Actuarial Equivalent

What Does Actuarial Equivalent Mean?

Actuarial equivalent refers to the way cash payments are measured when they are going to be paid in the future as benefits of a policy. This is done to determine how much premiums to charge. This is also a way of comparing the benefits of two policies.

Insuranceopedia Explains Actuarial Equivalent

How is the insured going to receive their benefits? How much will they get on a regular basis in the future when it is time for the insurer to pay the benefits? What is the specific schedule for the payment of benefits? The answers to these questions are what actuaries calculate when doing an actuarial equivalent. The answers to these questions also help decide how much premium to charge. Other factors in play are life expectancy, return on investments, interests, and salary.

Actuarial equivalent also helps a person decide which policy to choose.