Yearly Price Of Protection Method

Definition of "Yearly price of protection method"

Steve Casey real estate agent

Written by

Steve Caseyelite badge icon

RE/MAX Real Estate Center

Actuarial procedure used to determine the cost of protection of a cash value life insurance policy on an annual basis. This cost of protection is developed by the following steps:

  1. Cash value at the beginning of the year plus the premiums paid in for that year are summed up, and the total is multiplied by an assumed interest rate factor of (1+i), resulting in the theoretical end of the year CASH SURRENDER VALUE;
  2. From the theoretical end of the year cash surrender value, the actual cash surrender value at the end of year and the dividends during that year are subtracted. The resultant figure is the sum allocated for MORTALITY CHARGES for that year;
  3. The sum allocated for mortality charges for that year is then divided by the AMOUNT OF RISK (face value end of the year cash surrender value) per $1000 of FACE AMOUNT.

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

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 ...

In some states, principle of tort law providing that in the event of an accident each party's negligence is based on that party's contribution to the accident. For example, if in an auto ...

Computation of the asset share value, surrender value, and reserve and the comparison of the three computations in order to judge the adequacy and equity of the tentative gross premium ...

Property insurance closely associated with fire insurance and usually purchased in conjunction with a Standard Fire Policy. Allied lines include data processing insurance, demolition ...

Single life insurance policy combining term life insurance and ordinary life insurance. If the insured dies during the term period, a multiple of the face amount is paid to the beneficiary. ...

One of four types of risks affecting the life insurance company as identified by the society of actuaries. This risk is associated with losses that the life insurance company may incur as ...

Same as term Ceding Company: insurance company that transfers a risk to a reinsurance company. ...

Gain when the underlying asset that moves in one direction is significantly different from the loss when the underlying asset moves in the opposite direction; for example, when gains and ...

Policy in which a premium (the deposit) is paid in the first policy year, in addition to the regular term insurance premiums required. The deposit is left to accumulate at interest for a ...

Popular Insurance Questions