Support My Efforts By Visiting The Advertisers


This is a personal blog. The opinions expressed here represent my own, not those of my employer and is not intended to malign any religion, ethnic group, club, organization, company, or individual.

Investing In Insurance

>> Tuesday, December 29, 2009

It is already my 100 post!

I recently met a client who wanted to take up insurance for his parents. I casually asked why the sudden interest to insure them? He explained that he has a friend whose mother had recently passed away and he can now retire because the insurance pay out was quite significant. Needless to say, the reason my client was interested to insure his parents was because he too wanted to retire on the insurance pay out as well when his parents move on.

Saving the emotional and ethical comments for later, I decided to look at this from a practical angle if it was indeed worth while by analyzing the rate of return for such an "investment".

So I generated a table of average level premiums payable for an average male/female, non smoker for a term insurance coverage of $250,000 on death only (No TPD or CI riders) till age 99. (For those of you who do not know, although most term coverage is till age 65, there are insurers covering till age 99, and under this policy even if you did manage to live till age 99, they will pay out the coverage at your 100th birthday. The catch is the premiums are significantly higher of course.)

For those who are familiar with time value of money calculations, the working are FV=$250,000; PV=$0; N=number of years (i.e. Till Age - Age policy taken up); PMT=Premium per annum; 1/Y=the values of the table (i.e. the compounded returns).

Due to the longer life expectancy of  females, the premiums are significantly lower. (Hint: So if you had to make a choice, basically you know who is more worth while to carry out this plan with.)

For those who wish to carry out this "investment":
  • If the plan was taken up at age 50, you will receive a guaranteed return even if the insured lives forever (i.e. age 100).
  • Based on the average life expectancy, 75-80 for males and 80-85 for females, you will still be guaranteed a return of about 4%, regardless of the age the policy is taken up.
  • You can potentially get the lump sum earlier at a much higher rate of return.
  • A major drawback is you cannot withdraw the amount you invested for emergency use at any point in time, and if you were to stop contributing to this plan, you lose all your earlier contributions.
I believe not many has viewed insurance in this perspective so do share your thoughts of this "investment".




The owner of this blog does not share personal information with third-parties nor does the owner store information is collected about your visit for use other than to analyze content performance through the use of cookies, which you can turn off at anytime by modifying your Internet browser’s settings. The owner is not responsible for the republishing of the content found on this blog on other Web sites or media without permission.

Blog Comments

The owner of this blog reserves the right to edit or delete any comments submitted to this blog without notice due to;

1. Comments deemed to be spam or questionable spam
2. Comments including profanity
3. Comments containing language or concepts that could be deemed offensive
4. Comments that attack a person individually

Terms and Conditions

All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

This policy is subject to change at anytime.

About This Blog

To promote the education of individuals for the need to have a healthy lifestyle and wealth management through proper financial planning, particularly in investments.

Top Blogs


Top Sites

  © Blogger templates Sunset by 2008

Back to TOP