A Net Premium Valuation is an actuarial calculation, used to place a value on the liabilities of a life insurer.

Background

It involves calculating a present value for the contractual liabilities of a contract, and deducting the value of future premiums. Both contractual liabilities, and future premiums in this calculation allow only for mortality and interest. The key with a net premium valuation is that the premiums being valued are theoretical measures - they make no reference to the actual premiums being charged by the insurer.

This technique is a well established actuarial valuation method, that became popular because of its simplicity, consistency, and ease of calculation.

New Methods

With the advent of computers, the more complicated so-called Gross Premium Valuation calculation (which is also more realistic than the Net Premium Valuation) has become much more feasible, and is displacing the archaic Net Premium Valuation further from its historical position of prominence.

See also

• Gross premiums written
  Gross premiums written
  When a non-life insurance company closes a contract to provide insurance against loss, the revenues expected to be received over the life of the contract are called gross premiums written...
  
  
• Life Assurance
• Term life insurance
  Term life insurance
  Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or...
  
  
• Permanent life insurance
  Permanent life insurance
  Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy and the policy accrues cash value....
  
  
• Whole life insurance
  Whole life insurance
  Whole Life Insurance, or Whole of Life Assurance , is a life insurance policy that remains in force for the insured's whole life and requires premiums to be paid every year into the policy.-History:...
  
  
• Universal life insurance
  Universal life insurance
  Universal life insurance is a type of permanent life insurance based on a cash value. That is, the policy is established with the insurer where premium payments above the cost of insurance are credited to the cash value of the policy...
  
  
• Variable universal life insurance
  Variable universal life insurance
  Variable Universal Life Insurance is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner...
  
  
• Corporate-owned life insurance
  Corporate-owned life insurance
  Corporate-owned life insurance , also known as dead peasant life insurance or janitors insurance, is life insurance on employees' lives that is owned by the employer, with benefits payable to the employer...
  
  
• Servicemember' Group Life Insurance
• Segregated fund
  Segregated fund
  A Segregated Fund is a type of investment fund administered by Canadian insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death. As required by law, these funds are fully...
  
  s
• Annuity
  Annuity (finance theory)
  The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time. This usage is most commonly seen in discussions of finance, usually in connection with the valuation of the stream of payments, taking into account time value of money...
  
  
• Independent Financial Adviser
  Independent Financial Adviser
  Independent Financial Advisers or IFAs are professionals who offer independent advice on financial matters to their clients and recommend suitable financial products from the whole of the market...
  
  s
• Estate planning
  Estate planning
  Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses...
  
  
• Retirement plan
• False insurance claims
  False insurance claims
  Insurance fraud or false insurance claims are insurance claims filed with the intent to defraud an insurance provider.-Health insurance fraud:...