Someone posted a comment that the insurance c0mpany has to make a reasonable margin to cover its expenses and make a profit. I agree.
The cost of a life insurance cover for a person to provide an adequate sum for a family should be $200 a year (e.g. to cover $300,000). It is all right for the insurance company to charge $300 a year, and have $100 as a margin to cover expenses and earn a profit.
Unfortunately, most insurance products (e.g. whole life, endowment or investment-linked policies) require a premium of $3,000 to provide the same amount of cover. About $6,000 is taken away to pay the commission and marketing expenses. This is too expensive and does not provide value to the consumer. These policies should be avoided. The agent who sell these policies are not taking care of the interest of their clients.
I hope that insurance companies and agents will act in the interest of consumers and offer the right products.
What I understand: effectively, split the mortality cover from the "investment" component, take a cheaper term life policy and invest the money yourself, say in passive funds - is that what you are saying? If so, sounds about right.
ReplyDeleteWhat I did not understand: of an annual premium of $3000, you say "$6000" is taken away to pay for commision... not getting this
Example: if you buy a Vivolife wholelife plan and pay an annual premium of $3000, $6000 will be taken to pay commission and marketing and other expenses over the years.
ReplyDeleteThat is why your saving takes a long time to break even and to achieve 3% it takes even longer, maybe 30 years.
Is this plan a good plan? Certainly NO. You are better off buying a term and invest the difference. You get higher protection and higher return. There is no compromise of your needs. BTID is a pure and free of useless frills plan which maximises your benefits.
Oh wow. I have both an ILP and an endowment (I think). The latter costs nearly 7K a year and it was taken years ago, in which time my income has increased a lot.
ReplyDeleteI have an MBA (!) but never got into the details of my insurance policies - now you can bet that I will take my financial interests into my own hands.
What you need is a qualified and competent adviser to look into your insurance policies. Don't get an insurance agent. It was he or she who sold you but didn't explain to you clearly. I would advise that you seek one with CFP designation. Review is important. Very often it turns up a lot of rubbish. Start taking an interest before it is too late.
ReplyDeleteSaid earlier, get a proper adviser to help otherwise it will be like leaping from the pan to the fire.