Explanation of Present Value Chart

The following chart is provided to show the impact of 3% inflation on a level face amount policy over a period up to 35 years.

For example, if a 30 year old bought a 500,000 policy today, and kept it for 30 years, the relative value of that policy, in today's money, would be \$205,993 by the end of 30 years.

In other words, any level policy is really a decreasing policy in an inflationary economy. Even when inflation is as low as 3%, policy values drop significantly over a person's insurance buying lifetime.

IMPORTANT: Remember that the relative value of the premiums is also dropping. A 30 year old non-smoker in preferred good health can buy a \$500,000 30 year term policy for about \$50 per month. While the relative value of the \$500,000 will be about \$205,993 by the end of 30 years, the \$50 per month premium will be equivalent to about \$21 in today's money. While inflation shrinks the the face amount of your policy, it is also shrinking the value of the premium you pay.

SUMMARY: This reinforces that buying a level term plan, that covers you to the point you plan to retire, is a good strategy. It takes into account inflation and the fact that your needs for insurance will go down as you approach retirement.

 Values Based Upon 3% Inflation Year Face Amount of Level Policy Relative Value by end of year 1 500,000.00 485,436.89 2 500,000.00 471,297.95 3 500,000.00 457,570.83 4 500,000.00 444,243.52 5 500,000.00 431,304.39 6 500,000.00 418,742.13 7 500,000.00 406,545.76 8 500,000.00 394,704.62 9 500,000.00 383,208.37 10 500,000.00 372,046.96 11 500,000.00 361,210.64 12 500,000.00 350,689.94 13 500,000.00 340,475.67 14 500,000.00 330,558.90 15 500,000.00 320,930.97 16 500,000.00 311,583.47 17 500,000.00 302,508.22 18 500,000.00 293,697.30 19 500,000.00 285,143.01 20 500,000.00 276,837.88 21 500,000.00 268,774.64 22 500,000.00 260,946.25 23 500,000.00 253,345.87 24 500,000.00 245,966.87 25 500,000.00 238,802.78 26 500,000.00 231,847.36 27 500,000.00 225,094.53 28 500,000.00 218,538.38 29 500,000.00 212,173.18 30 500,000.00 205,993.38 31 500,000.00 199,993.57 32 500,000.00 194,168.52 33 500,000.00 188,513.12 34 500,000.00 183,022.45 35 500,000.00 177,691.70