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Comparing the forex with investing in insurance
Comparing the forex with investing in insurance
Comparing the forex with investing in insurance
Comparing the forex with investing in insurance
Comparing the forex with investing in insurance
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Comparing the forex with investing in insurance

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Learn the right way to trade forex.Download this guide to guide you the right way to trade forex.Visit http://profitforextrader.org to get your free gift

Learn the right way to trade forex.Download this guide to guide you the right way to trade forex.Visit http://profitforextrader.org to get your free gift

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  • 1. : Comparing The Forex With Investing In Insurance Click here to grab your mystery giftInvesting in Forex is more risky but the gains that can be achieved are a lotlarger than insurance, although insurance is a very good long term investment.While there are innumerable kinds of life insurance available, they can besimplified into two general types: those that insure against death only and thosethat not only insure against death but make a provision for savings in addition toinsuring. The first type is called term insurance.It pays off only in the event of death. While it is worth nothing to the individualhimself, since he never gets his hands on any of the money that went to pay thepremiums, it does generally provide the maximum death benefits per dollar ofpremiums at the younger ages. Its sole purpose is to insure against death. As itsname implies, it is written for a term—1, 5, 10, 20, 25 or 30 years—and if theterm expires before the insured dies, that is that. There are no more premiumsdue and he gets nothing from the insurance company except the right to renewthe policy for a longer term and/or the right to convert the policy to permanentinsurance without a medical examination.Policies other than term insurance cost more than term insurance initially andthe additional premium provides essentially one thing savings for the personinsured. Now the main question to answer from an investors point of view is,"What do I get for this additional premium in the way of a return on my money?"If a ten-year term policy is purchased the average net cost per $1,000 is $3.91per year, and if a 20-year term policy is purchased the average net cost is$3.82. It gradually goes down according to the length of the policy, but if terminsurance were bought each year, for just one year, the annual rate would behigher with each renewal since the older a person is the greater the likelihood ofhis death.If he waits until he gets to age 55 the cost of term insurance rises tremendously.A five-year term policy at age 55 costs $21.85 per $1,000 and a ten-year policy$23.26. Term insurance usually may be maintained only until the insured is age65. Thus, if a man kept term insurance to age 65, but died at age 66, hisbeneficiaries would get nothing and all of the premiums he had paid for this
  • 2. insurance would go down the drain.These policies all provide nothing in the way of savings and there is no return onyour money that you, the insured, will ever get. Your beneficiaries will get theface of the policy at your demise.In contrast to term insurance there is permanent insurance. This is insurancethat may be kept as long as the insured wishes to keep it. If the insured lives, hehas built up a substantial cash value in his policy which he may take in cash oras income or which he may leave with the insurance company as "paid up"insurance.The most popular form of permanent life insurance is convertible whole lifeinsurance, sometimes called ordinary life or straight life.Convertible life requires the lowest premium of all permanent insurance plans.Premiums may be paid on this policy as long as the insured lives or for a shorterperiod of time depending upon the objective of the insured.Permanent insurance has a level annual premium for the duration of thepremium paying period. The annual premiums in the early policy years are inexcess of the actual premium needed to cover the risk. The excess premium iscalled the reserve and it is this reserve, together with interest earned on thereserve plus future earnings, which provide the cash needed to pay deathclaims in the later years.If we consider that the 20-year term rate is the pure cost of insurance, and thatthe difference between this rate and the straight life rate represents the savingselement of his premiums, you determine this savings element by subtracting$3.82 from $17.70, which equals $13.88. Over 20 years this savings elementamounts to $277.60. For this total of $277.60 put in in premiums, $403.94 wascollected—a profit of $126.34 over 20 years, or $6.31 per year.The $277.60 was not put in all at once, but over a period of 20 years. Nothingwas invested at the beginning of the 20-year period, and in the twentieth yearthe whole sum was invested, so that the average investment for the period washalfway between nothing and $277.60—$138.80. The return on this figure is thetrue return, and $6.31 per year on $138.80 is a little under 5%.Let us consider the Retirement Income policy at 65, bought by a person 25years old. Over a period of 40 years, he puts in $30.92, the annual premium,times 40, or $1,236.80. If the average net cost of the pure insurance feature is
