Adjusted Premium Method

DEFINITION of 'Adjusted Premium Method'

A calculation method used arrive at a life insurance policy's cash surrender value (CSV). There are three steps in the Adjusted Premium Method.

1. Calculate the first-year expense allowance
2. Arrive at the Adjusted Premium
3. Substitute the adjusted premium for the Net Level Premium used in the equation for arriving at the Prospective Reserve.

This is a term specific to the insurance industry.

BREAKING DOWN 'Adjusted Premium Method'

The cash surrender value (CSV) is the cash-out value that the policy holder would be paid upon cancellation of the policy. Adjusted Premium Method is not to be confused with the Net Level Premium Method, which is a way to calculate the Adjusted Premium (as seen in step three).

RELATED TERMS
  1. Adjusted Premium

    An adjusted premium is the premium of a life insurance policy ...
  2. Earned Premium

    The amount of total premiums collected by an insurance company ...
  3. Adjustable Premium

    An insurance premium that can move up or down over time based ...
  4. Net Premium

    The expected present value of a policy’s benefits less the expected ...
  5. Basic Premium Factor

    The acquisition expenses, underwriting expenses and profit, as ...
  6. Net Premiums Written

    The sum of premiums written by an insurance company over the ...
Related Articles
  1. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  2. Insurance

    How to Choose Permanent Life Insurance Policies

    When does it makes sense to buy a guaranteed rather than a non-guaranteed life insurance policy?
  3. Insurance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  4. Retirement

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  5. Insurance

    How Cash Value Builds In A Life Insurance Policy

    If you have permanent life insurance, more of your insurance premium goes to cash value in the early years of your policy: a step-by-step guide.
  6. Rate Increases

    If you’ve read any news stories about long-term care insurance in the last few years, you’ve probably read horror stories about astronomical premium increases that left consumers ...
  7. Insurance

    Strapped For Cash? Try Insurance-Premium Loans

    If you need more life insurance than you can afford, insurance premium financing can help. But you need to look at the pros and cons.
  8. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  9. Term

    What's Universal Life Insurance?

    Universal life insurance is permanent life insurance that offers a savings element.
  10. Insurance

    How to Compare Permanent Life Insurance Policies

    How you can use the internal rate of return to compare and purchase a permanent life insurance policy.
RELATED FAQS
  1. How do I calculate insurance premium tax?

    Find out how your health insurance premiums can affect your income taxes, including when you may be able to deduct premium ... Read Answer >>
  2. How is my insurance premium calculated?

    An insurance premium is the money charged by insurance companies for coverage. Insurance premiums for services differ from ... Read Answer >>
  3. How can premium financing of life insurance help high net worth individuals (HNWI)?

    Discover the various benefits that premium financing of life insurance policies might enable high-net-worth individuals to ... Read Answer >>
  4. If I surrender this life insurance policy and take the $40,000, are there any tax ...

    I have a flex life policy for $100,000 that has a cash value or surrender value of $40,000. ... Read Answer >>
  5. How can an investor determine a company's annual return from looking at its financial ...

    Understand what a share premium account is, what funds go into the account and the specific purposes for which the funds ... Read Answer >>
  6. How do I calculate the combined ratio?

    Learn about the combined ratio and how it is calculated under a financial basis and a trade basis using the loss ratio and ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center