Cash Accumulation Method


DEFINITION of 'Cash Accumulation Method'

A mathematical method of comparing the costs of different cash value life insurance policies. The cash accumulation method assumes that the death benefits for the policies are equal and unchanging. The aggregate total difference between the premiums paid into the two policies is then evaluated over time. Ultimately, this comparison is used to rank policies according to cost effectiveness.

BREAKING DOWN 'Cash Accumulation Method'

Under the cash accumulation method, the policy that has the most cash value at the end of the trial period is considered the superior policy. This comparison requires that the same rate of interest be paid into each policy during the comparison.

  1. Cash

    Legal tender or coins that can be used to exchange goods, debt ...
  2. Liquidity

    The degree to which an asset or security can be quickly bought ...
  3. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  2. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  3. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  4. Home & Auto

    A Multipurpose Future Planning Tool

    Overfunded variable universal life insurance policies can be an all-in-one financial solution.
  5. Insurance

    How Life Insurance Works in a Divorce

    Learn the implications of life insurance in a divorce situation, and identify the steps you should take to ensure your policies are sorted out post-divorce.
  6. Entrepreneurship

    Creating a Risk Management Plan for Your Small Business

    Learn how a complete risk management plan can minimize or eliminate your financial exposure through insurance and prevention solutions.
  7. Insurance

    What's The Difference Between Medicare And Medicaid?

    One program is for the poor; the other is for the elderly. Learn which is which.
  8. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  9. Insurance

    Avoiding The Modified Endowment Contract Trap

    To avoid MEC status, flexible-premium policies must cap the amount that can be paid into the policy over a period of seven years.
  10. Entrepreneurship

    Top 10 Features Of a Profitable Rental Property

    Find out which factors you should weigh when searching for income-producing real estate.
  1. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  2. Does renters insurance cover water damage?

    An all-perils renters insurance policy does cover water damage, less the deductible, to personal property if the damage is ... Read Full Answer >>
  3. Does a Flexible Spending Account (FSA) cover massages?

    Flexible Spending Accounts (FSAs) cover massages for certain medical treatments. These treatments must be approved and prescribed ... Read Full Answer >>
  4. Does a Flexible Spending Account (FSA) cover Lasik?

    Flexible spending accounts (FSA) can be used to pay for qualifying LASIK procedures. LASIK is not the only laser eye surgery ... Read Full Answer >>
  5. Are Flexible Spending Account (FSA) expenses tax deductible?

    Flexible Spending Account (FSA) expenses are not tax deductible. The U.S. Internal Revenue Service (IRS) states you cannot ... Read Full Answer >>
  6. Does a Flexible Spending Account (FSA) cover acupuncture?

    A Flexible Spending Account (FSA) covers acupuncture. The Internal Revenue Service (IRS) has defined acupuncture as a qualifying ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center