Reserve
The liability the insurer sets aside to fund future benefits, built from early-year overcharges under level premium plans, the policyowner's cash value being the reserve backing permanent insurance.
Drill all 803 terms as flip-card flashcards in the Exam Engine →
Practice This Concept
An insured pays a full annual premium of $1,200 for a life policy and cancels after three months. The $300 portion covering the three months of protection already provided is known as the:
Earned premium — The earned premium is the portion of the premium that corresponds to the period of coverage already provided, here three months of the twelve-month policy, or $300. The unearned premium is the $900 remaining for the nine months of future coverage, which is ordinarily returned to the policyholder upon cancellation. The earned and unearned split matters for cancellation refunds, for the insurer's financial statements and unearned premium reserve, and for accounting when policies are replaced. Level and gross premium describe pricing structure, not the allocation of premium over the policy period.
National insurance concept
In insurance mathematics, the 'chance of loss' is best described as:
The probability that a loss will occur for a given exposure unit or group — The chance of loss is the probability that a loss will occur — for an individual exposure it is the likelihood of that person's loss, and for a group it is the expected proportion of the group that will suffer losses. Actuaries estimate this probability from historical data, and the law of large numbers makes the estimate more reliable as the pool grows. The chance of loss is the foundation of premium setting and reserve calculation in every insurance line.
National insurance concept
- General InsuranceAn insured pays a full annual premium of $1,200 for a life policy and cancels after thr…
- General InsuranceIn insurance mathematics, the 'chance of loss' is best described as:
- Life InsuranceIn a term life insurance policy, the insurer's limit of liability is best described as:
- Life InsuranceWhich feature is characteristic of a traditional whole life insurance policy?
- Life InsuranceA life insurance policy contains a war exclusion. If the insured dies while serving in …
- Life InsuranceA business sets aside its own funds to pay for expected minor losses rather than buying…
Practice all general insurance questions →