Question
Robert is considering a 20-year renewable term insurance policy, with a face vale of $500,000 for a $400 yearly premium. However, his insurance agent told
Robert is considering a 20-year renewable term insurance policy, with a face vale of $500,000 for a $400 yearly premium. However, his insurance agent told him of a new option where he can receive his accumulative premium payments ($400 a year for 20 years) at the end of the policy. This feature will change the yearly premium from $400 to $650. Should Robert accept this option if his after-tax rate of return is 4.56%? (Note: His insurance agent reminded him that nearly 98% of all term policies are never paid out, so this will allow him the protection and receive a lump sum at the end of the policy, if he is still living, of $8,000)
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