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
Employee of a state insurance department who audits statements of insurance companies to determine their continued solvency. ...
Major credit insurer of the early 20th century that merged into the London Guarantee and Accident Co. in 1931. ...
Money that is lent. In life insurance, a loan can be taken against the cash value of a life insurance policy at any time. The policyholder does not have to repay the loan until the policy ...
Coverage under the Homeowners Form-4 (HO-4) for the insured's personal property and loss of use against fire and/or lightning; vandalism and/or malicious mischief; windstorm and/or hail; ...
Tool of risk management used for risk financing by local governments. The technique is for many local governments to combine resources in order to self insure a particular line of business, ...
INSURANCE health insurance policy providing coverage for an insured's medical expenses except those that are specifically excluded. This may be the most advantageous medical expense policy ...
Interest adjusted method that measures the cost of life insurance. Named for the late distinguished actuary M. Albert Linton. This method compares a whole life policy with a combination of ...
Liability coverage mandated by the employee retirement income security act OF 1974 (erisa) under which employers are required to purchase insurance to cover their contingent liability for ...
Insurance for accountants covering liability lawsuits arising from their professional activities. For example, an investor bases a buying decision on the balance sheet of a company's annual ...
Have a question or comment?
We're here to help.