Thursday, February 18, 2010

Switching to a new policy with special benefits

Sometimes, a new life insurance product is introduced with an additional benefit, such as the waiver of premium during retrenchment.  This type of rider usually has small print to restrict the entitlement to the benefit, such as circumstances of retrenchment or the waiting period.

While the value of this type of rider is debatable, it should not be used as a reason for a policyholder to terminate an existing policy to switch to this new policy. The policyholder will incur a large loss on the existing policy by making this switch, and will have to pay the upfront cost again on the new policy.

Switching policies is a costly exercise and should be avoided. An ethical agent will not give this type of wrong or harmful advice to their customers.

Tan Kin Lian
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2 comments:

Anonymous said...

Retrenchment benefit is a dubious and useless feature . In time of retrenchment policyholders will terminate the policy instead of exercising it.
In the first place the agents should have planned for this event , not only to take care of this expense but other expenses.
The truth is the insurer is using it as a diversion to hide the rotten core of its main benefits, ie the protection and the return.
One social enterprise agents are misrepresenting their product by promoting this feature..There are a lot of these charlatans around these days selling koyok.

February 18, 2010 10:28 AM
Anonymous said...

Vivolife has this so-called retrenchment benefit, waiting period is 3 months, and can be exercised only once.

E.g. Say on 1st Jan I kenna retrenched, and I report to Ntuc Income to claim this benefit. I still have to pay premiums for Jan, Feb & Mar. In Apr if I am still unemployed (dunno show what proof -- cpf statements?) ntuc income will then refund the premiums paid for Jan-Mar, and waive the premiums for Apr, May & Jun. You can only use this benefit 1-time only, even if you claim back less than 6 months premiums e.g. found another job in the 4th month. But nobody will inform ntuc that they are no longer jobless lah. They will keep quiet to get the full 6-months waiver. Ntuc also knows this and is already priced into the premiums.

Yes, Mr Tan is right. If any agent or consultant tries to convince you to surrender your existing wholelife / endowment to sign up another wholelife / endowment, you should demand that he/she write the explanations in an email to you, using his/her official email address. Then you should forward this email to MAS and CC the company's feedback to ask whether this is really in customer's best interest or if this is considered twisting.

February 18, 2010 12:12 PM

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