Affordable Life Insurance: Fungible Present Value Analysis
Fungible present-value analysis clearly highlights that, from the policyholder's perspective, a good affordable life insurance policy program depends on having a competitive compounding rate and a competitive cost, or sufficiently superior performance in one area to offset comparatively poorer results in the other. Even though this analysis can effectively dissect an illustration or an actual policy's historical summary, it is important to note the few rules and caveats for using the fungible present value approach. First, the actual protection received in this illustration varies from year to year because the application of dividends to purchase paid up additions increases the at-risk amount and, correspondingly, the growth in cash value decreases it. Second, FungPV figures are directly comparable only if they are derived for the same compounding rate and duration.