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
Policy designed to act as a supplement to Medicare. The supplementation is in the form of additional benefits to that provided by Medicare. The additional benefits are in the form of ...
Individual or entity who enters into a contract or other legal proceeding, such as a lawsuit. ...
Federal agency that researches injury and illness arising from workplace hazards and recommends standards for maximum exposures to hazardous substances. ...
Physician who conducts physicals of applicants for life and/or health insurance. This physician is selected by the insurance company at its expense. ...
Indemnification bond under which a stock certificate holder who loses the original certificate will be issued a duplicate. The indemnity bond guarantees that if the original stock ...
Stipulation that no claim will be paid until a loss exceeds a flat dollar amount or a given percentage of the amount of insurance in force. After the loss exceeds this dollar amount or ...
The term elevator collision insurance or elevator liability insurance is included in business liability insurance policies in order to cover potential damages suffered by the elevator or ...
Damaged insured property in receipt by the insurance company resulting from abandonment and salvage, subrogation, and reinsurance. ...
Part of an ocean marine policy that provides coverage of goods through all of the stages of a journey. Coverage begins when goods leave the warehouse of a shipper, and continues until they ...
Have a question or comment?
We're here to help.