Tan Kin Lian's Blog: Life insurance policy with annual payout

Tuesday, August 21, 2007

Life insurance policy with annual payout

COMMENT POSTED IN MY BLOG:

A few months ago, you said that a life insurance plan that gives out a regular payment reduces the return to the policyholder. NTUC has now introduced a new plan that pays out 5% of the sum asssured each year. Does your remark apply to this plan as well?

REPLY:

According to the advertisement, the potential return of the new NTUC plan is 3.7% per annum. This return is lower than the return on an endowment plan. The guaranteed payout seems to reduce the return to the customer.

If you are saving for the next 25 years, you should aim for a higher return, say 5% or more. Compared to 3.7%, the difference can be quite substantial (say 17% more). Read this FAQ.

8 comments:

Anonymous said...: How on earth can Income call this new repackaged endowment product REVOsave a revolutionary product. I think the more appropriate name is REVOrse-illusionary product. It is illusionary because at first glance
it looks like your saving is enhanced twice; first in the anticipated and then by reinvestment into a regular ILP or into fixed interest rate. Either one, you will be shocked they fall very short of direct investment into a simple regular endowment by as much as 45% if reinvested in the fixed rate and 20% in the ILP assuming a rate of return of 5%.
What sunny day or rainy days? It is a gloomy day when you discover that you are much better off investing in a simple endowment. At 4.5% over 20 years instead of 3.7% even reinvested. This is what you call warped marketing or sale manipulated with one objective,ie.
illusionary selling.; August 21, 2007 10:32 PM
Anonymous said...: Anticipated products are already obsolete. They are the worse kind of the endowment product group. REVOsave or REVERSEsave is like the phoenix rising from ashes without the feathers. I don't have to go into the nitty gritty of this plan. Just check out with your most trusted insurance agent and ask for his opinion or better still ask for a quote on an endowment plan. Often you get better return by investing directly into an instrument instead of going around the mulberry bush.You end up dizzy.
This is the case here,.; August 21, 2007 10:49 PM
Anonymous said...: You should also ask the agent to tell you what is the return, if all the yearly payouts are taken out.

I was told that the return is as low as 2%.

I do not know how the potential return of 3.7% is calculated. Does it assume that the yearly payment is reinvested in the ILP fund?

Why not invest the total premium in the ILP fund and get a much higher return, as advertised by NTUC?; August 22, 2007 7:48 AM
Anonymous said...: If you need a yearly a sum for whatever purpose you are better off by putting it into a plain vanilla saving account and invest the difference without the hassles and all the confusion. You don't need to pay all the charges that will go to insurance agents as commission.
Redressing up a product with all unnecessary frills just add cost and does not add value to the client but only to the insurance agents.
Income is even redressing up the agents by giving new names and tittles.Whatever new titles the
insurance agents are going by is useless if there is no new skills. Customers can see through the facade and they are not stupid.
What they need is extreme makeover, inside out.; August 22, 2007 10:16 AM
Anonymous said...: Anticipating endowment plan used to be popular with women and aunties because they could have cash back for spending or to go for holidays.
As a plan to address real serious need it is a sham.Anyone saving for
children education or retirement it is the lousiest type of endowment to use.
The new Income's plan revosave is no different from this except it has reinvestment features. Still this is a dressed up features which has no added value.
I got quotes from an agent for revosave and regular endowment and you know what. The regular endowment plan FAR outperforms the revosave in terms of return and absolute amount and coverage over 25 years. The worst return is reinvesting into the 3.5%. It is less by more than 50% than the ordinary endowment. For reinvesting into the ILP the result is still very bad. Based on 5% rate of return, investing in ILP gives about 25% lesser than the endowment.
The question is, did the designer of this product do any homework and research. If they did how come you you have a such product without any added power . In fact it is worse than buying those products seperately. Maybe i have the answer.It is a quickly assembled product to catch customers off guard. To add greater punch to this they use alot of ads, pomps and fanfare for the launch making it look like a very special product.But alas , customers are not stupid except for some aunties and old women.(this IS the market)
Secondly, to make it costly with a lot of charges, hopefully it can motivate the agents with high commission to aggressively promote it.Well,there are still a lot of aunties and old women out there and with glib tongue of both male and female agents the aunties and old women will be soon persuaded and confused . This seems to be the marketing ploy of the new Income; confuse and sell.; August 22, 2007 1:17 PM
Thomas Phua's Blog said...: It is mentioned that ID7 Ideal Plan has low cost.

revosave payout when invested in the ILP, has no advisory fees, no policy fees and buy the units in bid price.

If this is correct, it is even better than ID7?; August 24, 2007 12:00 AM
Thomas Phua's Blog said...: Never underestimate the aunties, they probably made more money in the stock market than some learned people.

My mother in law is not educated, but she invest looking at volumes, white and green on the TV text and she can make money.

Some aunties as not as stupid as one think ; )

But I have advised before, if your age folks goes to bank, please make sure they do not fall into trap.; August 26, 2007 12:00 AM
Anonymous said...: So said you the aunties are good at technicals, choosing between white and green. It's 50/50chance it may look.But what if the green and white are losers, is it not zero chance?. It's luck. The monkeys can pick as well , if not better, than a professor of finance, does that mean the monkeys are more intelligent than the professors.In this game of chance and in a bull market even your cats and dogs can pick more winners than you. Why? because they have no preconcieved
notions, baggages or biases and more importantly,they are stupid, that is why they pick more winners.
But to buy a "structured" product like Income's revosave either you need own intelligence or someone else's intelligence. And most of the times your intelligence is never put to use because the agent's intelligence (to confuse you) gets the better of you so you don't see the traps.They have trained tongues if not biforked tongues. Another is to see where your hot button is. They only have to hit it and the sale is made.The hot button is what appeals to the aunties.
That is what revosave is designed for.It has no better values than simple products . By putting many products together and tangle them up to confuse you. They say the benefit is the sum of its components.Check it out and you will discover it is lesser than its sum.
THE PRODUCT IS HIGHLY DEPENDANT ON THE INSURANCE AGENTS FOR THE SUCCESS.THE COMMISSION IS HIGH AND IS PAID BY you.Why do you think they are so enthusiatic to promote it to you? It is so LUCRATIVE.; August 26, 2007 3:22 PM