Rate Of Return Method Of Cost Comparison
Approach advocated by the Federal Trade Commission (FTC) in its 1979 life insurance cost disclosure report. It calculates the rate of return earned by the savings element of a life insurance policy in these steps:
- determine pure cost of protection (mortality expectation).
- determine amount of dividends paid (if it is a. participating policy).
- subtract the pure cost of protection plus dividends from the GROSS PREMIUMS paid into the policy. This is the savings element.
- the rate of return equals the interest rate at which the savings element must be accumulated in order to equal the cash value of thepolicy at some future specified time period.
Popular Insurance Terms
Type of guaranteed investment contract (GIC) under which a series of payments are made into an account (usually monthly to reflect the frequency of the employee's salary) of an insurance ...
Investment risk associated with the relationship between the yield (interest, dividends, and capital) of financial instruments and the rate of inflation in the economy. For fixed income ...
In health insurance, the applicable average rate charged for a semiprivate room in the geographical area in which the charge is incurred. ...
Language in the insurance policy that can be considered unclear or subject to different interpretations. Under these circumstances, the courts have generally ruled in favor of insured ...
Insurance policy under which payment is made for a loss not subject to any deductible or under which payment is made up to the limits of the policy, and then an excess insurance policy ...
Pre-determined dollar amount up to which an insurance policy will cover an insured each year, regardless of the number of claims submitted or defense costs associated with these claims. For ...
Form of state rating law that requires prior approval of property and casualty insurance premiums by the state insurance department for certain changes. Here, a state generally allows new ...
Legislation that raised taxes on life insurers and further defined life insurance. Because the tax equity and financial responsibility act of 1982 and 1983 (TEFRA) failed to raise the ...
Illness or sickness such as cancer, poliomyelitis, leukemia, diphtheria, smallpox, scarlet fever, tetanus, spinal meningitis, encephalitis, tularemia, hydrophobia, and sickle cell anemia, ...
Have a question or comment?
We're here to help.