Tan Kin Lian's Blog: Termination of Living Policy

Sunday, November 29, 2009

Termination of Living Policy

Dear Mr Tan,
In 1993, I bought the above policy for myself and family members. I believe at that time, you were in charge of NTUC. I read that you have bought the above too but have since redeemed it. Would you be able to share why and should I continue or redeem the policy like you did. I am now 60 years old.

REPLY
My reasons to give up the living policy are:
a) I am now retired and will not suffer any loss of income in the event of disability
b) I expect medical expenses to be covered under my Medishield plan
c) If I have to pay expenses not covered under Medishield, I can pay out of my accumulated savings
d) I do not like the restructuring of bonus introduced by the new management.

12 comments:

Anonymous said...: Are you aware that your mortality cost has gone up at this age? It may have exceeded the premium you pay and it is eating into your cash value.Soon your cash value will deplete.
The options you have.
1.Ask yourself whether you need the insurance? ie. your responsibility is all over and it is time to focus on retirement. Money is needed for retirement, right?
Is it a living policy? Do you have a shield/medical plan? What is your health?
If you have to cancel make sure you have a medical plan and you have saved enough money for self insurance. Critical illness need not happen. If it happens in later age don't think of the worse. The hospital will provide the treatment at affordable cost. You don't need to spend a few hundred K to treat yourself at this age, do you? Don't be fooled by insurance agents.
Never do partial cash out from your policy becuase you NEVER OWN THE MONEY.Don't fall into the trap. It is actually borrowing and you need to pay hefty interest rate of between 5.5% and 8%. It is madness and puzzling too that you have to borrow your own money and pay interest on your own money.Just surrender the policy then the cash is yours.
Don't fall into another trap set up by the company and with agents conspiring when they tell you that you need coverage. They tell you for their own interest becuase if you terminate your policy their income or revenue also terminated. You see , now?
My friend, terminate it and keep the cash for your retirement before you get another bonus cut.The return is miserable.

The Watchman; November 29, 2009 11:36 AM
Anonymous said...: I am 60 years old and retired two years ago. I visited the NTUC Income last week to terminate my 15 year-old Living Policy. Looking at the miserable sum, the only regret I had was that I did not terminate my policy earlier.; November 29, 2009 2:15 PM
gerimegaly said...: Have you considered partially surrendering the accumulated bonuses, then letting the plan run on Automatic Premium Loan?

If you do this, you get to cash out "some" of the cash accumulated in your policy since 1993, and leave the remaining cash inside, to "self-finance" the plan.
And this could possibly mean another 10 more yrs of coverage...without having to pay any more premiums.

And if a claim occurs going forward, the insurance company will simply minus the outstanding loan, from the death/living proceeds.

gerimegaly
http://futures-trading.blogspot.com; November 29, 2009 5:18 PM
Anonymous said...: gerimegaly,
Partial surrender is very dangerous and very stupid thing to do. Do you know what is automatic premium loan?
It means you make a loan against your so called own money and pay an interest rate of 5.5% to 8%. Wow!! does the insurance company pay you 5.5-8% rate of return every year? The insurance company will laugh all the way to bank; their investment in your policy is risk free and gauranteed whereas your investment in the company is not guaranteed and it is only getting 2.5% if you have kept it for 30 years. In other words your policy is getting a negative return of -3.00% to -5.5% return. Is it stupid or dumb or mental hospital case?
Is it how agents advise their clients? Do you know for the insurance companies APL is the most profitable business? It is free lunch!!!!!!
Do you know that the cash value is being attacked or robbed at 2 fronts? High Mortality charge at one front and the other the 'ah long san' interest rate.
What kind of advice you give? it is suicidal. Terminate the policy is the best option and self insure.

The Watchman; November 29, 2009 6:23 PM
gerimegaly said...: wow...you are really an Expert here. 5.5% p.a. is "Ah Long" rate? Hmmm...and all along I thought the "Ah Longs" charge 20% ?!?!

Who am I, compared to you...You are after all, "The Watchman".

Perhaps you might want to get a license from MAS to give financial advise. Strictly fees, and everyone wil definitely flock to you. Sure get rich!!; November 29, 2009 8:17 PM
Anonymous said...: gerimegaly,
qualified than you?....Hmm Hmmm yes but may not be better than others but ethics is my game.
anyway ,I am getting a license for each of you insurance agents soon.
Just stay tuned.

The Watchman....watching you; November 29, 2009 10:31 PM
gerimegaly said...: Hahaha...I don't enjoy being "watched", but I guess there will always be those with "voyeuristic tendencies"...Afterall, to each his own :-); November 30, 2009 8:34 AM
Anonymous said...: Regarding APL and policy loans, it is a lousy deal for policyholders. You are being paid on average 2% to 2.5% (non-guaranteed) while the insurance company charges you a guaranteed 5.5%pa to 6%pa.

