Comparative Interest Rate Method
What Does Comparative Interest Rate Method Mean?
The comparative interest rate method is a technique for calculating the cost differences between two insurance policies. This method is interest-adjusted, meaning it takes interest costs into account. Typically, it compares the cost differences between a decreasing term policy with a side fund and a whole life policy.
Insuranceopedia Explains Comparative Interest Rate Method
The comparative interest rate method is frequently used in the insurance industry because it helps prospective life insurance buyers determine which policy may be best suited for their needs. Interest is a crucial variable in life insurance, as it can significantly impact the policy’s value. If a particular policy is found to be more favorable after applying the comparative interest rate method, it can serve as a strong selling point for that policy.
