Cash Accumulation Method

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  2. Death Benefit

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

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

    1. The total cost of an option. 2. The difference between the ...
  5. Liquidity

    1. The degree to which an asset or security can be bought or ...
  6. Asset

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

    How Much Life Insurance Should You Carry?

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

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  3. Options & Futures

    Cashing In Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  4. Home & Auto

    A Multipurpose Future Planning Tool

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

    Homeowners Insurance Losers: States That Pay Most

    Which states charge you the most for homeowner's insurance? Hint: They're regularly featured on the Weather Channel.
  6. Professionals

    Helping Clients Choose Long-Term Care Insurance

    The need for long-term care has become an inescapable (and pricey) issue for retirees. Here's what financial advisors can do to help.
  7. Stock Analysis

    3 Things That Could Hold Intuitive Surgical Back

    Taking a long-term view that favors Intuitive Surgical developer increasing in value, doesn't mean that there are near-term headwinds facing this company.
  8. Insurance

    Life Insurance: How Much Does Age Raise Your Rate?

    If you need life insurance, try to get it before your next birthday. Here's why.
  9. Retirement

    Healthcare: What Are You Really Paying For?

    Long-term care costs rise fast and long-term care providers bundle services together, making it tougher for families to understand what they are paying for
  10. Retirement

    4 Myths You Don’t Know About Medicare

    Here are four common misconceptions about Medicare, the federal government’s health insurance program for people who are 65 and older or disabled.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center