Adjustable Feature Details

An adjustable feature is a provision found in insurance agreements. These features could include the adjustment of ratings and commission and life insurance factors, rating modification, and/or sliding scale commissions. Both parties agree to adjust the final premium rate (the amount a customer pays in an insurance policy) or the final agreed commissions with formulae that both parties generated during the contract. Parties adjust the values, terms, and variables in the formula so that they both benefit from the agreement.

Most insurance companies use adjustable features to generate cash flow for the insurer as well as the reinsured. This is also why several insurance companies are accountable for the risks or factors that may significantly affect the business. The majority of the adjustable features in a contract cover these factors. Usually, insurance companies consider the liabilities and aspects that an adjustable feature may affect before creating formulae.

Insurance companies also use adjustable features in making estimates. They include adjustable features in their calculations to examine risk factors and how they can prevent the preconceived risk. Insurance companies calculate these estimates using business models and graphs with the overall cash flow between the insurer and the reinsured. A cash flow is the net amount of cash being received and sent by one business [entity] to another. Other than that, adjustable features can determine the results of the contract, including performance and cash flow.

Adjustable Feature Example

The most common examples of adjustable features are adjustable life insurances. Adjustable life insurance is an example of adjustable features since they are used in insurance or reinsurance contracts to adjust and balance the two parties' risks and benefits. They also modify and adjust the factors included in the treaty, with or without formulae. Adjustable life insurances also adjust the policies included in the agreement.

The changeable features include risks, premiums, and possible benefits. However, the most frequently changed features are cash flow and the amount the insured must pay. The adjustments balance the value of purchase with the quality of service. For instance, a sudden increase in an individual's cash flow may outbalance the cash the company expects to receive in payments.

Adjustable Feature vs. Adjustable Life Insurances

Adjustable life insurances are hybrids of term-life and whole-life insurances. Policyholders can choose to adjust policy features such as the period of protection, premiums, and the payment duration. Adjustable life insurances also use the term "cash-value," or the interest-bearing savings component, in organizing modifications.

Adjustable features and adjustable life insurance, even with their similarities, in function, are not the same thing. First off, most adjustable features use formulae and financing models to generate the agreement. Adjustable life insurance does not. Adjustable life insurance is also frequently used in term-life and/or whole-life insurances. Again, adjustable features don't. Lastly, adjustable life insurance itself is an adjustable feature.