premium deficiency reserve

Dictionary of Insurance Terms for: premium deficiency reserve
premium deficiency reserve

supplementary life insurance reserve required by state regulators when the gross premium is lower than the valuation premium. Some life insurers are able to charge policyholders a premium that is lower than required by the reserve valuation system they use. This may be because mortality tables are outdated and their own experience reflects different loss statistics. But if the insurer charges a premium lower than that dictated in the calculation of policy reserves, it must set up a deficiency reserve for the difference.

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