Insuring against critical illness

If you are 30 years old, and you wish to insure against critical illness for $100,000, you have the following choice:



1. Buy a "whole life" critical illness policy and pay $200 a month

2. Buy a 30 year critical illness cover and pay $40 a month



If you choose option 2, you can invest $160 a month in a low cost fund to earn an average of 5% per annum, you will get give you $128,000 in cash at the end of 30 years. (This is not a guaranteed return, but it is the likely return).



If you pay $20 a month on a decreasing critical illness cover, you will get $144,000 (estimated)



If you put $200 a month in the critical illness cover, you are likely to get a cash value at the end of 30 years of around $100,000 (plus or minus $10,000).