interest adjusted method
Way of calculating the
relative cost of similar life insurance policies over a given period of
time that takes into account a policy’s premiums, illustrated dividends,
and future cash value as well as the timing of such cash flows. Timing is
important because consumers prefer to have a dollar today rather than the
same dollar next year, and this method reflects the fact that money has a
time value. The method also makes assumptions about the length of time a
policy will be in force, the dividends to be paid, and probable interest
rate.
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