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Main Insurance Terms net payment method of comparing costs

net payment method of comparing costs



See alsointerest adjusted cost,life insurance cost Related Terms: Dictionary of Insurance Terms interest adjusted cost

procedure for calculating the cost of life insurance, taking into account the time value of money (investment return on sums placed in premium dollars had these sums been invested elsewhere). There are several ways to calculate interest adjusted cost based on time value of money.

Dictionary of Insurance Terms life insurance cost

amount paid to an insurer. Determination of the actual cost (not the price paid) of a life insurance policy has been widely discussed for many years in life insurance and consumer circles. The traditional or net cost method (that adds a policy's premiums, and subtracts dividends, if any, and cash value) does not consider the time value of money. The linton yield method, a theoretical approach, attempted to remedy this by comparing a cash value policy with a combination of decreasing term insurance and the yield of a side fund of bonds and other investments. Other methods have been proposed. At present many states require prospective insureds to be given interest-adjusted cost figures that do take into consideration the time value of money. This method is not altogether practical for interest sensitive policies, but it is generally felt that present work toward a new approach will eventually result in a useful means of comparing the costs of these policies.



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net payment method of comparing costs