Usually related to life insurance, cost indices reveal the true cost of insurance. They’re what a policyholder gets from a policy versus what he or she pays in over time.
The most common insurance factors that come into play when examining cost indices are premiums, cash value and dividends. Cost indices like these allow the policyholder to compare policies that are similar and make the right decision based on each individual situation.
However, since money is paid in and received at various times, this must be taken into consideration when making comparisons from one policy to another.
Insurance agents use life insurance tables that reveal cost indices based on the policy being considered, the cost of the policy, the point at which it is likely to pay out and any additional interest money that could be earned during the policy’s duration. This gives customers solid statistics and helps them determine which policy makes the most sense for them.