money from ...
Management tool through which a plan for evaluation, measurement, and improvement is implemented. The insurance entity can use this tool to analyze market trends, measure sales performance, ...
Special type of charitable remainder trust (CRT) under which a designated beneficiary (cannot be a charitable beneficiary) receives an annual fixed income. The grantor of the trust is ...
Surcharge, in retrospective rating of property and liability insurance, added to the basic premium rate charged to reflect fixed cost of adjusting or settling losses. ...
Federal law passed in 1920 that allows any seaman incurring bodily injury as the result of the performance of one or more functions of the job to bring a suit for damages against the ...
When we are young, we usually don’t take our retirement seriously and don’t even know the definition of an Individual Retirement Account (IRA). We become more preoccupied with ...
Insurance coverage that protects a contractor or other type of business providing a service for expenses incurred in the event a contract is not ratified by a foreign government. For ...
Have a question or comment?
We're here to help.