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
Life or health insurance policy written on an applicant who has passed a medical examination and signed the application but has not paid the premium due. ...
Condition in which buildings are built with sealed windows resulting in poor ventilation causing occupants to experience dizziness, nausea, respiratory problems, headaches, fatigue, sinus ...
Percentage of total assets set aside by an insurance company to provide for unexpected losses. In general, a minimum of a 5% surplus ratio (5 cents in reserve for each $1 of assets) is ...
Individual or entity who enters into a contract or other legal proceeding, such as a lawsuit. ...
Contractual rights to a stipulated percentage of the increase in the value of an insurance agency over a given future period of time. They are used to convey a percentage of the increase in ...
Same as term Consumer Credit Protection Act: 1968 federal legislation that makes it mandatory for lenders to disclose to credit applicants the annual interest percentage rate (APR) and any ...
Termination of premium payments by an employer on behalf of an employee to an employee benefit plan. ...
Circumstance under which there is a significant deviation of the actual aggregate losses from the expected aggregate losses. For example, a hurricane is a hazard that is catastrophic in ...
Legal document setting out the rules to be followed by a trustee in administering assets of a trust. The trust agreement may limit investment of trust assets to specified types of ...
Have a question or comment?
We're here to help.