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
Still with life. This is a life insurance term used to describe the living benefits available under a life insurance policy such as a monthly retirement payment to an insured. ...
Statutory liabilities minus the interest MAINTENANCE RESERVE minus the ASSET VALUATION RESERVE. ...
Policy under which the insurer will pay the actual cash value of the property at the time the property was damaged or destroyed provided the loss falls within the limitations of the policy. ...
Standard set under the occupational safety and health act that sets allowable levels of worker exposure to such toxic substances as asbestos, certain chemicals, and radiation. In many cases ...
Additional amount of accidental death and dismemberment insurance not provided by the employee benefit plan (standard group life plan) that may be chosen by the employee. Generally, the ...
U.S. Supreme Court case in 1868 in which the decision (since overruled) was that an insurance policy was not an instrument of commerce, and thus did not involve interstate commerce ...
Smallest premium necessary to keep the life insurance policy in force regardless of the current mortality, interest, and expense experience of the insurance company. This type of premium is ...
Recipient of an indemnity. Indemnitor provider of an indemnity payment. ...
Behavior or character standing of an individual in a community. Some personal habits are considered in underwriting an insurance application. ...
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