Thursday, March 13, 2008

Whole Life

Dear Mr. Tan,
Is whole life a good plan?

REPLY
It depends on the pricing. If it has reasonable charges, it is a good plan.

Unfortunately, most of the plans in the market have high charges to pay agent's commission and advertising cost. They give poor value to the customer and lock the customer for many years. It take about 15 years to reach breakeven point.

For insurance proection, the best plan is a term insurance over 25 years. To reduce the cost, you can take a decreasing term or a income benefit plan.
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4 comments:

Anonymous said...

A whole life insurance policy should be made simple to understand.

Distribution cost can be brought down if there are sufficient consumer education on buying insurance. Have you wonder why consumer goes to a bank to deposit money and not going to insurance company to buy policy?

Unfortunately, todays policy can be difficult to understand due to complicated marketing terms and attached with weird riders.

If you are a sole breadwinner in a family, limited term whole Life policies with critical illness coverage is good because

a) it does not require one to pay for insurance when one is economically inactive.

b) protect your future earned income where critical illness strikes early before you accumulate enough.

c) financial gift to your benefitary. Provides an incentive for your children to look after you at old age.

If policy, if marketed as a savings plan, will be a misrepresentation of the product.
Unfortunately, consumer education is lacking in identifying good policies from bad ones.

March 13, 2008 12:15 PM
Anonymous said...

Hi Mr.Tan,

I've a Whole Life covered for 100k since 1984 till now and the cash value is still very very low $XXXX/=
I would not even encash it becos the cash value is too low in today's context.Maybe I will contemplate reducing the amount covered so that the premium will be lower.I'm now 55 year old.

Bt.Panjang Uncle

March 13, 2008 3:42 PM
Anonymous said...

Why buy whole life when term CI can do much more EFFICIENTLY AND EFFECTIVELY?
The solution is having a good qualified competent and honest adviser. The problem is , it is not easy to find one but you can narrow down to where you can get one.The Association that regulates the conduct and practice may be a good place to look for one.At least you are assured that the adviser is competent, qualified and honest(if he has not been censured) and trained and have knowledge and expertise.
I advise that you get a Certified Financial Planner(CFP) from Financial Planning Association of Singapore(FPAS).

March 13, 2008 7:52 PM
Anonymous said...

Bt Panjang Uncle, too bad you bought an AIA policy.

If you have bought Income policy which has been under Mr Tan for 30 years, it would be a different story. I am sure you would get good values.

I know because I have one policy taken from 1992 with Income and one 1990 with Prudential and my Income policy though 2 years later than Prudential, cash values are much higher.

Frankly, I am thinking of cashing in on Prudential policy but since yield is 2% plus, I thought let it be until I need the cash.

North Uncle

March 16, 2008 8:29 PM

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