From the point of insurance company, which will have the greater net present value. A term policy of 5 years or a term policy of 20 years
Total Comments: 4
Posted: Wed May 03, 2006 04:38 am Post Subject: Net present value for the term life insurance
Certainly insurance companies will choose that project which has a positive net present value. That means the project with higher profitability.
Now come to the term life insurance policy. There are two forms of term life insurance policy. Annual renewable term and level term.
5 years and the 20 years term policies refer to the Level term insurance.
For the level term the premium remains same for the given period of years.
But when you choose a longer term, the cost of insurance (premium) will be higher. Because for the older it is more expensive to insure, as the years are averaged with the premiums.
For the insurers, both the projects should have a positive NPV.
My understanding is that for the 20 years term the NPV is greater than the 5 year one. As uncertainty related to the interest rate, inflation, money market fluctuation is much more unpredictable for the longer time periods.
Posted: Tue Dec 25, 2007 03:25 pm Post Subject:
i just have a hunch that you should choose the term policy of 20 years....
i don't know much about this.....
you can consult a expert in this regard
Posted: Wed Dec 26, 2007 01:59 am Post Subject:
Isn't there policies that promise to keep the same premium no matter how old you get, I always see them advertised on television. Some of them even say that it does not matter what age you are at the time and they don't give a physical exam either. Of course you would have to investigate to make sure that it was the right insurance policy for you as an individual, and that it covered everything you needed it too. I am sure there are alot of scams out there, so you would want a reputable company.
Posted: Wed Dec 26, 2007 07:01 am Post Subject: How about this one!
Isn't there policies that promise to keep the same premium no matter how old you get, I always see them advertised on television. Some of them even say that it does not matter what age you are at the time and they don't give a physical exam either.
If you're worrying about the age-bar or say the exam...then I think you should also worry about not getting the right term life insurance benefits by not sitting for the exam or through paying a lower rate.
Posted: Wed May 03, 2006 04:38 am Post Subject: Net present value for the term life insurance
Certainly insurance companies will choose that project which has a positive net present value. That means the project with higher profitability.
Now come to the term life insurance policy. There are two forms of term life insurance policy. Annual renewable term and level term.
5 years and the 20 years term policies refer to the Level term insurance.
For the level term the premium remains same for the given period of years.
But when you choose a longer term, the cost of insurance (premium) will be higher. Because for the older it is more expensive to insure, as the years are averaged with the premiums.
For the insurers, both the projects should have a positive NPV.
My understanding is that for the 20 years term the NPV is greater than the 5 year one. As uncertainty related to the interest rate, inflation, money market fluctuation is much more unpredictable for the longer time periods.
Posted: Tue Dec 25, 2007 03:25 pm Post Subject:
i just have a hunch that you should choose the term policy of 20 years....
i don't know much about this.....
you can consult a expert in this regard
Posted: Wed Dec 26, 2007 01:59 am Post Subject:
Isn't there policies that promise to keep the same premium no matter how old you get, I always see them advertised on television. Some of them even say that it does not matter what age you are at the time and they don't give a physical exam either. Of course you would have to investigate to make sure that it was the right insurance policy for you as an individual, and that it covered everything you needed it too. I am sure there are alot of scams out there, so you would want a reputable company.
Posted: Wed Dec 26, 2007 07:01 am Post Subject: How about this one!
Isn't there policies that promise to keep the same premium no matter how old you get, I always see them advertised on television. Some of them even say that it does not matter what age you are at the time and they don't give a physical exam either.
If you're worrying about the age-bar or say the exam...then I think you should also worry about not getting the right term life insurance benefits by not sitting for the exam or through paying a lower rate.
Thanks,
ArindamSenIndies
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