Comparative Interest Rate Method

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DEFINITION of 'Comparative Interest Rate Method'

An interest-adjusted method of calculating the difference in cost between insurance policies. The comparative interest rate method is used to illustrate the difference between the cost of a whole life policy and a decreasing term policy with a side fund. This comparison allows agents and consumers to determine which type of insurance might be the best for them in their situation.

INVESTOPEDIA EXPLAINS 'Comparative Interest Rate Method'

The rate of return earned by the money in the side fund is referred to as the Linton Yield. This rate will grow the side fund until it becomes equal with the cash value in the whole life policy. It is named after the renowned insurance actuary M. Albert Linton.

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