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
Imagine if there is a fortune teller who can foresee our life expectancy – how long we will live. If he says you can live very long, you should buy type C insurance, e.g. endowment plan. If he says your life is short, you 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 you are committed to show your love and responsibility to your 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