Tan Kin Lian's Blog: Benefit Illustration

Saturday, June 12, 2010

Benefit Illustration

A benefit illustration has to be given for each life insurance policy that is recommended to a consumer. More than 100,000 life insurance policies are sold each year. The number of benefit illustrations given out must be at least two times of the number of policies sold. This makes the benefit illustration to be widely used.

Many people criticised the benefit illustration to be too complicated. As a result, consumers do not bother to read or understand them. It is the duty of the insurance adviser to explain the content of the benefit illustration, but most advisers do not do this duty. This is evidenced by the large number of insurance buyers who do not understand the key features of the policy and the key points in the benefit illustration.

There are only two important points that the insurance buyer should be aware:

a) distribution cost
b) effect of deduction

These two key figures determine whether the insurance buyer is paying too much for the insurance or getting too little back as investment return.

If consumers know what to look for, and how to interpret these figures, they can avoid paying thousands of dollars away unncessarily. These key points are explained in my book, Practical Guide on Financial Planning, which can be bought online here for only $12. The book also contained advice on how to identify and avoid bad financial products.

7 comments:

Anonymous said...: I think to play safe don't buy these products and you don't miss at all.
Why? today these products are real rotten because of increasing cost. Cost affects the protection and the return. If you want protection buy a pure insurance to protect and not one with fancifool complicated saving features which is common today, from dividend, cashback to coupon and other craps. A pure protection plan and a pure saving plan, without all the craps thrown in.
Of course, the insurance agents have some bad things to say about this strategy. When commission is involved they have a lot of bad things to say, it doesn't matter they are untrue so long they work on the unwary customers. A crime is a not crime until you are caught for committing it, right? This is what they think. They will do ANYTHING , say ANYTHING, to convince you to buy...EG.. "it is cheaper to buy when you are young". It is only half truth. The other half truth is ' the cost of protection increases with age" is not told to you. This example is only one of the MANY LIES about whole life products will use to sell to you. After all insurance is sold and not bought.So it is easy to lie to con you into buying these products when they are not good for you.
Another simple argument by insurance agents is "different people got different needs"..It is true..but they sell peddle wholelife as 'one size fits all' or cure all or some snake oil koyok.Familiar with snake oil peddled at pasar malam or at Waterloo Street/Albert Street? This snake oil cures EVERYTHING just like wholelife is being sold. There are only 3 products they peddle. They are the shields and spears of the insurance agents.They all earn the agents high commission. Don't blame them, right? After all, they are salesmen and women out to make a living BUT at your expense. There is no fair dealing and MAS recently issued guidelines which are supposed to be warning to all insurance companies that they are to deliver fair dealing outcome to their customers. Is it followed?
I believe only 1% do, the other 99% of the insurance agents under whatever disguise, financial consultants or life planners, wealth managers etc...are snake oil salesmen and women out to con you for a commission.How can there be fair dealing when the products are NOT suitable, expensive,needs not met, return very poor, low coverage?
Please do consider those parameters as suggested by Mr. Tan when you are pitched a wholelife, endowment or a cash back product.Do it out of courtesy to the insurance agent who might be your friend, relative or your sibling and gently tell them they are conman or woman representing a con company.; June 12, 2010 6:56 PM
Anonymous said...: not to forget units allocation as well... which can be 50 per cent of your first year premium.

can slowly calculate when ur 50 per cent left will be back to its original state...; June 13, 2010 2:03 AM
Tan Kin Lian said...: If you have a benefit illustration and need me to take a look, you can scan it and send it to kinlian@gmail.com.; June 13, 2010 5:41 AM
Anonymous said...: Yes, policyholders should send their insurance policies for review. I am not surprised there are many who didn't know what they bought or conned by their favourite agents.

With 'profit' insurance products are scams. What profit? for who? Both the insurers and the agents had already laughed all the way to the bank with profit from your stupidity.; June 13, 2010 12:33 PM
Anonymous said...: Those who bought wholelife or limited payment wholelife products, do you know that the cost of insurance is increasing as you age?
The insurance companies and the agents cheated you by covering up and by lying to you.
Why don't you ask the actuary to see if it is true? or ask MAS which is abetting the insurance companies by keeping mumb about it.; June 13, 2010 1:29 PM
Anonymous said...: The worse is buying because of a free gift or voucher. Think carefully. If you fall for the free gift you are locked for life and cannot get out without loss that is far more than the free gift value. This is an old trick. One social enterprise is on the prowl. Their agents will be enticing or inducing you buy some dubious regular premium products which are sure suckers' products. Go through a need analysis to see if the products meet your needs adequately and provide the best solution.Anyway, I know they won't. They will short change you.
Don't waste your money and ruin your own financial life by these salesmen and women from the social enterprise and who don't know one end to the other about financial planning.They are product peddlers with the commission in mind. These products on 'promotion' all carry high commission. So , beware of wolves in sheep's clothing.; June 13, 2010 3:12 PM
Anonymous said...: Why should consumers not deal with unregulated persons?

Consumers are strongly encouraged to deal only with persons that are regulated by MAS. MAS' regulatory regime aims at safeguarding the interests of consumers by ensuring that only competent and professional persons may provide financial services. If a consumer chooses to deal with persons that are not regulated by MAS, he forgoes the protection afforded under laws administered by MAS, particularly if these persons are based overseas."

Even regulated salesmen, like insurance agents are not competent and consumers are NOT protected from these conmen's , no difference from unregulated salesmen of financial products.; June 13, 2010 10:05 PM