A lady in the mid 30s was sold a whole life policy with premiums payable for 30 years. It covers $100,000 payable on death, permanent disability and dread disease. The annual premium was $3,850. The agent said that it was a good policy, as the premium stops after 30 years, and the policyholder will remain covered for life.
The cash value at the end of 30 years was projected to be $161,000 on an optimistic basis (assuming an investment yield of 5.25%). This looked attractive, compared to the total premium paid of $108,000.
However, if the policyholder were to set aside 5% of the premium to buy the cover against premature death or dread disease and to invest the remaining 95% of the premium to earn a yield of 4.5% per annum, the accumulated amount at the end of 30 years would have been $233,000. This would have ...
...The cash value at the end of 30 years was projected to be $161,000 on an optimistic basis (assuming an investment yield of 5.25%). This looked attractive, compared to the total premium paid of $108,000.
However, if the policyholder were to set aside 5% of the premium to buy the cover against premature death or dread disease and to invest the remaining 95% of the premium to earn a yield of 4.5% per annum, the accumulated amount at the end of 30 years would have been $233,000. This would have ...
