The Mutual Assurance and Life Company is offering an insurance policy under either of the following two terms:

Question

A. Make a series of 12 payments of $1,200 at the beginning of each of the next 12 years (the first payment being made today)

B. Make a single lump-sum payment today of $10,000 and receive coverage for the next 12 years

If you had investment opportunities offering an 8 percent annual return, which alternative would you prefer?

Answer 1

Assuming the alternative rate of return is 8%, the 12 payments of 1200, once per year, beginning now, are equal in value to one payment now of $9,766.76.  The formula in Microsoft Excel is =PV(8%,12,1200,0,1).

Answer 2

If your being sold Life insurance as an investment don't take it.

You should only buy life insurance for the insurance benefit. Insurance has 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 insurance is that correct? This sounds like a bad idea to me but I would need more details to make a valid comparison.

Other details are needed to compare this scenario.

I suggest you get a second opinion from an independent broker. Whenever I see something like this it is always from a captive agent with a career agency trying for the big commission.

Try using yellowpages.com to search for life insurance brokers in your area.

Don't call your auto and home agent they specialize in property and causality insurance. You need someone that specializes in life insurance.

A Broker represents multiple carriers and can help you sort through all the different insurance companies and plan options in your location.