Here is an example of the power of marketing, that act against the interest of the customer.
If you are 30 years old, you can insure for $100,000 under a decreasing term plan and pay only $8 a month.
The insurance agent does not offer this product to you. He will tell you to buy a whole life plan and pay $160 a month (ie 20 times of the cost). His marketing pitch is, "if you buy a whole life policy, you can get a return".
The return on the whole life policy is probably 3% per annum.
If you pay for the term insurance separately and invest the difference to earn a modest 5% per annum, you can get 20% more at the end of 20 years. The difference could be higher.
Why does the whole life or endowment policy pay a poor return? This is due to the commission that is paid to the agent. It can take away up to 1.5 years of the premium.
hi Mr Tan,
ReplyDeleteis there a term plan that insures against critical illness and TDP with similar cost to the above? i.e. $100k coverage for $8 a mth... thks.
NTUC Income has a living benefit that covers critical illness and provide a flat coverage (ie not reducing coverage). The premium is higher than $8 a month.
ReplyDeleteYou can read the FAQ in www.tankinlian.com/faq, "Choice of Insurance plan".
You can also call NTUC Income directly.
Dear Mr Tan,
ReplyDeleteDo you think there is any value of a term life policy that is guaranteed to age 99? I know of a few IFAs who attack term policies which are not guaranteed to age 99; instead they push for whole life or term policies that runs to age 99.
indexfundfan @ indextown