Life Insurance Premiums Flashcards
Influence on LI Premiums
Risk of mortality, insurer expenses (admin and commission), insurer’s investment of premium
Gross Premium
Mortality risk and expenses minus investment performance
Net Premium
Mortality risk minus investment performance
Net premium might be used when…
Adding additional coverage for existing policyholders
Premium Mode
Frequency at which premium must be paid
Fewer installments mean…
Lower cost
Single Premium
Can create significant cash value quickly
Paid Up/Limited Pay
No payments needed after a certain number of payments or certain age (60, 65, 70)
Paid up/limited pay often involves overpayment in early years and…
Insurer assumptions about dividends and/or accumulated cash value
Continuous Premium
Premium due at regular intervals for the full duration of the contract
Level Premium
Stay the same during the entire contract, or at least stated term of the contract
Without level premiums…
Cost goes up with age
Straight Life
Continuous and level premiums for the rest of the person’s life
