Dear Mr. Tan,
I plan to buy insurance for my two boys - 9 and 6 yrs old. My agent recommended me the ILP product.
I learned that ILP is not good as compared to traditional life policy or term insurance. The ILP insurance cost is high when I get older. If the invested funds are not performing, I risk to have negative value in my ILP policy.
I am confused whether to go ahead with ILP or go for term insurance for my boys..
REPLY:
It is best to buy Term Insurance for the life insurance protection and to invest in a low cost investment fund (e.g. unit trust). Read this FAQ:
http://www.tankinlian.com/faq/child.html
In selected an investment fund (unit trust or investment linked fund), look for a fund which invest 100% of the savings (i.e. no deduction to pay commission to the adviser) and which has low annual expense ratio.
I understand that the ILP from company X takes away 18 months of your savings to pay commission to the agent. You can check with the agent if this is the case. You should avoid this high charge.
"The ILP insurance cost is high when I get older"
ReplyDeletethis statement needs clarification: all life insurance costs higher when you get older, this includes term and whole life. this is because you have higher risk of dying or contracting serious illness when you get older.
you don't appear paying increasing cost in whole life and some term policy because the premium is 'leveled': you are paying more than it's supposed to be in earlier years to compensate the increase of premium in the later years.
the problem with regular premium ILP is not the fact that it is more expensive when you get older, but because it charges an exorbitant amount of distribution cost.
The regular ILPs are very misunderstood product because agents never explain them properly. NTUC 's regular ILPS, ID2 or ID7 are different from the rest.They are very good saving plan, better than endowment any time.They are not insurance plans. The others are ILP plans that you can use to mimic traditional insurance plans.
ReplyDeleteFor your children they need medical plans; get a shield plan. They don't need insurance.
Don't let the insurance agents fool you with this line that the earlier the cheaper the premium.So what if you buy it when YOU NEED IT. If you put aside the premium saved and invest it; it is more than making up the premium.
You must get it right.They don't need life insurance. You can save for them for whatever goals and don't let your money be drained by insurance.