Adjusted Premium Method

AAA

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.

INVESTOPEDIA EXPLAINS '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. Adjustable Premium

    An insurance premium that can move up or down over time based ...
  3. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  4. Premium

    1. The total cost of an option. 2. The difference between the ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. How An Insurance Company Determines ...
    Home & Auto

    How An Insurance Company Determines ...

  2. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  3. Getting the Whole Story on Variable ...
    Options & Futures

    Getting the Whole Story on Variable ...

  4. Variable Vs. Variable Universal Life ...
    Retirement

    Variable Vs. Variable Universal Life ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center