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
Property to be insured, or that is insured, which is located within the specific geographical region falling under the auspices of the fire department. ...
Premise that, out of a large group of people, a given number will die each year (conversely, a given number will remain alive each year) until all the people in that original group are ...
Bona fide organization that purchases insurance on a group basis on behalf of members. However, a group cannot be formed for the purpose of purchasing insurance since adverse selection ...
Fire that spreads substantial destruction. ...
Written notice, to be submitted by the claimant, required by the insurance company in the event of an insured peril. This notice is part of the standard property and casualty insurance ...
Retirement plan in which money is currently allocated to fund an employees' pension. ...
Coverage normally used on an indefinite basis under OCEAN MARINE INSURANCE and INLAND MARINE INSURANCE (TRANSPORTATION insurance): business risks for the damage or destruction of a ...
Federal legislation passed in 1988 (repealed November 23, 1989) that significantly increased the benefit amounts provided under medicare, both Part A and Part B, in the following manner: ...
number of people born as a percentage of the total population in any given period of time. ...
Have a question or comment?
We're here to help.