If you find the time, can you explain the different types of life insurance policies, such as whole life, endowment, term, ILP. I am quite confused about them.
REPLY
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8 comments:
Whole life(WL) is shackling you for life so that the insurer is paid for life.
WL is a potential source of investment for the insurer .
WL is popular with insurance agents because it gives them high commission
WL provides lifetime business for agents because their customers are perpetually under insured.
WL ensures that the policyholders stay status quo.
WL gives false sense of security. It is always money no enough and protection no enough.
The only people who will benefit from this product is the insurance agents and the company. It is win-win-loss
Mr Tan, the link to your explanation is locked:- We're sorry, but chuenyang@gmail.com does not have access to this document.
You might need to tweak the settings.
We know many insurance plans ripped us off by paying high commission to the agents and their companies.
But for conservative people, beside putting money with the banks and buying government bonds which are already giving pathetic returns, what other choices do they have?
Jasmin
Endowment is supposed to be saving plan with more money going into saving and less protection.Similar to whole life it is inefficient .
A lot of your premium goes to pay the commission and your money is invested in conservative funds with the rest of other people's money. Why put your money in the same pool? Your time horizon is different; your risk appetite is different. your goal is different;there is NO distinctions between the investors.It is one size fits all type of porfolio.
Endwoment is like buying a term protection and invest in a unit trust.If you do on your own you DON"T have to pay huge commission to the agents.You take control and you decide everything.Why waste money on insurance when you don't need it? Insurance is not free.
Jasmin,
many people hide behind conservativeness or risk averseness and expect higher return. Everybody is conservative. Everybody wants no risk or low risk and high return, it is natural.But unfortunately, risk averseness could translate to high risk and NOT low risk because the low return eventually loses its real value resulting in guaranteed loss.Putting in bank deposit is guaranteed loss.
To understand how insurance companies invest your wholelife or endowment premium perhaps can help you understand better.
Your premium is invested into a pool called the life fund which is invested in a conservative portfolio made up of 30% or less equities and the 70% of property, bonds and cash and maybe derivatives which are used from time to time.Your cash value and return is driven by this fund. NOT only your premium but all others' premium are thrown inside this fund. This fund disregards individual goals, time horizon, risk appetites and other perimeters. It is one size fits all portfolio.
If you invest on your own into a regular saving plan, you can choose your portfolio based on your goals, your risk appetite and time horizon, your assets and asset allocation and use time to lower the risk. By comparison, this way the risk can be lower than an endowment and return higher. You need not pay high commission to greedy and unethical agents and you can get 6% return with your 2 eyes closed. With an endwoment, you are maybe AT BEST preserving your hard earned money, ie 30 years from now your real money has not changed.An endwoment can at best give 3%+ return after donkey years, 30 years and any shorter than this you are finished. I have seen the BREAK EVEN point is also maturity point of some endwoments.Stupid , isn't it?
This is what your trusted insurance agents mean what they say let your money work harder when they want to sell you a whole life. They actually want to sell you a whole life with high commission.
Of course getting someone to help you is important. Never get a product pushing insurance agent you will be condemned.Get someone who is honest and competent and competent in investment and who can design a portfolio based on your circumstances and goals and risk.Salesmen sell, con, confuse and cheat.
Beware of regular ILPs they are also rip off products. They are also known as variable whole life and it is better than traditional whole life in that you have some control over the sum assured and the investment. The " bomb" that is associated with it is due to over insurance. Traditional wholelife has a bomb too but it is more controlled and NOT revealed to you.Traditional WL is NOT transparent and therefore the bomb is not apparent.
Between the devil(WL) and the deep blue sea(regular ILPs) regular ILPs are much better( comparative and not absolute) if you know how to use it for protection and investment.
I don't recommend regular ILPs and wholelife and endowment, they are all rip off products.
3 types of products that you should avoid and they are wholelife, endowment, including anticipated endowment, and regular ILPs.
Characteristics:
1.high expense ratio
2.expensive protection
3.low return
4.risky
Mr Tan mentioned a decreasing term insurance - who offer this?
NTUC iTerm do not include critical illness, how best to supplement it? A living rider?
thanks
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