Tan Kin Lian's Blog: Existing Life Insurance Policies

Tuesday, February 09, 2010

Existing Life Insurance Policies

A few people have asked for my views on whether they should continue their existing life insurance policies, as the return is rather poor. I asked them to read this FAQ and get the relevant figures to make a decision.

Generally, it is better to continue with the existing policy. You have already incurred a high upfront cost during the first few years of the policy, which gave you a bad start. But, excluding the upfront loss (which you have to write off), the going-forward return should be better, maybe 3% to 4% per annum, compared to alternative investments.

Never give up an existing policy to buy a new life insurance policy. You will incur the upfront cost again. My insurance agent will tell you that a new policy is better. This is bad advice. It is also unethical, as they are earning a large commission again, at the expense of the client. This is called "twisting" and is illegal in some countries.

Tan Kin Lian

5 comments:

Anonymous said...: I would recommend cancellation for these reasons.
Although the charges of the early years have been overcome the cash value continues to languish or stagnate in very low interest rate and it would take many years like 20 to 25 years to breakeven. 20 years is a long time and if you save in an instrument that gives 6 to 8% return whatever losses that be recovered and on top of it gives superior return than the miserable wholelife.
To terminate , of course , you must first consider your health your insurability and also how long you have the policy.
If you have just bought it cancel it without thinking and perhaps demand the return of the premium becuse it is obvious the agent didn't disclose fully and there was conflict of interest..
For those who are thinking of buying an insurance I suggest that you consult FISCA first before plunging in to please some agents.
REMEMBER THIS: don't buy wholelife including limited payment , endowment and the regular ILPs.They are as good as scams.; February 09, 2010 9:09 AM
Anonymous said...: I also think that cancellation may be a better choice if - the amount of money you will lose is acceptable to you (example, $5000 loss may be ok for me). In other words, ignore the percentage loss (x% compared with not cancelling) but consider the absolute amount.; February 09, 2010 11:39 AM
Anonymous said...: I agree that cancellation is the best option . Don't be held prisoner by the insurer. Break even or breakout of the prison is a very long way. Don't suffer and be helpless. Break free and take the losses and start afresh . Remember the best way is to SEPARATE your protection and saving so that you don't have problem when you need money.(It is really big joke that you have to borrow your OWN money and pay high interest for wholelife or endowment)What kind of saving plan? It is a scam.; February 09, 2010 12:44 PM
Anonymous said...: New products are NOT better than old products. How? Costs make them lousy. Unlike consumer products technology helps lower the cost and makes them better but NOT whole life or endowment products which depend on low cost to get better return and protection.; February 12, 2010 6:46 PM
Anonymous said...: I have an old insurance with $92+ per month for premium for 30,000 sum assured since 1995.

Should I cancel or stay with it? I have bought few other insurance thruout the year and now paid about more than $500+ other premiums per month.

Quite frankly, I have no idea at all.; March 29, 2010 3:28 AM