Limited premium policy

COMMENT POSTED IN MY BLOG:

Mr. Tan

I like you. I realise you are promoting the concept of buying term and invest the rest. You have taken it to the extreme by recommending decreasing term which is good especially for the poor. They are the people who need to stretch their money in order to be adequately covered.

What do you think of limited premium type of plan? I think this is good for agents' pocket at the expense of clients' protection. Only the rich and high income earners can afford this type. Unfortunately the poor are also buying and soon they will become the victims of lapses.

The question of honesty is called in here.

---------------------------------------

REPLY:

Limited premium policies are all right, if the commission is kept at a modest level, and the policy is designed to give good value to the customer. Unfortunately, most of the plans sold in the market have expense charges to pay high commission.

Many policyholders like to pay premium for a shorter period (eg during their working life), and to be insured for a lifetime. Each person should buy a policy that they can afford to upkeep. If they wish to have a limited premium policy, they should take a lower sum assured - so that the premium remains affordable.