What does the interest-adjusted net cost method take into account?

The interest-adjusted net cost method is a financial evaluation technique used in the insurance industry to assess the cost of life insurance policies. This method incorporates the concept of the time value of money, which recognizes that funds have different values at different points in time due to potential earning capacity.

By accounting for the time value of money, the interest-adjusted net cost method effectively evaluates how premiums paid and benefits received over time compare in present value terms. This enables a clearer understanding of the true cost of maintaining a policy, as it factors in how interest might accumulate on premiums invested over the policy period, leading to a more informed decision regarding the policy's overall value.

Other options, such as yearly premiums or dividends received, do not provide a comprehensive view of the financial implications in the same manner that considering the time value of money does. Additionally, cost of living adjustments relate more to changes in expenses over time rather than the intrinsic value of money over time, which the correct answer specifically addresses.