I am working in the insurance industry and have come across a number of customers who APL or take out policy loans --- most of their par policies have not even breakeven after 20 yrs and they went this route. It is like digging bigger hole for themselves. Many of them end up having the insurer terminate their policies within about 5 to 7 yrs coz the remaining cash value insufficient.

So unless you have some confidence of repaying back within 1 year, or no longer insurable & die-die just want the insurance cover for that few remaining years, do not go this route.

Also, for many par products, partial surrender of accumulated bonuses also comes with penalty. I.E. you do not get 100% of your asset share, particularly if you surrender within the first XX years.

Cash-flow & income planning in the first place is the most important aspect of financial planning, unfortunately 99% of agents do not bother with this, because nothing to sell. :-)

Ex-Con; November 30, 2009 8:45 PM
gerimegaly said...: I really don't understand this fixation with "returns" of a policy...especially a Critical Illness or Living Policy. Buying such a plan should, and never be about returns. If you want returns, buy stocks, unit trusts, or property!

Having such a plan, has got to do with having the desired coverage available, when or if you need it - Unlike Critical Illness Terms plans which have expiry dates, and the cost of having it as a Term cover beyond 65yrs of age can be a costly affair.

A policy bought in 1993 from NTUC, would probably have broken even, if surrendered today. However, surrendering the plan entirely, would only reap his 16 yrs of premiums paid to date. But he loses the cover/sum assured. Would the surrendered sum, be equivalent to his original sum insured + guaranteed bonuses paid to date? Unlikely...

Would you ask him to self-insure? Would that be the best solution? Does he need to cash out the plan, in order to live off that amount? We would never know what his true intentions or needs are, as the writer of the main question did not specify his intent, but merely asked for an opinion from Mr Tan, if he should keep his plan, or not.; November 30, 2009 10:50 PM
Anonymous said...: Ex-Con,
I do not agree with you that only 99% of agents will not put their clients interest first.I think it is 99.5%.
Consumers sure die one. Wonder who is the honest and competent one.
One agent above even suggested partial surrender. If this 60 year man takes his advice it will be the slippery road down to ?????...
Consumers don't know that whole life products have a lot traps in favour of the insurer.The consumers are suckers.; November 30, 2009 10:55 PM
Anonymous said...: Gerimegaly,
you are very confused..You don't buy a par product if your concern is protection. A term to address a specific need is VERy VELY cheap way and you can have ENOUGH of it to meet your needs. A par product is vely expensive and you cannot afford enough of it.
Let me give you an idea of what is protection at affordable premium.
Eg: the premium for a $20K sum assured wholelife living product can get you $200K living sum assured term.Which takes care of the client's need better?
Of course in term of commission the $20K gives more than the $200K.
You see the conflict of interest?
Worry about term can lapse or forget to pay is a VELY poor excuse.This is not stone age when the insurers have to send you a stone tablet to remind you of due premium. I agree it is troublesome.
The postman will have problem too.
Term expires? of course if you don't need it why keep it?
How about a term that insures you till 99 years?
How about paying a single premium for a term plan?
Premium at old age expensive and wholelife not? I think you need to research the facts on cost of insurance or mortality charge. Of course they didn't teach you at the tikam tikam exams. The college never had intention of letting you salesmen know in details otherwise if you know too much you dare not con your customers. After all the college was set up by insurance companies.The college only trains salesmen and NOT planners or advisers or consultants who have to know everything so that they can disclose everything and give the best advice in compliance with section 27 of the FAA.Salesmen no need, just con the customers and rip off the client with the most expensive par product and leave the consumers under insured.
This 60 year old man should not keep if he is concerned about retirement fund becuase the mortality charge at this age will deplete the cash value. Partial surrender is stupid b'cos you only make the insurer richer with 'ah long' interest rate of minimum 5.5%(ntuc). Does the insurer pay you 5.5%? At the end of the day the insurer slowly robs you off all the cash value.WL product is full of booby traps.That is why it is not transparent.
Self insurance? why not, if you have an H&S plan why worry about critical illness when this plan can take care of so much of the treatment cost . With medisave and accumulated cash why not? This is assuming you will definitely get critical illness, right? But Getting CI sometimes is like getting a 1st prize TOTO, you know? Ask you doctor. Or you mean you are scared of getting a CI at age 99?
Crappy insurance agents argument,eh?

Separate your protection and saving. Get protection first and FULLLY insured before thinking of saving.Use BTITR.

The Watchman; December 01, 2009 12:16 AM
gerimegaly said...: Again, who am I to argue with "The Watchman".
He is afterall, the ultimate adviser that only fees can afford.

I am merely a confused human being...simply not worthy.; December 01, 2009 10:21 PM