What is a growth rate in life insurance?
Last Updated:
January 9, 2024
Our Preneed plans have two types of growth rates – simple and compound. A simple growth rate adds a certain percentage of the total policy amount each month. So as long as the rate stays the same, the increase is the same number of dollars each month. For example, if you have a $10,000 policy and a consistent simple growth rate of 1%, $100 will be added to your policy each month.
A compound growth rate increases the death benefit by a percentage of the prior death benefit each month. So as long as the rate stays the same, the amount of increase each month will get larger over time. For example, if you have a $10,000 policy and a consistent compound growth rate of 1%, $100 will be added to your policy the first month, $101 will be added the second month, $102.01 will be added the second month, $103.03 will be added the third month, and so on.
Our Preneed plans have two types of growth rates – simple and compound. A simple growth rate adds a certain percentage of the total policy amount each month. So as long as the rate stays the same, the increase is the same number of dollars each month. For example, if you have a $10,000 policy and a consistent simple growth rate of 1%, $100 will be added to your policy each month.
A compound growth rate increases the death benefit by a percentage of the prior death benefit each month. So as long as the rate stays the same, the amount of increase each month will get larger over time. For example, if you have a $10,000 policy and a consistent compound growth rate of 1%, $100 will be added to your policy the first month, $101 will be added the second month, $102.01 will be added the second month, $103.03 will be added the third month, and so on.
