I am 21 years old and have recently bought an ILP. I have read your blog extensively to find out what the terms in my Benefit Illustration mean. I worked out the figures in an Excel sheet and found out that the Effects of Deductions take at least ~25% from the Accumulated Premiums, and that the Annual Rates of Return is reduced by at least 1.9% depending on when I choose to surrender the policy.
Is this a good policy to buy? The 14 day free-look period will start tomorrow and I am considering cancelling this policy as I feel that this is an expensive policy. Please do help me take a look at the files and let me know if my calculations are correct.
Your blog is very informative for a starter like me and I will continue to read it to find out more about financial planning. :)
The distribution cost at end of 5 yers is $3,929 which represents 164% of the premium. This is high.
The effect of deduction at the end of 25 year is:
Cash value Accumulated Effect of % of premium deduction Acc Prem 5% 85,900 120,272 34,372 29% 9% 153,000 221,578 68,578 31%
For 25 years, the effect of deduction should not exceed 20%. In this case, it is too high.
As you are still in the free look period, it is better to cancel the policy and get a full refund. As you are young, you can buy term insurance from SAF and invest the difference in a low cost investment fund, such as the STI ETF. Read my book Practical Guide on Financial Planning and also attend the talk organised by FISCA.
All the best for your future.