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
Cost computation form that assumes retirement and commencement of annuity payments on the first day of the month nearest the birthday when a retiree reaches normal retirement age. Most ...
Health insurance contract sold to an individual to provide coverage for medical expenses. Contrast with group health insurance. ...
The space created between the total death benefit and the cash value of a universal life insurance policy. An automatic increase in the death benefit results when the cash value approaches ...
Clause in an insurance policy that describes the administration and submission of claims procedure. ...
Rates used by a property and casualty insurance company that are different from that suggested by a rating bureau. An insurance company may use deviated rates because it feels they are more ...
Insurance company that is organized under the state laws by which the company is licensed and that is called a domestic insurer. Also, this insurance company may be chartered and licensed ...
Wording in life insurance policies to determine the order of deaths when the insured and the beneficiary die in the same accident. For example, if the insured is deemed to have died first, ...
Obligation of the insured to report losses from a covered peril to the insurance company or its representative as soon after its occurrence as possible. ...
Settlement choice under a life insurance policy whereby a beneficiary may elect to have the death proceeds paid in the form of a joint and survivor annuity. ...
Have a question or comment?
We're here to help.