Q. I am considering buy Whole Life insurance, how do I evaluate its return?
A. Because of the fixed premium feature of any Whole Life product, its return's calculation is quite easy.
However, before we introduce the tool below, it's worth pointing out a benefit of Whole Life that is little understood by most people - the policy owner's ability to use the cash value as a collateral to borrow against it for other investment uses.
For example, if you have $100,000 cash value in a whole life product, now have an real estate flipping opportunity that requires $100,000 cash. You can use the $100K CV as a collateral and borrow up to $100K from the insurance company. Your $100K cash value still earns the return inside the Whole life, and you also have the extra $100K cash for your investment. You do have to pay loan interest rate to the insurer, but if your other investment's return is superior, you will be able to pursue that investment while still letting your Whole life policy's cash value keep growing.
Now, back to evaluating a Whole life product's average annual return -
You just need to enter the starting age of the policy, the annual premium amount and the # of years the premium paid (or to be paid), then select any year in the future and the corresponding Whole Life's cash surrender value and death benefit value in the illustration, you will be able to see the average annual returns.
A. Because of the fixed premium feature of any Whole Life product, its return's calculation is quite easy.
However, before we introduce the tool below, it's worth pointing out a benefit of Whole Life that is little understood by most people - the policy owner's ability to use the cash value as a collateral to borrow against it for other investment uses.
For example, if you have $100,000 cash value in a whole life product, now have an real estate flipping opportunity that requires $100,000 cash. You can use the $100K CV as a collateral and borrow up to $100K from the insurance company. Your $100K cash value still earns the return inside the Whole life, and you also have the extra $100K cash for your investment. You do have to pay loan interest rate to the insurer, but if your other investment's return is superior, you will be able to pursue that investment while still letting your Whole life policy's cash value keep growing.
Now, back to evaluating a Whole life product's average annual return -
You just need to enter the starting age of the policy, the annual premium amount and the # of years the premium paid (or to be paid), then select any year in the future and the corresponding Whole Life's cash surrender value and death benefit value in the illustration, you will be able to see the average annual returns.
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