Illustrate the actual cost of term insurance and what those premiums could have earned had they been invested over a given period. |
The actual premiums you pay for term insurance does not represent the true cost. What you could have earned on those dollars had they been invested represents what is called the opportunity cost. If you invest one dollar and it earns 10 cents then the dollar you send to the insurance company costs you 10 cents.
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Study the worksheet that appears when the documentation button is clicked to gain an understanding of this screen. Some points about the worksheet. The opportunity cost to age 65 is calculated as: Opp Cost 65 = [(current premium) X (investment return) ^ (65 - current age)] minus current premium where the ^ means raised to a power. The opportunity cost for age 80 is figured as above except using 80 instead of 65. The cumulative columns (CumOppCst65 & CumOppCst80) accumulate the columns to their left. The worksheet repeats the above calculations for each row. |