by Respectfully - Supposn

Created on: February 15, 2009   Last Updated: May 01, 2009

Non-term life insurance policies have some portion of savings within their contracts. Comparison of such hybrid contracts is less feasible, (if not completely unfeasible) unless they're compared to some common "bench marks" and share some common characteristics; it may be possible to reconcile some differences.

All contracts must share the same amount of life insurance and their annual expense and insurance coverage must commence upon the same date. Even if purchasers intend to keep the insurance in force for their entire life time, a common "cashing-out" date must be applied to all contracts. for comparison purposes. (When insurance contracts' sales literature mention a policy's cash-out value, the age of 65 is usually mentioned. I suggest and the 65th birthday as the cash-out date.

The comparison shopper must choose a fixed annual interest rate. This is the value (to the shopper) of money for the duration of insurance, (e.g. from commencement to cash-out date). When I purchased my life insurance, contracts generally specified 5% for loans based upon the policy as collateral. I chose 5% for comparison purpose. You might also wish to consider the current market rate of high quality bonds for the number of year's duration between insurance commencement and cash-out dates as a chosen rate.

For example, I Googled " savings caculator " and found
http://moneycentral.msn.com/personal-finance/calcula tors/aim_to_save_calculator/home.aspx
(It's an " msn, money " accrued savings calculator).
.
Let us suppose that a shopper chooses 5% as the rate of money's long term worth (to themselves), insurance is intended to commence upon the shopper's 30th birthday and for purposes of comparison the 65th birthday is chosen as the "cash-out" date.

Using the savings calculator:
* Blank out the "marginal tax rate".
* Plug the constant of "5.00%" as the annual "interest rate".
* Consulting each insurance contract being evaluated, plug in: the amount of each insurance payment as both the amount "saved so far" and the "regular deposit". Then the plug in the numbers of "how often" payments are made each year and "how many years" of payments are made prior to the insured person's cash-out date (which in this example is their 65th birthday).
* Click on the "calculate" button to enable the total accrued amount of savings to appear within the "how much have you saved" window. That would be a theoretical amount accrued upon the 65th birthday with zero life insurance.
* From that theoretical accrued

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