Several Types of Policies Equivalent in Net Cost

While policies differ greatly in form, it is important to note that the net premium (the premium before any addition is made for expenses or contingencies) for all, as will be shown later, is computed on the basis of the same assumptions. Thus a company in computing the net premiums for all its types of policies may use the same mortality table, usually the American Experience table, and the same assumed rate of interest, usually 3 or 3½ percent. If this is done, it follows that all the policies issued by a given company are equivalent to each other from the standpoint of dollars and cents.