The obvious way to compare costs of different life insurance policies is to compare the premiums charged by different companies for the same coverage. That works fine for term insurance, but not for whole life.

Dividends, cash values, interest you could have earned elsewhere and the number of years a policy is kept in force also play important roles in determining the actual cost.

And it is nearly impossible to tell in advance how your premium is divided among insurance coverage, commissions and company profits, how much goes into the cash-value fund, and how much interest you'll earn on the cash value.

A handful of companies use something called the Barnes standard as a way of disclosing policy costs to insurance pros and financial planners, but consumers are pretty much in the dark.

Whole life benchmarks. Any agent will gladly produce a "net cost" calculation for you. That adds up all your premiums over a period of ten or 20 years, subtracts anticipated dividends and cash value, then subtracts that number from total premiums to produce a startlingly low net cost of coverage. But the net-cost method ignores the fact that you could have done something else with the money and perhaps earned even more than the policy paid you in dividends.

Insurance industry analysts have tried to incorporate this factor into newer formulas that produce a couple of esoteric numbers called "interest-adjusted net-cost indexes." By adding a certain level of assumed earnings, say 5%, to the cost of your premiums, these indexes account for the possibility that you might have chosen to invest the money at that rate.

The "interest-adjusted surrender cost" is a measure of the true anticipated cost of keeping a policy in force for ten or 20 years and then surrendering it for its cash value. The "net payment cost index" assumes you hold on to the policy until you die.

What to ask the agent. Most states require agents to provide these numbers for cash-value policies if you ask for them. Interest-adjusted costs vary according to the type of policy and your age at purchase. Armed with these numbers, you can compare the costs of different policies within the same company and among different companies. What you'll discover is that the cost of whole-life insurance is all over the lot. Careful shopping can pay off big.

Ask the agent for the ten- and 20-year "interest-adjusted surrender costs" per $1,000 of face amount for the specific policy being recommended. Also ask for comparable data for the same kinds of policies issued by two other companies. The agent doesn't have to furnish information on competitors' policies but should be able to obtain approximate figures for some companies from manuals widely used in the insurance business. If the agent won't or can't help, call other companies yourself.

Useful though they are, the interest-adjusted net-cost indexes are not an invariably accurate guide to what a policy will actually cost. They are based on the assumption that the cash values will earn a certain amount per year.

When interest rates are higher or lower than that, the relationships between premiums and cash values are thrown out of whack, especially in the later years. But the distortions affect all policies, so you can still use the indexes as a relative measure of comparative policy costs over the years, provided the issue dates and death benefits are the same.

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