DEFINITION of 'Yearly Price Of Protection Method'

A method used in actuarial analysis, which is often used in the insurance industry. The Yearly Price Of Protection Method is used to find out the cost of protection of a policy that includes a savings component such as a cash value life insurance policy. It relates to computations that involve insurance probability estimates.

BREAKING DOWN 'Yearly Price Of Protection Method'

The cost of this protection is based on the cash value at the beginning of the year plus premiums paid for that year. The determined total is multiplied by an assumed interest rate factor of (1+i). The result equals the part of the life insurance premiums paid that can be received if the policy is canceled, in other words, the cash surrender value which only applies to ordinary life and limited policies, not term insurance.

RELATED TERMS
  1. Life Insurance

    A protection against the loss of income that would result if ...
  2. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  3. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  4. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  5. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  6. Insurance Premium

    The amount of money that an individual or business must pay for ...
Related Articles
  1. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  2. 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.
  3. Financial Advisor

    Permanent Life Policies: Whole Vs. Universal

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

    How Cash Value Builds In A Life Insurance Policy

    If you have permanent life insurance, more of your insurance premium goes to cash value in the early years of your policy: a step-by-step guide.
  5. 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.
  6. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  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

    Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  9. 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.
Hot Definitions
  1. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  3. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  4. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  5. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  6. SEC Form 13F

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