Sunday, March 22, 2009

Financial planning for newborn

Hi Mr. Tan,
I'm doing some financial/insurance planning for my newborn. I plan to purchase a Vivolife Policy (Sum Assured: $50K), with monthly premium of $86 payable over 10 years. And another term insurance (Sum Assumed: $100K), with monthly premium of $12. Is it recommended to do so?

In addition, to start a saving plan to accumulate his education fund in 20 years time. I would need some advise on which is the better option below;

Option 1: Monthly premium of $100 into Investment-Linked Product or Endowment Plan (PayMyUni under Income) ?
Option 2: Initial sum of $5K for Investment-Linked Product, with yearly top-up of $1K. Btw, which is the product worth investing in?
Option 3: Lump sum of $10K into SAIL (Income Policy), with projected return of $24K in 20 years.

I am not familiar with the Vivolife product, but I understand that it has high charges (to pay commission to the agent) and gives a poor return to the policyholder. You can search my blog for comments from people who are familiar with this product.

Read this FAQ about saving for your child's education.


zhummmeng said...

Before you plan for your child have you planned yours,ie have you met all your needs adequately, from dependent income replacement to disability income(including your spouse's) and your retirement needs.
Is your agent or salesman a financial planner?
Your child's needs rank last.
Vivolife is a poor plan in term of protection and return. You may think after paying for 10 years that is the end of paying.. The truth is your insurance salesman never or don't want to tell you that you NEVER stop paying the company until you terminate it.
Your agent might have told you that it is cheap to take it when young and you continue to pay the same insurance cost even when you are 60 years old. Is it true or false? This is where you judge your agent. Is he or she a liar or simply ignorant, dishonest or unqualified?
The truth is your insurance cost goes up as you age. A baby taking up now will pay the same cost when he or she is 60 years old as a 60 year old man who JUST takes up.Check with your actuary friend.
There is a big blackout on this.
Next ask yourself. What is the probability of your child contracting a dread disease ? 1%!!!
The premium could be saved to take up enough insurance for yourself. Your child will thank you for that.
How much do you need to bequeath to your dependents if you drop dead? At least $500K average for a 2 child family.
How much do you need to take care of YOURSELF when you contract a dread disease? 5 times your annual child will thank you knowing that money saved for them or your assets are untouched because of your illness.
How much do you need when you are permanently disabled? At least 70% of your monthly salary... your child will thank you knowing that if you are disabled there is still income to support the family and the assets untouched.
Consider all the above before you jump in just because some idiotic
or unscrupulous agent suggested or persuaded you. Remember you are the BREAD WINNER (the horse). Anything goes wrong with horse the cart stops moving; all insurance policies you have for your loved ones will go up in smoke.
Wait a minute, there is premium waiver if you should die, your agent tells you. Let me tell you waht good is the waiver when your family is left so little to live on. Ask them to eat grass?
My advice to you is have ALL your needs, including your spouse, met first then meet your child's "needs". This is putting the horse in front of the cart and your family is in the cart and you are drawing.
If you are worried about medical get your child a medishield or a private H&S using CPF medisave. This will take care of 80% of his or hers needs.
Education funding? forget it..this should be the last worry. or it is not even a worry at all.
You must be a first time father that you get so excited.. wait till reality or rationality dawns on you. Man , use your head and don't use your heart...your heart always betrays you and the insurance agents love exploiting your weak heart or soft heart.
For you...remember to separate your protection from your saving or investment.All those whoelife limited pay or endowment they are scams...
get an honest financial planner with right qualification to help you. This agent you have is definitely a salesman or product pusher.. he or she is pushing for his or her own pocket. Please believe you me.

zhummmeng said...

if you must or die die must fund your child's education in 20 year's time do you know how much you need?
At least $120K in future dollars.
Between PayMyUni(ntuc) and College Plus( TM Asia Life) , College Plus beats PayMyUni hands down but.....
both endwoment products are inefficeint at the best and are scams at the worst.
The SAIL ? you are barking up the wrong the tree and it is another scam endwoment which is risky if not very risky. For the same risk you get much higher return. Becareful , the salesman might misrepresent the risk to you.
If you need to provide the fund the best option is option 2. $5K plus yearly recurrent $1K in a risky fund ,risk same like the SAIL or their endwoments, you might attain your goal of $120K sooner than 20 years.
Again, consult an HONEST and qualified and competent planner and NOT salesmen or product pushers with titles like financial consultants, senior, exeeeecutive or otherwise.
All the best.

The said...

Below is a letter to the policyholders of TM Asia Life assuring them that thier bonus will not be cut.
What about NTUC INCOME? I don't think there should be a cut. Already got cut last year permanently so if there is another cut it will a double whammy for the policyholders.
Policyholders may ask what has happened to the money cut from their annual bonus.Has NTUC made more money to pay better bonus or special bonus or it was lost? These are the questions in every policyholder's mind. I hope the ceo and the board will have a good answer. It better be.

"Your Participating Policy

2008 was a year of crisis for financial markets and the global economy: stock markets crashed, credit became tight and highly-regarded financial institutions have been rescued by government intervention on an unprecedented scale. Singapore has not escaped this economic storm and 2009 will be a difficult year for the economy and financial institutions alike.

Some policyholders are understandably concerned about what this situation means for their participating policies and the Participating Fund, where their monies are invested. We would like to address these concerns.

Like other companies, TM Asia Life Singapore Ltd. is not immune from these turbulent events, but we invest the money entrusted to us knowing that there will be good years and bad years. In managing the Participating Fund, our objective is to take an appropriate and manageable level of risk so that we can deliver consistent returns to you over the long term, while at the same time, cushioning you from short term market volatility.

We do this by building up reserves during good times so that we can remain financially strong when economic conditions are difficult. Thanks to this prudent management over the years, our Company and the Participating Fund remain financially sound, even with the present downturn in the economy.

We are proud of our unmatched history of providing consistent, stable returns to our participating policyholders, and we would like to reassure you that we will not be reducing our bonus rates for 2009, despite the existing adverse conditions.

With TM Asia Life, you can take comfort that your money is in safe hands, even when times are tough."

Anonymous said...

to zhummmeng:

are u very certain that vivolife is a product that still have continual payment after the payment period, I'm not from Ntuc Income but my knowledge of this product is that no further payment is necessary after the stated payment period. However, the monthly premium for this product is non-guaranteed during the payment period.

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