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Insurance

  Insurance   |   Terms
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  • October 31, 2022
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Target Premium

A type of premium that is associated with universal life policies that does not guarantee the existence of adequate funds to maintain the policy to any time period coverage or occurrence, including end of life. However, it gives an estimate of the amount that is “targeted” or planned, using conservative variables, to account for the policy. Typically, a target premium is estimated using a software and a bunch of inputs/ variables that are usually entered by an insurance  broker into a program.

The target premium is established by an insurance firm for each policy and age. The firm will usually pay a full commission limited to the target premium. The target premium may or may not be the same as the base premium (the latter could be less than the target premium, but will not exceed it).

A target premium is usually treated as a “no lapse premium” in the sense that if it is always paid, the respective insurance policy should not lapse.


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