Tan Kin Lian's Blog: Buy Term and Invest the Difference

Tuesday, July 19, 2005

Buy Term and Invest the Difference

"Buy Term" refers to term insurance, which is an insurance contract payable on death. The cost of term insurance is very low, as the chance of making a claim is usually less than 1%. To insure a sum of $100,000, you need to pay $500 or less, depending on your age.

Some people pay more than $5,000 on a life insurance plan to insure $100,000. This is a traditional plan that provides insurance cover and savings. When the policy is terminated at a future date, there is a cash value that is refunded. It represents a portion of the premium, accumulated with interest.

Under the "Invest the Difference" concept, the balance of the savings is invested separately. Usually, it will give a much higher return.

Insurance agents like to sell the traditional plan because they can earn a high rate of commission (up to 100%) of the annual premium, including the saving portion.

If you "buy term" separately, you only pay commission to the agent on the term insurance premium. You save commision on the saving portion.

9 comments:

Anonymous said...: Actually I think the phrase was "Term's the Best, Invest the Rest"; July 19, 2005 7:15 AM
Anonymous said...: coolbuz,
You might also wish to check your grammar and disposition. Reading your post, I do not know which is more worrisome.; July 19, 2005 10:54 PM
Tan Kin Lian said...: Some readers worry about my grammar and spelling.

It is okay. These are accepted when blogging, even if it comes from a CEO.

I am quite busy, so I cannot take too much time to check this and that.; July 25, 2005 5:43 PM
Anonymous said...: This comment has been removed by a blog administrator.; July 25, 2005 11:49 PM
Anonymous said...: I agree with the CEO.

Grammer and spelling doesnt matter. As long as the original message is clear and correct.

We are all busy people.

======; July 26, 2005 1:13 AM
Tan Kin Lian said...: I have deleted any posting by a person who attacked me personally for posting this view.

This person is obviously an agent, and quite likely one who works in NTUC Income.

I do not mind having people who disagree with my view, but this person should not indulge in personal attack and should be prepared to be identified personally.; July 26, 2005 6:19 AM
Anonymous said...: This comment has been removed by a blog administrator.; July 27, 2005 12:17 AM
Anonymous said...: Sir,
Thank you for your wise words.
You say it's best to buy a term policy to keep the premium less and more affordable. Why then are insurance agents allowed to earn such big commissions(up to 100%) for selling something that you don't advise and the general public do not actually need and/or afford?!
Say, I only got to know now that my agent has benefitted THAT much from selling me a few WHOLE life policies many years back. And now I am left pulling a heavy cart!

Would NTUC like to adjust the commisions to agents or set guidelines for your agents and policyholders so that it serves more good than harm? As you know policyholders have very much less knowledge about insurance than agents who are the professionals.
Would appreciate a review of policies.; August 05, 2005 10:25 AM
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