Yearly Rate of Return Method

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Yearly Rate of Return Method Actuarial procedure used to determine the annual rate of return at which annual benefits would have to be gained from the Cash Value Life Insurance policy in order to equal the annual investment made in the policy. The benefits under the policy are the Cash Value dividends (if Participating Insurance) and the Death Benefit for the year under discussion. The investment made in the policy is the amount of the premiums paid into the policy that year and the cash value at the beginning of that year. The equation then becomes:

Sum of Policy Benefits

Yearly Rate of Return = ______________________ - 1

Sum of Policy Investments

This method was developed by Dr. Joseph Belth, a professor at Indiana University.