Tax Benefits in Life Insurance Products

Dear Mr. Tan,
You mentioned that the high cost in life insurance products reduces the yield and gives a poor return to the consumer. Does this situation apply to the developed countries as well? If so, why are the consumers there, who are more sophisticated, still buying the high cost life insurance policies?

REPLY
You will find countries in three broad categories:

1) In some countries such as USA, Australia and France, there are tax benefits in buying certain types of life insurance products. These tax benefits offset the high cost of the products and still give an attractive return to the consumer.

2) In some countries such as Malaysia, the regulator set certain limits on the marketing costs. This ensure that the products give reasonably fair value to the consumers.

3) In countries such as Singapore, the marketing cost is too high and there is virtually no tax benefit to offset it. It is better to buy Term insurance and invest the remainder in a low cost investment fund.