Tan Kin Lian's Blog: Invest in single premium ILP

Monday, July 30, 2007

Invest in single premium ILP

COMMENTS POSTED IN MY BLOG

COMMENT 1:

(Edited) Whole life plans, with or without limited premium paying term, is a gimmick to hoodwink consumers into paying more without much added value. They are sold at the expense of coverage.

Recent survey shows that Singaporeans are grossly under insured. Why? The insurance companies and their agents have been around for so many years and what have they done for the consuming public?

The answer is that insurance agents had never put their clients' interest first. They put thier pocket first. Term insurance don't pay much, wholelife with cash value pays more commission.

No wonder AXA, the world's largest insurer is committed to selling only term plans and ILPs. They strong believe the concept of buy term and invest the rest.

COMMENT 2:

I understand that the ILPs sold by AXA have high charges as well. They charges are as bad as the traditional policies. You can read www.askdrmoney.com to find out their charges. Do not buy the ILP from AXA.

COMMENT 3:

Unless advisers are paid a fee for giving advice, they will always be tempted to sell plans that benefit their pockets more.

Unfortunately, there are still not many people who like the idea of paying advisers a fee. They cannot see the benefits that an a professional adviser can give them.

Some DIY their investments plan but many lacks discipline to carry out for long term and lacks the knowledge to review and rebalance along the way.

Maybe someday, CPF board may allow members to use their CPF monies to pay such advisory fee.

COMMENT 4:

(Edited) Single premium ILPs had 5% sales charge which was higher than Income. Now every SP has 3% and that levels the playing field.

Doctor Money's comparison is for regular ILPs.....

Naturally like traditional plans they carry high charges. You pay for flexibility. You can change them to whatever you want at different stage of your life cycle.

MY ADVICE:

Invest in a single premium ILP to reduce the upfront charge. Some insurance companies offer you a plan that allows recurring single premium to be invested. This is the most cost effective plan.

Read this FAQ.

6 comments:

Anonymous said...: Many companies offer RSP without the advisory fees. You can save as low as $100 on a monthly basis paying just the sales charge of 3%. You can also make use of CPFOA for RSP. Their RSP is like investing in a single premium ILP on a monthly basis or other frequency you choose.
The ideal plan ID2 offered by Income takes alot out of the premium and cannot be compared to RSPs of other companies. Advisors cannot earn much but they are willing to give the best to the clients. The advisers work on volume.; July 26, 2007 12:04 PM
Anonymous said...: I have been advised by a NTUC agent to purchase a S$100,000 limited Premium Living payable 20 years for my 16 years old daughter. My daughter has 2 life policies with GE. I am undecided and am afraid to make a wrong choice again. Kindly advise. Thanks.; July 28, 2007 3:41 PM
Anonymous said...: Do the two life policies cover critical illnesses? If they do, how much is the total coverage? For a child or for that matter a person
not gainfully employed,it requires to cover treatment and some ancillary cost only.As a rule of thumb it is between $70K to $100K plus a H&S medical insurance. This is what your child needs at this moment in time. You buy insurance to meet needs NOW and not what you expect in the future.If an agent
tells you otherwise and tells you your child needs more than this tell him to fly kite. Obviously that agent is unqualified and only interested in the commission.
Another thing, limited premium is expensive. Imagine the premium you pay will give more coverage if you buy a normal whole life. Don't worry about the limited term. It is a gimmick. If you can keep for 20 years with any type of plans you are doing alright.
Also think of buying term plans. With that premium you can millions of coverage. Of course your child doesn't need so much. The money saved , invest it in a well diversified portfolio and the return is more than double than what you get from traditional par plans, limited or normal premium type.
Remember this "buy term and invest the rest". If your agent thinks otherwise get another one but qualified for help. All the best.; July 28, 2007 4:26 PM
Anonymous said...: I don't believe in those with cash value policies. I have only term from NTUC. They are cheap and i have no worry about keeping them. I can throw them away when the time comes without the feeling of loss.
I invest in the combined funds which are giving me good returns. I can move the investment whenever I like and i can use the profit to finance my term policies if i run into a crunch.
It is so flexible having two types of plan seperated.
Don't fall for all those limited premium plans with fanciful names
like LPPL living policy.; July 31, 2007 10:02 AM
Khiat Han Hwee Adrian said...: I will buy that a Limited Premium Living Policy under these circumstances:

1) If the 2 Life Policies from GE does not cover Critical Illnesses or if they are below $100k in cover.
2) If I have plenty of liquidity and monthly cashflow is not a problem for me.
3) If I'm ready to accept the projected 4% returns, noting that its projected.
4) If I hate risk and uncertainty to the core and investment is a 100% no no thing to me.
5) If I know I have no discipline to invest the rest, when I buy term.

There are no right or wrong plans. Its a matter of choice of options. Hope your adviser had given you options.; August 01, 2007 3:01 AM
Anonymous said...: There is such thing as right or wrong plan.But there is no one plan that fits every body.
A wrong plan does not address a need adequately or nothing at all.
A right plan addresses the need fully.It meets the financial and does not impinge on the circumstances of the person.
If Adrain's argument is right then agents can sell anything and any amount of insurance as long they meet some areas of the client's needs; no plan but haphazard.
What makes you think discipline happens with traditional products. Have you not had any of your clients lapsing their policies? This is not discipline but financial problem arising out of poor recommendation of wrong plan.
Disciple comes from believing and the reasons you are doing.It also is the job of the adviser to come along side the client to guide the client in his or her journey through his or her financial life and not abandon the client.This usually happens after a sale.; August 02, 2007 9:30 AM