It's my very first project. I tried to use as many different functions as possible just for practice. So, sometimes it could be not very logical structurally but it was useful for me to remember them :)
Idea of this project - is a real-life task. I should choose a "critical illness insurance" plan for my family. There are several possibilities: for 30000$ or 50000$. Proposed fares for 50000$ coverage are the following:
- Paying less - 84$ monthly for both adults. Fare will be fixed till 75 years old.
- Paying more - 139$ monthly, but at 75 years old, if you didn't use insurance, you'll receive all paied money back.
Which plan to choose? It seams like a good option to choose the second one. Or you will use it or everything you paid will be reimbursed. Let investigate it.
My first concern was which insurance protection to choose: $30K or $50K. I investigate inflation influence.
Total amount paid for $50K insurance plan with nonrefundable fare during 40 years is about $40K. If we take into account inflation of 2%(average inflation rate in Canada for the last years), we can see on the chart that in 20 years value will start decrease significantly and in the end of the period will devaluate twice. The same will be with insurance value that you can achive in case of illness.
Conclusion: $30K will be really not significant amount in 20 years. So, I'll investigate $50K only. Also, it's a good idea to upgrade insurance plan in 20 years (year 2040).
Fare difference is $55 per month. What if I make money work for me? Let see when investment of 4% or 5% will help me to cover all amount spend for insurance.
4% investment paid-off time chart:
5% investment paid-off time chart:
You can see on chart that paid-off year will be:
-
2037 in case of investment for 4% with non-refundable fare. Paid-off here means that in 2052 you will get back all money you paid for insurance and after that you'll just earn more.
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2052 in case of investment for 5% with non-refundable fare
Conclusion: If we take nonrefundable fare and make investment of fare difference we will receive our money back earlier than the end of insurance period.
Total spend for refundable and nonrefundable fare vs investment of fare difference chart:
| total, nonrefundable fare | total, refundable fare | investment 5pct |
|---|---|---|
| $40 320 | $66 720 | $84 374 |
Conclusion: In case insurance wasn't used, in 40 years (end of insurance period) you will receive your money back in the amount of:
| Nonrefundable fare | Refundable fare | Nonrefundable fare + investment |
|---|---|---|
| $0 | $66 720 | $44 054 |
In a nutshell:
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Refundable fare. At any time you have insurance. But this fare become more valuable only if you don't use it during insurance period. You'll get all money back, but don't forget that in 50 years the value of this amount will be twice less due to inflation.
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Non-refundable fare is more interesting at any point during these 40 years. Any time you have insurance + in about 20 years you'll just get profit from your investments that you can use any way you want. At the end of the period, you'll get less money, but due to inflation, it'll not be a big difference.