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
Method of pricing property and liability insurance. It uses charges and credits to modify a class rate based on the special characteristics of the risk. Insurers have been able to develop a ...
Provision in a life insurance policy that permits the policy owner to name anyone as primary and secondary beneficiaries. The policy owner may change the beneficiaries at any time by simply ...
1969 federal legislation requiring states to treat national banks, including those whose principal offices are out of state, the same way for tax purposes as they treat their own ...
Legal obligation of an individual or business because of negligent acts or omissions resulting in bodily injury and/or property damage or destruction to another party. There are no ...
Person other than the annuitant as designated by the policyholder on whose life expectancy the annuity payment is also based. ...
Continuing on an indefinite basis. ...
Form provided for an inspection report. ...
Federal regulation of the money supply through changing commercial bank reserve requirements and interest rates, thereby stimulating the economy or deflating the economy. ...
Actuarial procedure used to determine the annual rate of return at which annual benefits would have to be gained from the cash value life insurance policy in order to equal the annual ...
Have a question or comment?
We're here to help.