the present value of the claims is higher if you make a claim early in the stage of the policy. that is to say if you cliam at 60 years old your 100k will defo be much less than your 100k when you cliam it at 30 years old.

to get the amount at present value you can use the annuity formula to calculate your yearly premiums and approximate them to present value. also take your total claims (sum assured + cash value of whole life policy) and approximate them to present value. subtract the latter by the former and you have a comparison.

hope i get that correctly.

best regards.

I do apologise. What i meant to ask was “as the policy reaches maturity, the amount paid out on death would have significantly LESS “current-value” on the year a claim is made, assuming inflation remains a constant at 3%. And the depreciating value would be compounded year on year?”

There’s a point that I would wish to seek your opinion and other readers as well. Although your reasoning of current value of monies vs future monies that are refunded to us either barely match up, or not at all(more often than not, to the insured disadvantage), how about the subject on the perennial “what-if”, which is what insurance is all about.

Which is to say, assuming you have a “AIA S$ MoneyBack Protector 25″ with a 25yr policy which you have a $100k claim on death. What if a death occurs to the insured, let’s say on the 12th year of the policy? Then the “current-value” of monies paid out on that 12th year would be a good gamble? I’m not clear on how to work the sums out but i’m quite certain that down the road, as the policy reaches maturity, the amount paid out on death would have significant “current-value” on the year a claim is made, assuming inflation remains a constant at 3%.

So the gamble which you mentioned at the start of your article would really pay out at the earlier stages of the policy. Of course that is not what we hope for (no one hopes to buy a policy so as to die earlier to make that claim). If the calculation of annual inflation is taken into context, then wouldn’t a long drawn out policy be unbeneficial, compared to investments in let’s say our Government bonds?

I would really love to hear from you on your thoughts about this to learn more.

do take note that such philosophy changes, as do the insurance industry changes. We do not know what new products that comes along will be able to alleviate concerns of term, concerns of ILPs and concerns of Whole Life.

Government policies will also change this. Just like the recent Annuity deal (which i think is very detrimental), it could greatly affect your decisions. That is why you see I do have a limited whole life, though its not a large proportion.

regards,

Drizzt

I do agree too that buy term and invest the rest will be the most viable and practical option to the general public comparing to traditional life policies.

Well great article all in all =)

I know its lengthy, but i couldn’t be bothered to break it up to another or write another day. Its kinda tiring.

Regards.