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
Future benefits to be paid to the policyholders and beneficiaries, assigned surpluses, and miscellaneous debts. These primary liabilities take the form of reserves, which must be listed on ...
Table used by the Internal Revenue Service (IRS) in evaluating split dollar life insurance plans as to the extent of the economic benefit that is considered taxable ordinary income to the ...
Coverage on an all risks basis, subject to exclusions of war, wear and tear, loss resulting from delay, loss of market, infidelity of the insured's employee, loss due to rain, sleet, snow, ...
Federal legislation that established the old age survivors, disability, and health insurance (OASDHI). ...
To place insurance in force on an individual, individuals, or an organization. ...
Physician who conducts physicals of applicants for life and/or health insurance. This physician is selected by the insurance company at its expense. ...
Contract providing a monthly income benefit to members of a group of employees. A group annuity has the same characteristics as an individual annuity, except that it is underwritten on a ...
Same as term : Self Insurance: protecting against loss by setting aside one's own money. This can be done on a mathematical basis by establishing a separate fund into which funds are ...
Total of the insurance company's mortgages whose interest has not been paid for at least three months. These are mortgages upon which the insurance company is in the process of foreclosing, ...
Have a question or comment?
We're here to help.