Limited premium policy

Many people like the concept of an insurance policy that provides cover for a lifetime, but require the premium to be paid for a limited period (say 20 years).

However, they find the premium to be quite high.

Here is an example of a 20 year limited payment policy that covers $100,000 for a lifetime. This policy earns bonus.

For a male aged 30, the annual premium is $2,948. The projected cash value at the end of 20 years (inclusive of bonus) is $82,510. The projected yield is 3.1%.

This is based on the current rate of bonus. If the bonus rate increases, the yield will be higher. If it reduces, the yield will be lower.

Most insurance companies offer a lower yield than the above example. Their limited payment policies is not attractive.

It is better for the policyholder to buy a term insurance and invest the difference in a low cost, well diversified equity fund. The yield should be much higher.