Someone asked me, "Why is term insurance not popular?"
The answer is, "agents prefer to sell endowment and whole life insurance".
For example, a policyholder can buy term insurance for $100,000 over 20 years by paying a premium of $400 a year. If they buy a whole life policy, they pay a premium of $2000 a year.
Agents can earn commission of up to 1.5 years of premium when they sell a whole life policy. Yes, they can earn $3,000 on selling a whole life policy to you. You pay for it through the higher premium.
They earn less on their term insurance policy. Maybe $200 to $400 in commission.
So, agents sell whole life and endowment policy. They tell the customer that this is a better plan for the customer. They did not tell the customer that they earn a higher commission.
In reality, the customer is better off to buy a term insurance and to invest the difference in a unit trust or investment linked plan (such as the Ideal plan from NTUC Income) where 100% of the savings is invested.
Be careful about buying a ILP from other insurers. They may take away 1.5 years of your savings as well.
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- Why is term insurance not popular?
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