chapter 7 summary Flashcards
premium
an exchange for insurance protection and a portion of the policy owners consideration
premium calculations include
mortality factor or mortality rate, interest factor, expense factor
mortality rate
the frequency of deaths in a defined population at a specific time interval
morbidity rate
the occurence of diseases in a defined population at a specific time interval
interest
a way insurance companies can lower premiums
expense factor
(or loading charge/factor) derived from operating expenses or funds that the insurer “pays out”
net (single) premium
a premium that makes provisions for mortality (death benefit) losses only while being influenced by the interest rate assumed, gender, the benefit to be provided, and the mortality rate
gross (annual) premium
premium that is charged by an insurer which is comprimised of the morality, interest, and expenses
factors that influence premium
age, gender, health, occupation, hobbies, habits, benefits, riders, premium mode
premium mode
the policy feature that permits the policy owner to select the frequency of premium payments
single premium funding
the policy owner pays a single premium that provides protection for the life of the policy
fixed/level premium funding
averages the single premium over the policy period
modified premium funding
characterized by an initial premium that’s lower than it should be during an introductary period (typically first 3-5 years)
graded premium funding
a contract that is characterized by a lower premium in the early years of the contract
flexible premium funding
allows policy owner to adjust the premiums throughout the life of the contract
earned premium
the amount to which an insurer is entitled since it provided coverage for a specific period
unearned premium
an amount of premium that the policyholder has paid to the insurance company, but coverage has not yet been provided
reserves
the funds set aside by an insurer and used to pay claims
legal reserve
the amount of funds an insurance commissioner requires an insurer to maintain based on the mortality table and an assumed rate that’s designed by the state’s commissioner or state insurance law
surrender cost index
uses a calculation formula in which the net cost is averaged over the number of years the policy was in force to arrive at the average cost-per-thousand for a policy that is surrendered for its cash value at the end of that period.
net payment cost index
uses same formula as surrender cost indec but it doesn’t assume that the policy will be surrendered at the end of that period
per capita
by the person or by the head
per stirpes
by the bloodline
