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
in health insurance, reimbursement for an insured's medically related expenses, including room and board, surgery, medicines,anesthetics, ambulance service to and from a hospital, ...
Insurance company that transfers a risk to a reinsurance company. ...
Situation where the United States dollar rises in value in comparison with other foreign currencies resulting in the decrease in the value of the foreign securities. This is due to the fact ...
Total amount of insurance that an insurer will write on any specific city block. Such a limit will reduce the insurer's exposure to a potential catastrophic occurrence, such as a hurricane, ...
Standard State Valuation and Non forfeiture Law approved by the national association of insurance commissioners (naic) in 1942. This law is named for Alfred N. Guertin, the actuary who ...
Provision found in property and liability insurance policies that mandates that the insured notify the insurance company as soon as possible following the occurrence of a covered loss under ...
Synopsis of the key financial figures concerning the pension plan that is contained in the form 5500 that must be filed annually with the Internal Revenue Service. This report must be given ...
Accounting method of establishing data on an annual basis. ...
Method of accessing capital by the insurance industry in order to hedge against a future catastrophic occurrence. The mechanism works as follows: Primary insurance company AJAX pays a ...
Have a question or comment?
We're here to help.