A net premium valuation is an
actuarial
Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, pension, finance, investment and other industries and professions.
Actuaries are professionals trained in this discipline. In m ...
calculation, used to place a value on the liabilities of a
life insurer.
Background
It involves calculating a present value for the contractual liabilities of a contract, and deducting the value of future
premiums. Both
contractual
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of those a ...
liabilities, and future premiums in this calculation allow only for mortality and interest. The key with a net premium valuation is that the premiums being valued are theoretical measures - they make no reference to the actual premiums being charged by the insurer.
This technique is a well-established actuarial valuation method, that became popular because of its simplicity, consistency, and ease of calculation.
See also
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Gross premiums written
In the insurance industry, gross premiums written is the sum of both direct premiums written (see next paragraph) and assumed premiums written, before deducting ceded reinsurance. Direct premiums written represents the premiums on all policies the ...
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Life Assurance
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death ...
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Term life insurance
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guarante ...
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Permanent life insurance
Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract between an insurance policy
In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the policyhol ...
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Whole life insurance
Whole life insurance, or whole of life assurance (in the Commonwealth of Nations), sometimes called "straight life" or "ordinary life", is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided r ...
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Universal life insurance
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Variable universal life insurance
Variable universal life insurance (often shortened to VUL) is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which o ...
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Corporate-owned life insurance
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Servicemembers' Group Life Insurance
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Segregated fund
A segregated fund or seg fund is a type of investment fund administered by Canadian insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital u ...
s
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Annuity
In investment, an annuity is a series of payments made at equal intervals based on a contract with a lump sum of money. Insurance companies are common annuity providers and are used by clients for things like retirement or death benefits. Examples ...
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Independent financial adviser
An independent financial advisers (IFA) is a professional who offers independent advice on financial matters to their clients and recommends suitable financial products from the ''whole of the market''. The term was developed to reflect a United ...
s
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Estate planning
Estate planning is the process of anticipating and arranging for the management and disposal of a person's Estate (law), estate during the person's life in preparation for future incapacity or death. The planning includes the bequest of assets to ...
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Retirement plan
A pension (; ) is a fund into which amounts are paid regularly during an individual's working career, and from which periodic payments are made to support the person's retirement from work. A pension may be either a "Defined benefit pension pla ...
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False insurance claims
Insurance fraud is any intentional act committed to deceive or mislead an insurance company during the application or claims process, or the wrongful denial of a legitimate claim by an insurance company. It occurs when a claimant knowingly attem ...
Life insurance
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