The Mutual Assurance and Life Company is offering an insurance policy lower than any of the following two vocabulary:
A. Make a series of 12 payments of $1,200 at the beginning of each of the subsequent 12 years (the first payment being made today)
B. Make a single lump-sum payoff today of $10,000 and receive coverage for the next 12 years
If you had investment opportunity offering an 8 percent annual return, which alternative would you prefer?
If your being sold Life insurance as an investment don't pinch it.
You should only buy life insurance for the insurance benefit. Insurance have too many expenses built into it should never be sold as an investment.
In the above scenario it looks like your paying $10,000 for 12 years of life span insurance is that correct? This sounds like a bad notion to me but I would need more details to make a valid comparison.
Other details are needed to compare this scenario.
I suggest you draw from a second opinion from an independent broker. Whenever I see something like this it is other from a captive agent with a work agency trying for the big commission.
Try using yellowpages.com to search for life insurance brokers contained by your area.
Don't call your auto and home agent they specialize surrounded by property and causality insurance. You need someone that specializes in time insurance.
A Broker represents multiple carriers and can help you sort through adjectives the different insurance companies and plan options in your location.
Answers: Assuming the alternative rate of return is 8%, the 12 payments of 1200, once per year, beginning now, are equal contained by value to one payment presently of $9,766.76. The formula in Microsoft Excel is =PV(8%,12,1200,0,1).