What is the definition of Indeterminate Premium Life Insurance Policy?
An Indeterminate Premium Life Insurance Policy is a kind of life policy that has adjustable premiums.
This type of whole life insurance policy will have a guaranteed maximum premium rate and an actual premium rate. The actual premium rate (which is lower than the maximum premium rate) is based on the current estimate of mortality, expense loadings and investment earnings. The actual premium rate changes depending on the changes of these factors, but the premium will never exceed the guaranteed maximum premium.
This provides the policy owner with the benefit of lower-than-expected premiums, when the market and other factors do well. However, if the market and other factors are not favorable, there still is a limit as to the level of premium he has to pay.
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