Tuesday, August 26, 2008

Whole life policy with premium for 10 years

Dear Mr. Tan,
I am 24 years and pay a premium of $2,500 for 10 years to be covered for $80,000 for death and critical illness for life. The cash value at 65 is $89,000. Is this a good deal?

REPLY
If you invest the 10 years of premium to earn 5.25% (which is the same rate used by the insurance company to project the bonus, you will get a total amount of $164,000 when you are 65. The cash value of $89,000 represents a reduction of 46% from the amount due to you. I consider a reduction of 46% to be too large and the policy gives you a poor return.

2 comments:

  1. You don't have to cash your policy out at age 65. You can leave it in force until you die (hopefully at age 112!)

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  2. If you leave the cash value for the rest of your life do you know that the cash value will shrink. Do you know you will be paying a time BOMB ? Next, why are you keeping it till 112? as legacy? There is no estate duty in Singapore.You must be very rich when the rest are struggling to have a 'silver or golden retirement'
    Your children will be better off if you have an AMD on stand by lest you will be burden to your children and grandchildren.

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