The agent is giving bad advice and is misleading the young man.
Beyond age 65, there is no need for life insurance. The young man would have become an old man with grown up children (who do not depend on him) and would have accumulated sufficient savings to last for a lifetime. There is no need for people to have life insurance when they are old.
If he buys a life insurance policy, the consequences are likely to be:
- The agent would have taken away more than one year of his hard earned savings
- The cash value of the policy at age 65 would be quite low, giving a yield of perhaps 2% per annum
- The policy will continue to be a burden to the policyholder.
- The policy could have taken away more than $100,000 of his savings by age 65 (see "effect of deduction").
My advice to all young people, male and female, is to avoid locking up your future savings in a life insurance policy that gives you a poor return. Here are the ways to avoid this trap:
- Read my book, Practical Guide on Financial Planning, available for $12 here.
- Join FISCA and attend the educational talks
- Read the FAQs in my website. It's FREE.
- Avoid people trying to market life insurance or investment products to you. Here's why.
If you agree with my views, please pass the link to this article to all of your friends, so that they can avoid falling in the same trap. Send e-mail or go through Facebook and other social media.
Tan Kin Lian
5 comments:
Mr Tan,
How does the insurance environment in other countries compare to Singapore?
In which ways are Singapore better and worse?
Let me tell you why wholelife or limited payment wholelife , the odds are stacked high against you, the consumers from the moment you buy them till you are 60 years old and beyond.
WHY do you think the insurance agents and the company are so keen to sell you this type of products despite the bad reputation and the rottenness of these products.
1. agents sell because of high commission so they cook up a lot reasons or lies why you need these products.
2.the company keeps rolling out them despite the high cost and rotten return because these products provide the company a life time source of revenue and income so they have features to ensure you are locked from the moment you take it up. The company and the agents lie to you that they are saving plan. Ask yourself why you need to borrow when the cash value is yours? When you borrow the company is investing in you and earn from you a very high return but the company pays you peanuts and your policy breaks even only after 20 years. Is it fair deal?
If you don't borrow and obediently keep your policy the company is making money from you the charge from mortality risk and the charge increases with age. Are you told about this? No...in fact they lie to you and does the BI show it? The agents regurgitate the lies by the company that you pay low premium when you are young but is the premium the only component of the cost structure? The truth is the company is STEALING from you.
Now , when you are at 60 years old the product has a feature which allows you to convert to an annuity. Isn't this contradictory?
The company even incentivizes you to convert by offering you a 5% extra.In other words they don't want you to keep any longer and on top of it there is another sale for them, right? an annuity. Why? is it the company is so kind to think of your financial well being at old age? Don't be fooled. When you die they have to pay out more. Getting you to convert saves them a lot of money, at least 70%.
What I am trying to say the company is NOT sincere and truthful when they tellyou you need this product for wholelife. Yes, they tell you at the point when they want to sell you this product and when you are in they start thinking how to get rid of you when you are at 60 years old.They only want to win. These are their lies, selling tricks like the spear and shield salesmen, either way they win.
However, the truth is you don't need to have insurance when ALL your responsibilities are over.What you need at this stage of your life is MONEY and have enough of it. To take care of worries of medical have a H&S plan using your medisave.
Wholelife plan is a bet the company gambles against you that you won't die or kenna cancer before you are 60 years old. And when you can kenna they raise the barriers like high mortality cost, the year to year jump in cost is very steep, when you are old and this cost will deplete your cash value . If you continue to hold a BOMB will be developed and your policy might even lapse. They tighten until you can't breathe The company always wins like the casino.
Don't trust them. They may say honesty is the best policy . The devil never says he is evil.
Dear Atticus
Please send an e-mail to kinlian@gmail.com. I wish to communicate with you directly on another matter.
Dear Atticus
The life insurance environment in Singapore has become quite bad in recent years. The charges are far too high. In many countries, the regulators put a cap on the charges that can be taken away from the unsuspecting consumers. They know that the consumers can easily fall into the trap. They do not read or understand the benefit illustration.
In Singapore, the regulator requires the charges to be stated in the benefit illustration but do not put any cap. So, many consumers get taken for a ride.
This is why I am doing my best to educate consumers to avoid all types of high cost life insurance products. they should buy SAF term insurance.
Mr. Tan,
You are doing an excellent job in an open eyes big big environment where it is full of danger for the consumers as most of them dont open eyes big big then kena cheated and no one to turn to.
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