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).

  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. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  5. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
  4. Retirement

    Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
  5. Insurance

    How Life Insurance Works in a Divorce

    Learn the implications of life insurance in a divorce situation, and identify the steps you should take to ensure your policies are sorted out post-divorce.
  6. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  7. Insurance

    Avoiding The Modified Endowment Contract Trap

    To avoid MEC status, flexible-premium policies must cap the amount that can be paid into the policy over a period of seven years.
  8. Home & Auto

    Make This The Year You Get Vacation Insurance

    With a few simple policy additions you can protect your holiday plans from being ruined.
  9. Economics

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  10. Economics

    How Does Reinsurance Work?

    Reinsurance is a practice in which insurers transfer portions of portfolios to other parties in order to reduce their exposure to claims.
  1. Does renters insurance cover personal injuries?

    Renters insurance provides two main forms of coverage – liability and contents insurance – and they are offered together ... Read Full Answer >>
  2. Does renters insurance cover jewelry?

    Renters insurance provides personal property coverage that covers your personal property – including jewelry – in case of ... Read Full Answer >>
  3. Why might landlords require renters insurance?

    Landlords can require renters insurance to lower their own liability and insurance costs. According to data from the Insurance ... Read Full Answer >>
  4. What is the expense ratio in the insurance industry?

    The expense ratio in the insurance industry is a measure of profitability calculated by dividing the expenses associated ... Read Full Answer >>
  5. Do beneficiaries pay taxes on life insurance?

    Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted ... Read Full Answer >>
  6. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center