What is the life insurance ‘cost index’?

The life insurance "cost index" is a measure used to compare the relative cost of different life insurance policies. It is calculated by dividing the total cost of the policy by the death benefit, expressed as a percentage. For example, if a life insurance policy costs $1,000 per year and provides a death benefit of $100,000, the cost index would be 1% (1,000/100,000). The cost index can be used to compare the relative costs of different policies with the same death benefit, or to compare the costs of policies with different death benefits. The cost index can be a useful tool for comparing the affordability of different life insurance policies. However, it is important to keep in mind that the cost index does not take into account other factors that may be important when choosing a life insurance policy, such as the insurer's financial strength, the policy's features and benefits, and the insurer's underwriting standards. When comparing life insurance policies, it is also important to consider the purpose of the policy, such as income replacement, debt repayment, or estate planning. The amount and type of coverage needed may vary depending on the individual's circumstances, so it is important to work with a licensed insurance professional to determine the appropriate coverage amount and type of policy. In summary, the life insurance cost index is a measure used to compare the relative cost of different life insurance policies. It can be a useful tool for comparing the affordability of different policies, but should be considered alongside other factors when choosing a life insurance policy.