Sinkie
Greater Supremacy Member
- Joined
- Jan 20, 2009
- Messages
- 86,040
- Reaction score
- 20
All the values are in 2013 dollar(Net Present Value)
Inflation rate=Investment rate=3%(IMO, the investment rate is too low)
Discount rate=2.91%
'deflation factor'=0.97087
The first row shows the entries in each column are affected by inflation or investment rate. Inflation will affect insurance payout because when they pay out later, you can only buy less things.
However, for the rest, they are affected by investment rate and not inflation. For instance, if you keep next year premium of 1008 in a 0% interest bank account, you still need to pay 1008, not 978.64, in 2013 dollar. Insurer charge the same premium with or without inflation; your burden only becomes smaller if you invest your premium in the meantime.
In general total premium paid at 0%=/=surrender value. The value you got is around there due to coincidence. Unless you want to come up with reason to explain, or the mathematical proof, your 'rule of thumb' is invalid.
iAdvisor has generated some of the surrender value for this plan. You can apply your 'rule of thumb' and see how bad it fails.
hello DevilCurseYou, deflation factor = discount rate/investment rate?
deflation factor is something new i learn today, thanks for this new term.
thanks for the reply and table also, but a few questions
any particular reason that you are using the term plan death coverage to compute for column I, the wholelife death coverage?
because as requested from you to refer to the previous thread, this quotation is actually base on this
and also iirc, this quotation is for a non-smoker female age 30 on her next birthday, i thought payment usually start when she is 29, are you missing 1-2 payment also?
and wow this is interesting, but with your good knowledge on corporate finance, can you count what is the real value of this surrender value when client is at age 70?
Last edited:
