Dear Mr. Tan,
I have just retired. I am not sure if I should continue to pay the premium on my current life insurance policies, especially those that require me to pay for the whole of life. I can afford to pay the premium, but I am not sure if the return is worth while. What is your advice to me?
REPLY
If you are able to continue to pay the premium, you can look at the return on your existing policies over the next 5 or 10 years. If the return is higher than other types of investment, then you can continue these policies.
Read this FAQ:
http://www.tankinlian.com/faq/exist.html
I don't think you should view whole life policies as an investment tool for return cause that was not the main design of life insurance.
ReplyDeleteYou can continue to pay for it and let it be the last gift you can give for your family/children.
Should you want to stop payment, I believe you should have a healthy amount of cash value now andyou can get a automatic premium loan and let the policy cash value pay the premium, which prevents the policy from lapsing. Check with your planner in how to do so.
At the end of the day insurance is not investment, its about how you feel towards your family.
Ask yourself whether the insurance is still useful, whether you need it. If you are thinking of a legacy if you should die then keep it.If not my advice is to discontinue and put the premium into some better return instrument.
ReplyDeleteAt this age did you know the mortality charge is so huge that it eats into the return. You are unaware becuase your insurance agent didn't know or didn't want you to know. You will be better off investing yourself and if you worry, treat it like self insurance. You should be looking at your retirement.
But I thought since we pay the same amount year after year and the return has been projected then how can it eat into the returns? I need to know too since I am facing the same issue. Is it true that we are getting lesser and lesser return as we grow older?
ReplyDeleteYou may be paying the same premium through out but the mortality charge the company deducts from your cash value increases with age and it becomes a bomb when you hit your 60s.
ReplyDeleteThat is why the return decreases and if you continue to keep it, it MAY become zero return.
All this information your agent will not disclose to you .If he or she has disclosed you might not have bought a whole life. You might want to consider term and invest the rest, the strategy which is more advantageous to you but low commission to the agent.
I have been saying that insurance agents never tell you the whole truth but half truth. Their intention is sell you whole life so that they can get whole and high commission.
Why don't you have all policies reviewed by a honest and qualified adviser to see if there is any garbage sold to you.It is better to know than finding out at end of your life to discover them. You also may want consider taking legal action against the errant agent for recommending you inappropriate products. All the best to you.
The previous annoymous is refering to an ILP. Yes ILP do eat your cash value a lot upon 60 years+ if you have a high sum assured. For these reason, some people will sell away the units to realise the profit or reduce to the minimum sum assured.
ReplyDeleteBut for whole life, it doesnt really matter as everything was taken into consideration into the premiums you paid regularly.
If you have no use, cash it out and invest it in broadly diversified portfolio,so that this investment forms part of your retirement fund.
ReplyDeleteIt is true that your return gets lower as you age. The reason is the mortality charge the insurance company takes from you has exceeded the premium you are paying and the difference is deducted from your cash value.
The company loves people who buy whole life plans because your whole life policy is a source of revenue for the company for whole life.
Likewise the insurance agents who conspire with the company get very good commission for persuading, or forcing or conning you to buy. So you see the whole conspiracy about whole life and endowment plans.
Tell your children not to make the same mistake and be fooled by glib tongue hustler insurance agents. The worst specie is the female with bi-forked tongue.
whole life insurance isnt about the cash value. If cash value is what you really care, you shouldn't get a whole life policy in the first place
ReplyDeleteYou are right. You should have gotten a term insurance and cancel it at 60.
ReplyDeleteTreat it like a car insurance taken up to 60 when you decide to stop driving. Any cash value from car insurance? Did you cry foul? No. Why then is everybody concerned about cash value when recommended term? Car insurance is an expense and so is term insurance.
If you want good return invest in funds seperately.. Ii is the best way to accumulate wealth, and not endowment and whole life or revosave or sabosave.
I am now confused with the differing opinions. Perhaps Mr. Tan can clarify. So is it true that the returns will be lesser and lesser for living policies? Or does it apply to ILP only?
ReplyDeleteTraditional products like whole life and endowment are not transparent. The customers don't know how much has been charged yearly to the cost of the protection(mortality charge)and it is increasing yearly.Neither do the insurance agents know.These products are also know as 'BUNDLED product".
ReplyDeleteIn an UNBUNDLED product like regular ILPs you know how much is taken to pay your insurance, the investment return, the funds you have chosen etc. You are given this report at least once a year.
YOU get zero report for traditional products. You are not told how much is taken from your premium to pay
your insurance protection cost, the return of the fund.The whole idea is to keep you in the dark.This cost goes up until it hits the BOMB level which is around 60 or more . At this time your return starts to decline becuase now your premium isn't enough to pay your insurance and the additional cost will be taken from your cash value and more and more will taken as you age.The mortality charge chews away your cash value.
It is a misconception that the BOmb happens to ILP .It is not true. It also happens to traditional products.How come you are not told
by your agent? Obvious reason is you always think your insurance agent is trustworthy and competent; he or she isn't. If they are, they won't tell you also because that would frighten you and you might end up not buying. This will cost the agent a huge commission. They play safe. Get the deal first. This is willful concealment of facts.This breaches the Financial Advisory Act.
I believe the agents themselves also do not know. Many agents also bought Living policies themselves.
ReplyDeleteSo you see the agents are not properly trained. How to advise clients then?
ReplyDeleteIi is doomed from the start, right?
The only certainty in life is death.
ReplyDeleteSorry for being straight to the point.
There are traded policies in other countries, where you can invest by buying over some one's endowment plan, and when the insured dies, one gets the payout, which the investor will make the "profit".
Perhaps, "sell" it to the next generation as an "investment". Or leave behind an inheritance.
- Thomas Phua
Recently, I tried to sell all my policies to these traders. They did their calculations but do not find it worthwhile to buy them except one, which is expiring in a year's time. Does that mean that NTUC Income policies are not good value?
ReplyDeletewith only one year to maturity, of course investor will not buy from you, in the first place are you sure there are such traders in Singapore?
ReplyDeleteWith one year left, why would one wish to bet that you are dying within the year?
How much can the investor gain?
Surely your Income policy is going to mature with good value.