cash accumulation method

Definition

A mathematical calculation used to compare costs of different cash-value life insurance policies. The calculation will assume death benefits of all policies are equal and not apt to change. The total difference between the premiums which are paid into both policies will then be analyzed over a period of time. The comparison of policies is done to rank life insurance policies based on cost effectiveness. The policy that holds the most cash value at the end of the test term is assumed to be the best policy. In order for the calculation to work, the same rate of interest will need to be paid in during the comparison time.
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cash accumulation equation cash advance