Net Premium

Net premium in insurance can be defined in many ways. If an insurer passes on some of its insured risk to other insurers/reinsurers, it also passes on some of the gross premium income. What is left is its net premium income. An insurance policy’s net premium is calculated as the premium required to cover a guaranteed benefit (minus bonuses and expenses).Vauling insurance liabilities using the net premium method takes the present value of net liabilities (the present value of future benefits excluding future bonuses) minus the present value of future net premiums.