14 Dec 2006 | 2 comments | insurance | Comments feed

Life insurance is CHEAP?!

There are many types of life insurance plans. If we categorize them based on the premium paid and the protection we are getting. Basically there are 3 types (refer chart):

Type A : High Protection, Low Cash Value.
Type B : Medium Protection, Medium Cash Value
Type C: Low Protection, High Cash Value

If there is a fortune teller who can foresee our life expectancy. If he says we can live very long, we should buy type C insurance, e.g. endowment plan. If he says our life is short, we should buy type A insurance, e.g. term life. However, in reality, who knows how long we can live? So most people buy type B insurance, e.g. whole life participating plan.

For Type B insurance, the total premium we paid will match the total cash value of the policy at year 14th-18th. That means after we had paid the insurance premium for 15 years, we can still get back all the principle money if we surrender the policy. If we are committed to show our love and resposibility to our family, buying insurance doesn’t cost much. It only cost 15 years of interest return! After 15 years, the insurance can be considered FREE!

Mathematic Equation:
Insurance charges = interest return

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