Life Insurance Carriers have to put away part of the premiums they collect from policy owners into a reserve, which is a way for them to save monies to pay future claims for policy owners. This is a fantastic way to help ensure policy owners that monies will be there when they need it the most.
The reserves that carriers use can be classified as initial reserves, terminal reserves and mean reserves. I’ll try to explain a little of what these mean with a link to another resource for your research. The initial reserve is used primarily to determine dividend payments to policyholders. The terminal reserve is used to calculate the net amount at risk and the mortality experience to dividends every year, also could be used to calculate the surrender values of policies. The mean reserve is used primarily for the purpose of reporting to regulatory agencies and to owners.
Below is a link to another resource for your research…
life insurance reserves Definition | Business Dictionaries from AllBusiness.com