Mr. X posted in my Facebook that he is happy with his Manulife policy that gave him a return of 6% p.a. On my request, he sent the details to me. I checked the calculations and found that he was mistaken. Here is my reply.
You are paying $376.64 in annual premium each year on this policy. The surrender value, at the end of 20 years, including the bonus, is $8,434. The yield for the 20 year period is 1.06% p.a. It is a poor yield. It can hardly keep up with the rate of inflation over this period.
Although the insurance policy does provide some life insurance protection, the cost of this protection is extremely small.
Most life insurance policies offer a yield of 2% to 3% p.a. and is still considered to be a poor yield. In my talk on insurance, I advised that the benchmark for a good yield is 4% p.a. on a life insurance policy.