Monday, November 26, 2007

Save for a child

Dear Kin Lian,

It has been very enlightening to read your blog and gain valuable insights about financial matters.

I bought a Prudential ILP for my son four years old. I now understand better about financial policies. I realize that much of the initial allocation of premiums in the 1st 3 years did not go into the funds purchase, but more of the distribution cost.

I have a one-year old daughter. What type of insurance I should choose for her?


I suggest that you cover her under a Medishield plan (to take care of expensive medical treatment).

You can set aside some personal savings for her in a low cost equity fund. If you wish, it can be a separate investment account specifically for her.

Alternatively, you can make the savings in your own acount and transfer the money to her when she needs it at a later date.

Read this FAQ:


Anonymous said...

I am in the same situation as this person. I bought an ILP from an insurance agent. I found, to my horror, that so little of my money is invested during the first few years. I missed out on the boom in the stockmarket. I am stuck.

Why does the government allows the insurance companies to offer this type of products? It takes advantage of the unsuspecting consumers. The agent earns high commission, but the consumer is taken for a ride.


Anonymous said...

This is the problem . Insurance agents are not truthful, honest and have the compunction when it comes to dealing with people's financial life.
What you have a bought is a DIY or flexible regular ILP which you can use to mimic or imitate traditional policies. It is a 4 in 1 plan.You can use as wholelife, endowment, investment or as term plan. You can adjust or change as and when your circumstance changes. You can say this is a flexible "traditonal"plan which NTUC had many years ago.
This product is suitable for young people who need large coverage in the early years(as Term) and adjust coverage as time passes(as wholelife) until when you need lesser coverage(it becomes an endowment) and until you don't need coverage when it becomes an investment plan. If you don't adjust the initial coverage it will become a TIME BOMB in your later years.
The charges are as high as the traditional plans and like them first 3 years no cash value.This type of plans must not be confused with what NTUC has now, the ID2 or ID7 which are regular INVESTING plans which have lower charges.
Understanding what you buy is important. You are not alone. Many bought it because it is "cheap" and yet it can have high coverage. But not many people understand how it works because insurance agents never explain clearly. They are interested in the high commission which is 50%, 25%, 25%. They are not interested in you. They see you they see money.
This is the problem the industry is facing, with a lot of salesmen and women but very few real advisers who can help you with all the areas of your personal finance.

Anonymous said...

The old NTUC ideal plan was also a 4 in 1 plan too. It was a fantastic plan.If you have this plan you don't need other plans.
But alas,like all other plans which give the insurance agents low commission it died a natural death.
It is sad that good plans that are good for customers are discontinued because the salesmen don't want to sell. So you see ntuc agents are also like other salesmen who are motivated by high commission.No wonder there so many complaints against them,.
Today, products that are not to the advantage of customers are rolled out for the sake of the salesmen and the company. The customers are
inevitably the victims of sellers.

Anonymous said...

Mr. Tan, I think some of the comments left on your blog are very biased.

A child ILP is at most about $100~$150/mth, but the comments left behind, deemed it that because of one child ILP, he/she missed out the market boom?

Furthermore, CPF has already highlighted that Medishield can only offset medical bills incurred in a C/B2 ward. So while it is good to get a child covered under Medishield, it is even more practical if the child is under one of the private plans (for expensive bills).

It is disappointing that your blog, despite your intention for it to be objective, still allows comments that are biased and negative.

I suppose if there are good financial advisors out there, who are more than happy (initially) to share ideas with you may be turn off by one or two people who has a certain agenda against the insurance or banking industry as a whole.

Take care.

Priyadi said...


"A child ILP is at most about $100~$150/mth, but the comments left behind, deemed it that because of one child ILP, he/she missed out the market boom?"

$100-$150 might not be that much, but it is still an unnecessary expense. and she still missed last 2 years stock boom for that amount of money.

try calculating future value from a periodic investment, and then do once again but with first 1.5 months blanked out. you'll find that the bulk of the money comes from the first years of investment.

on the other hand, her agent will get a generous $1800-$2700 for selling a useless product!

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