If you pay premium towards a "savings-type" life insurance policy, you should demand a net yield of 3% for 10 years. These products include endowment, whole life, investment-linked, critical illness and their variations, such as limited premium and cash back.
If you save $100 a month for 10 years, the life insurance policy must give you a net return of at least $13,900. Your total savings is $12,000. The gain is $1,900 (i.e 15.8% on $12,000). If you are not getting this gain of 15.8% on the total savings, you should avoid the life insurance policy.
If you save $300 a month, you should check if the cash value at the end of 10 years is at least $13,900 X 3 = $41,700.
Most life insurance products give you a poor yield, as a large portion of your premium is used to pay commission to the agent and the agency manager. The true cost of the life insurance protection is a small proportion of the premium that is spend in marketing and sales.
Lesson: Demand a net yield of 3% on your savings. Look at the benefit illustration on your life insurance policy. Look at the figures for 10 years duration. Compare the cash value with the total premiums. If you do not get the gain of 15.8%, do not buy the life insurance policy.
Subscribe to:
Post Comments (Atom)
:.
0 comments:
Post a Comment