The two basic forms of life insurance policies are term life — in which you buy protection for a specified period of time (the term) — and cash-value. With cash-value insurance policies, you pay more than just the cost of the premium into an account that is yours and accrues interest. In effect, cash-value policies are like a savings plan.
For a life insurance policy to be part of your estate planning, you must know your rate of return — how much interest your money earns. When a company quotes you a price for a cash-value policy, it also quotes a guaranteed rate of return. At the same time, you will likely be given one or two other rates of return and will be shown charts and tables demonstrating how much your money will yield after just a few years.
Be very wary of these tactics. Don’t think you’ll make a killing! Assume your money will earn very close to the guaranteed minimum, and consider anything over the guaranteed minimum as a bonus.
The return you receive from your cash-value policy is to
For a life insurance policy to be part of your estate planning, you must know your rate of return — how much interest your money earns. When a company quotes you a price for a cash-value policy, it also quotes a guaranteed rate of return. At the same time, you will likely be given one or two other rates of return and will be shown charts and tables demonstrating how much your money will yield after just a few years.
Be very wary of these tactics. Don’t think you’ll make a killing! Assume your money will earn very close to the guaranteed minimum, and consider anything over the guaranteed minimum as a bonus.
The return you receive from your cash-value policy is to
- Increase your surrender value (the amount that you can expect to receive if you withdraw the funds)
- Increase your death benefit
- Pay the expected increase in the cost of your protection each year
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