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. Cash Accumulation Method

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

    An educational tool that shows a prospective or new insurance ...
  3. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  4. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  5. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  6. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. Retirement

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  5. 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.
  6. 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.
  7. Insurance

    What Is the Best Age to Get Life Insurance?

    Learn about the optimal time for purchasing personal life insurance and why delaying the buying decision may have costly consequences.
  8. Financial Advisor

    How New Rules Impact Indexed Universal Life Sales

    Indexed universal life insurance is growing in popularity. Here's how recently enacted new rules will effect the sale of these policies.
  9. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
  10. Insurance

    Getting Your (Insurance) House in Order

    From starting a family to retirement, insurance can play a role in taking care of financial needs. This piece looks at some of the choices you can make.
Hot Definitions
  1. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  2. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  3. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  4. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
  5. Dilution

    A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Dilution can also occur ...
  6. Agency Problem

    A conflict of interest inherent in any relationship where one party is expected to act in another's best interests. The problem ...
Trading Center