Hi Mr. Tan,
I have been reducing the policy illustration given to me by the insurance agent. It contain many pages of confusing figures.
I saw an item called "reduction in yield" of 1.5% plus. Is this acceptable?
REPLY
The reduction in yield shows the impact of the various charges that you have to bear, for the commission, life insurance cover and other expenses.
A reduction of 1.5% is high. In most cases, the reduction should be around 1%, The impact of a higher reduction can be quite significant for a policy that is taken for 20 to 30 years.
Read this FAQ:
http://www.tankinlian.com/faq/yield.html
If the projection is based on 5.25% and reduction is 1.5% the yield of the product can go no further than 3.75% over at least 20 years. Is this a decent return? It barely beats inflation which is about 3.5% over the same term. And this is assuming that the products deliver according to projection. Most endowments fall under this. Again nothing beats the regular ILP saving plan.
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