Wednesday, July 28, 2010

Poor yield from Vivolife policy

A policyholder in mid 30s showed me a benefit illustration of a Vivolife policy (whole life policy with premiums payable for 25 years).

The net yield to the policyholder is between 1% to 2% and the reduction from the gross yield is almost 3%. I find this policy to be too expensive and gives a poor yield to the policyholder. The cash value comprise of a guaranteed portion and a non-guaranteed portion. If the bonus is reduced in the future, i.e. the non-guaranteed portion, the net yield will be even lower.  It is better to buy a term insurance and invest the difference in a low cost fund. See Practical Guide on Financial Planning.

Year  Premium  Cash Value  Gross Yield   Net Yield   Reduction
 25     2727     77021        3.75%        0.93%       2.82%

 25     2727     90419       5.25%       2.11%       3.14%

1 comment:

zhummmeng said...

The problem the yield is NEVER told to the customers and also because the so called executive consultants also don't know how to use the financial calculator. As a result the customers got conned but still don't know until reviewed by a third party like FISCA.
People who bought Vivolife are paying too much even for protection. The saving element is a loss loss . The pitch is pay for 10 years and be protected for life.How long is for life. Many policyholder terminate at age 60-65 and they ares stupid to carry beyond because the insurer will be too happy to receive large revenue at the expense of the cash value.
I advise people with vivolife to have a check with FISCA and find out if the agents mis-sold or misrepresented the product.

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