Wednesday, March 05, 2008

Poor cash value for this whole life plan

Hi Mr Tan
.... you mentioned total premiums $5,600 was made and policy has existing cash value of $2,700 with a "loss" of $2,900... just curious, are you expecting free insurance?

This is a whole life policy about $430/yr or $35/mth. Even if you were to get term insurance at $80/yr, you would have "lost", $1,040 after 13 years.

Furthermore, assuming that her budget is $430/yr and that is all she can spare, where would you suggest she invest the balance of $350/yr, to get a investment gain of 4% p.a.

Even if she had invested and able to get 4% p.a., for the last 3 months, all the equity markets were down, it would be hard for her to sell as her funds would have dropped at least 20% in value.

It would be good to know what the expected surrender value is after 20 years so that we have a better picture.

REPLY

The term insurance premium for a cover of $30,000 should be less than $30 a year. The life insurance company sell high cost products that takes away more than 10 times of the real cost, and locks the customer into a product that they will suffer a big loss for the "whole life".

Many insurance agents make a living out of the losses of their customers. There are many new customers that they can take advantage of, each day.

I hope that the life insurance industry and its "professional" agents will be ethical in doing what is right for customers.I have never seen any whole life policy that offers such a poor cash value after 13 years. Matters are getting out of hand.

For my views about investing your savings, read this FAQ:
http://www.tankinlian.com/faq/savings.html
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3 comments:

Anonymous said...

I know most of the whole life plans taken 10, 15 years ago had breakeven point at around 20 years. Today the BE is lowered to 10-15 years. Still , they are not good value for money. Yes, insurance is not free but the large chunk of clients' premium went to pay the agents and company's shareholders. Even NTUC's products are not spared by commissions.
The issue here is too much goes to paying the agents for doing nothing. If there is an online portal, cleints are better off buying at a discount.Agents only explain the the benefits and features. If that is what they do why pay high commission for doing this and filling up the forms(MAS is dealing with this). The commission is part of the cost. High cost means lower return. You don't need an accountant to explain.

March 05, 2008 9:23 AM
Anonymous said...

if what you say is true, 13 years ago ... all insurance companies, including the one headed by you, Mr. Tan, NTUC Income, is selling such policies. Whether company A takes 150% or Income takes 80%, it makes no difference - just pot calling the kettle black. Just because the company makes less does not mean that it is doing the right thing.

March 05, 2008 3:18 PM
Anonymous said...

You can say that, but there were pots that are less black,( grey). Now you can say all the pots and kettles are black and if there is anything that is blacker than black, NTUC is trying hard to be the first.
Ethical products are things of the past. Now, use your salesmen and give them high commission even shit can be sold.They are fantastic people. They turn black into white with money. It is a money's world. They are magical laundry machines.

March 05, 2008 7:23 PM

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