Definition of "Surrender cost index"

Method of comparing the costs of a set of cash value life insurance policies that takes into account the time value of money. The true costs of alternative cash value policies with the same death benefit depend on a number of factors amount and timing of premiums paid, amount and timing of dividends (in the case of participating policies), time period involved, and the CASH surrender value. In evaluating a particular group of policies, a surrender cost index can be calculated using interest adjusted cost comparison. The index ranks the policies for the same period of time, say the first 20 years of the policy life, by cost per $1000 of face amount, showing the cheapest through the most expensive. In effect, the index illustrates the relative cost of acquiring a dollar's worth of each policy's cash surrender value after 20 years. Contrast with the net payments index, a ranking of policy costs using the traditional net cost method of comparison that ignores the time value of money and thus gives a less accurate picture of relative policy costs.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Premium income divided by the surplus account. ...

Low-cost life insurance sold by savings banks in the states of Connecticut, Massachusetts, and New York. SBLI is a popular source of life insurance in these states for two reasons: it is ...

Management philosophy developed by W. Edwards Deming, the thesis of which is the continuous improvement in quality through research in customer satisfaction and the empowerment of ...

Variation of ordinary life insurance under which current mortality experience and investment earnings are credited to the insurance policy either through the cash value account and/or the ...

Clause included in or attached to a fidelity bond designed to pay the losses that would have been paid under another specific bond had that specific bond's period of discovery not expired. ...

Amount of reinsurance accepted by a second reinsurer which is in excess of the original insurer's retention limit and the first reinsurer's first surplus treaty's limit. ...

Part of a marine cargo policy that exempts the policyholder from vouching for the seaworthiness of the vessel. For example, while a purchaser of hull marine insurance warrants that a ship ...

Amount designated as a future liability for life or health insurance to meet the difference between future benefits and future premiums, net level premium is determined so that this basic ...

Coverage that indemnifies a third party lender if a customer refuses to repay a loan made on a faulty product and the dealer who arranged the loan refuses to correct the fault. This ...

Popular Insurance Questions