Hi Mr. Tan,
Now I am planning to get a protection insurance for my newborn baby.... After listening to many insurer and products, I have finalised the below plan.... need your advise which is the best?
My main concern is I want a protection for my baby of sum assured of 100k with critical illness for whole life and my budget is hope to be within $100 monthly.
Initially I have decided to take up ILP. I met some friends who are over 50yrs old and they warned me against it as they are holding some ILP and regret it because of the high cost..... so should i spend another $20 more in other to get a traditional life policy?
(details removed)
Looking forward to your advise.
REPLY
Please read this FAQ on saving for your child's education.
If you decide to buy an ILP (which I recommend), you should choose one with low expenses. This website shows you the front end charges of several products in the market.
The best is a "do it yourself" unit trust. The next best is a low cost ILP offered by NTUC Income.
For your baby, I suggest that you buy a Medishield or private Shield plan, to cover the cost of medical treatment. The premium is very low, i.e less than $100 a year.
Your 50+ friends were well meaning but unfortunately lack understanding of how those regular ILPs work.Those regular ILPs are flexi ILP plans which allow you to design your coverage at any point of time. Your friends might have started with a small premium but with very higher coverge and this kind of coverage you can never get from a traditional plan.He must have forgotten to increase the premium or adjust the coverage and because of this the plan got out of hand; it looks like a bomb about to explod while they are in the fifties.You must have heard about this time bomb sometime back in the newspaper.This plan is misundertood. In fact it is one for all stages of one's life. You can use it as wholelife,endowment, term life and an investment plan.Adjust between coverage and investment to meet your needs. Today it is still a popular plan especially with young people who can get maximum coverage with very small premium outlay.
ReplyDeleteAs for your child , go for regular traditional. 100K is more than sufficient supplemented with H&S medical plan.
It has been mentioned, that ILP with large coverage is a time bomb.
ReplyDeleteMortality charge is very small when child is young, but as the child grows up, the mortality charge also "grows" up and policyholder mostly do not know the cost, though it is stated in the table in the policy document.
You will know the charge from the table as premiums are reflected.
Mr Tan has recommended the Shield Plan which is an essential plan, but do cover the Deductible and Co-insurance with approriate rider offered by some of the insurers.
Traditional Plan like Living Policy is low in premium with a Living Rider.
Perhaps, you can consider a Living Policy of $30,000 with Living Rider $20,000 and this should cover the child for at least $50,000 over the lifetime.
- Thomas Phua
Mortality charge increases as you age.What ever kind of plan it is the same. Most people including the insurance agents don't know or pretend not to know that there is also a time bomb in the traditional wholelife living. Because it is not transparent it is not shown. Insurance agents like to tell you the premium is low when you are young. It is very true but you do not how much premium is paid upfront. Did you know that your cost of insurance or mortality charge is only one tenth of the premium? The 90% goes to build up your reserve to pay for your increase in mortality charge in the future especially when you are above 65 when the mortality charge is a bomb,ie your premium is not enough to pay your mortality charge. Very clever of insurance companies, this is a way to ensure your policy doesn't lapse but more importantly to ensure it continues to provide the revenue for the company.That is why this type of insurance is called permanent insurance because it is a permanent source of income for the insurance company.Think about it before you dismiss term insurance. Term insurance is the purest form of insurance. They can take care of your needs till you are 100 years old. If it is not long enough, you must be an immortal.Traditional plans are bundled. Today you find more bundled products called by different names,latest is RENOSAVE by INCOME. .
ReplyDelete