Do you need insurance?

Buying life insurance is not just about buying a peace of mind for yourself but also for narrowing in wealth gap!

Have you seen husband and wife buying for and on each other's life?

The compounding rate of return (CAGR) is estimated to be around 16%pa. (10.8x of total premium paid and/or 989% total return) for one who took up a $1m death coverage at age 49, being total premium paid over 16 years of $91.8k ($5.7k annual premium), payout at age 65 (refer to the illustration tables below).

Yearly premium would be lower when one starts at younger age. Return reduces when the $1m payout is of later date. For example, when the payout occurs at age 75, the CAGR is lower at around 7.4% (6.7x total premium paid and/or 570% total return) , having paid more of the premium. This however provides a decent wealth creation strategy, to narrow wealth gap for your family.

The drawback being if there is no claim after the policy term as there is no surrender value to the plan. Being that the coverage is more affordable than a wholelife plan with cash values, this term plan relies on the concept of buying term and investing the difference to achieve your other goals.

As for most insurance coverage, the rule of thumb is to have 10 times your annual income in life insurance, to cover expenses like housing, mortgage loan, childcare, health care, and education, so your family won’t be in debt.

If one makes $50,000 a year and work at least 30 years, one’s human capital is worth around $1.5 m.

This transfer and creation of wealth via insurance term plan with death coverage helps with narrowing of wealth gap for a family.

The above is purely for illustration purposes only.