I bought a ILP for my son 7 years ago and have been paying $100 a month for this policy. I received a semi-annual statement recently and was surprised to see a loss on my investment (total invested $6,777, current cash value was $6,380).
I went to their website to see the performance of their other funds but to my dismay, it only showed the last 20 pricing records for the individual funds, and no information for earlier years. Please advise if I should just terminate this ILP, as I don't have much confidence in this anymore.
REPLY
Most ILPs do take about 10 years to break even. They give poor value for money, due to the high distribution cost and effect of deduction. I would advise people to avoid buying these high cost products.
For a policyholder who has already invested in the product, it is usually better to keep the policy, provided that the investment can yield a reasonable return over the next few years. This would depends on the charges.
I suggest that you write to the insurance company and ask them to show you the following for of the past years:
- what was the yield of the fund for each year
- what was the reduction in the yield due to the charges taken from your savings
- what are the projected charges for each of the next 5 years. If the charges are less than 2% a year, it should be all right to keep the policy.
Generally, a ILP is quite difficult for the policyholder to understand the charges. It is best to avoid investing in this type of policy.
4 comments:
Read other people's experience on ILP and including my own ILP experience
http://createwealth8888.blogspot.com/2010/05/if-you-still-dont-believe-ilp-is-time.html
You are lucky that it is breaking even soon. Normally this type of regular ILPs will break even at 13th-15th year depending on the funds chosen and the performance. This type of products are also known as variable wholelife.The cost is similar to traditional wholelfie.For this reason they are not good products. The agent who sold you got 50% commission for the first year, 25$ for 2nd and 3rd year and 5% for the rest of the years.This cost is apart from other expenses.
However regular ILPs are better than the traditional wholelife/limited payment WL products which are scams and which are unable to get you the same cash value even after 20 years..
Having said that, regular ILPs and WLs are to be avoided too for these 2 products are very bad saving plan.
If you are thinking of saving use the RSP which is a regular investing plan without the high cost of regular ILPs.Upfront charge is about 3% and your money is not wasted on insurance that you don't need. With RSP you can break even after the 2nd month.
The problem is consumers are easily conned by insurance agents who know that they are dumb and gullible.
You might want to wait for a while more. Yes, wait.
Reexamine your reason to buy this and why choose this particular fund to link.
I bought ILP and have made profits by selling off the units as soon as the offer price was high enough to cover all my previous premiums, and also with about 10% profit.
I am still insured with the the same ILP, but its almost free now!
I will sell again when the bid price offers a gain above 10%.. it all depends on which fund your ILP is linked. I chose Asian Equities ex Japan with a slant on china, hong kong.
Re-examine your initial intent of buying THIS particular ILP and its underlying fund or investment instrument.
If you die die must buy a wholelife then the variable wholelife (VWL) aka regular ILP is MUCH better than the traditional wholelife.
The VWL is flexible that you can turn it into a limited WL on YOUR term.
*You take charge of the plan.
*You plan your coverage;
*you plan your return/risk;
*you plan the term of payment;
*you need NOT BORROW and pay hefty interest rate to the insurer;
*you can reduce your coverage and premium as and when you like;
*you break even faster and get better return.
*you get lower risk.
*you can be covered for WHOLE LIFE.
Can traditional wholelife or limited payment WL offer you these benefits?
Traditional wholelife and worse limited payment WL work against you. They have NONE of the above benefits and instead they trap you for life and short change you. You are held to ransom and inevitably under insured.
Regular ILPs aka variable wholelife is NOT the best but still much better than the traditional wholelife or limited premium WL which the scams of the life insurance industry.
NB. I don't like both. This is a comparison to help people who die die want a wholelife product but always got conned into buying the traditional WL. The salesmen or conmen of the traditional camp will frighten potential buyers that regular ILPs are risky.The truth is the traditional WL is RISKY and RISKIER because they CANNOT meet your goals whereas the regular ILPs can in term of protection and return.
Think about it. Don't believe the salesmen and conmen.
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