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.

BREAKING DOWN '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.

RELATED TERMS
  1. Yearly Price Of Protection Method

    A method used in actuarial analysis, which is often used in the ...
  2. Cash Accumulation Method

    A mathematical method of comparing the costs of different cash ...
  3. Policy Or Sales Illustration

    An educational tool that shows a prospective or new insurance ...
  4. Life Expectancy Method

    A method of calculating annuity payments, by dividing the balance ...
  5. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
  6. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
Related Articles
  1. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  2. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  3. Retirement

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  4. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  5. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  6. Insurance

    How To Read a Permanent Life Insurance Illustration

    To help you understand your life insurance policy, companies provide a permanent life insurance illustration. Here is how to read and understand it.
  7. Insurance

    3 Easy Ways to Save Big on Life Insurance

    Buying life insurance can be a tricky process. Here is some guidance for new and existing policies.
  8. Insurance

    Whole or Term Life Insurance? The Definitive Guide

    The math is clear, term life insurance is the right choice to protect against economic loss.
  9. Retirement

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  10. Financial Advisor

    Life Insurance for a Newborn Baby

    In most cases, this is unnecessary, though a small policy offers benefits in certain cases.
Hot Definitions
  1. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  2. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  3. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  4. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Beta

    Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. ...
Trading Center