Net Level Premium Reserve

Definition of "Net level premium reserve"

Hulen Buckner real estate agent

Written by

Hulen Bucknerelite badge icon

Fathom Realty

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Maximum amount that an insurance company will pay under a liability insurance policy for claims resulting from a particular accident. This maximum amount applies regardless of the amount of ...

Condition in which an applicant has met an insurance company's standards. Requirements include a loss that is definable; fortuitous; one of a large number of homogeneous exposures; and ...

Coverage that provides two types of benefits, disability income (DI) and medical expenses. Sold by insurance companies whose business objective is the profit motive (as distinct from Blue ...

Employee stock ownership plan (ESOP); trust (ESOP) under which an employer received tax credit instead of a tax deduction for contributions. Until passage of the tax reform act of 1986, the ...

In which at least two insurance policies provide identical coverage for the same risk. ...

Temporary insurance contract providing coverage until a permanent policy is issued. In property and casualty insurance, some agents have authority to bind the insurance company to cover ...

Act that makes the liability cost for cleanup joint and several. Even if a party is only partially responsible for losses inflicted, that party may be liable for the payment of the total ...

End of a defined time period that dividends become payable to the policyholder. ...

Agency that sells insurance policies from both a stock insurance company and a mutual insurance company. ...

Popular Insurance Questions