  • 3. assumed at $7.79 per annum and the cost is subtracted from the total annualpremium of $30.92, we get the investment in the savings element of theinsurance, $23.13 times 40, or $925.20. For these invested savings the insuredgets back $2,326.81 at age 65-40 years later-a profit of $1,401.61.If we use the same reasoning in regard to the average amount invested over theperiod (one half of $925.20), we arrive at an investment of $462.60. The profit orreturn per year is determined by dividing the total profit of $1,401.61 by 40 yearsand we get $35 per year. This $35 represents a return on the investment of$462.60, or 7½% per year.How good an investment is this $462.60 that grows to $2,326.81 in 40 years? Itis almost identical with an investment of $462.60 which returns 4% per year ifthe 4% is left in the investment to be compounded annually. The discrepancybetween the 7½% per year and the 4% is explained by compounding.The 4% compounded is not a bad yield. It is roughly equal to the return of aninsured building and loan association in the year 1962, but not as good as thebetter yielding ones.Now the characteristic of the Retirement Income policy is that premiumpayments end at age 65. The insured is now entitled to $2,326.81 if he left hisdividends in.Further, the insured can have his $1,597 (due him if he took his dividends out)paid to him and/or his heirs at the rate of about $10.00 per month for 157months (a full refund). If he is still living at the end of the 157 months, theinsured would continue to receive $10.00 per month for the balance of hislifetime.If desired, an alternate amount or alternate type of annuity could be selected.In addition to the guaranteed amounts, there would, of course, be dividendincome payable each month in accordance with the company practice. Thepresent income dividend is about 10% extra per month.All of the above income would be tax-favored as compared to ordinaryinvestment income.The income or annuity return per $1,000 of accumulated cash in the insurancepolicy is guaranteed by contract as of the date of issue for future delivery. It isinteresting to note that the cost of an annuity at 65 has been increased seven
  • 4. times in the last 20 years as the science of geriatrics has prolonged life.There is one type of policy which represents the savings element alone anddoes not provide the insurance element. This is the annuity. You make a cashpayment early in life, or periodic payments throughout your life, in order to getan income when you retire or pass a certain age.At age 25, for an annual premium of $100 for 40 years, you can get (a)$8,201.47 in cash at age 65 or (b) monthly payments of $51.34 for the rest ofyour life.You have invested in 40 years 40 times $100 or $4,000, and at age 65 this hasgrown to $8,201.47. It has better than doubled.To find the average annual return, we determine the profit ($8,201.47 less$4,000) which equals $4,201.47 and divide this by 40 to get an annual profit of$105.The average investment is halfway between zero and $4,000 and is equal to$2,000. The annual return is thus $105 divided by $2,000, or 5¼%. Thisrepresents considerably less than 4% compounded annually.If the option of $51.34 per month is selected instead of the sum total of$8,201.47, it takes between 13 and 14 years to exhaust the total, and if you livelonger than this number of years, you have come out ahead.Most other policies provide savings, and the return on these savings is what weare concerned with here. While the yield on the savings is low it must be pointedout that by entering into an insurance contract the insured is forced to save whathe might otherwise spend. A second advantage in buying policies other thanterm policies is that if the insured falls on hard times these policies are worthsomething in cash to help tide him over; and if he cant keep up the premiumsthere is a cash reserve to pay premiums for awhile. If term insurance premiumscannot be met the policy lapses.One insurance company took what it considered to be a typical year as regardsdeath claims and determined what the insureds family got back in relation towhat was paid. It determined that the average insured who was paid off thatyear collected $1.75 for every $1.00 put into premiums, and the average numberof years each policy had been in force at the time of death was 22.6. The returnwas 4% per year, and the insurance company points out that the 4% return wastax free in that no income tax was taken out either as the policy went along or
  • 5. when final payment was made. This 4% equals 8% in income for a person in the50% tax bracket.The return on the savings element of life insurance can be determined byreference to the attached table. The major types of policy have been comparedfor ages 25, 40 and 55 as to annual premium, value of the policy in cash atdifferent ages and monthly payments which can be received from age 65 to theend of ones life.Two of the greatest benefits of life insurance depend on: (1) inheritance taxesand (2) the uncertainty as to when the insured will die. These factors are notrelated directly to return on investment but cannot be minimized in anyconsideration of life insurance.Long term it is very difficult to lose money if not impossible and the returns canbe good. Click here to grab your mystery gift

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