In this article, I explain what is a participating life assurance policy and how are the reversionary bonus ro cash dividend calculated for these policies, and why this type of policies should be avoided by consumers in Singapore.
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For alternative types of investments that give a better yield, read Practical Guide on Financial Planning
With regards to ILPs (especially regular premium ILPs), most insurance companies practice a kind of withholding of your investments. This is to ensure that the company still earns a profit and to cover the agent's commission.
ReplyDeleteFor e.g. Ntuc's regular ILP called Vivolink, if you surrender within the first 5 years, there will be additional penalty deducted from your surrender cash value. The penalty is pro-rated i.e. the earlier you surrender the bigger the penalty.
E.g. If surrender within 1st year, penalty deduction of 25% of annual premium. If surrender within 5th year then penalty deduction of 5% annual premium.
Refer to http://www.income.com.sg/forms/insDocument/VivoLink.pdf.
It's on page 13. I wonder how many so-called ntuc financial consultants actually highlight this to their customers?
Furthermore, regular ILPs do not invest 100% of your premiums initially. For the above ILP, only 55% of your premiums are actually invested in the 1st year. The other 45% is taken away by the company & agent. Only after 3 years will your premiums be fully invested. (page 7 of the above pdf)
All these are on top of the insurance expenses and mortality charges which are paid through selling away some of your units at Bid price, every year. Hence the company also get free money from the bid-offer spread that you have already paid.
Now you know why all those agents and consultants never go through and tell you the fine print. Otherwise nobody will buy from them! Instead they concentrate on the sure-win 9% yield in the BI (bullshit info) and tell you how you can secure your retirement, or your children's university education blah blah...
Well, i heard that this product is having problem taking off. The agents disguised as executive financial consultants are so afraid when ti comes to ILPs.The company is trying pass off as the other regular ILPs and tries to promote the lower charges is misleading and misrepresenting the product.This vivolink is so rigid in the features and cast in stone. How can the company compare the product with the others? It is neither a saving plan nor a protection nor both. So , I reckon the only way to sell is to con and use dubious arguments to confuse the consumers and best to con their own cleints into buying.
ReplyDeleteHow can salesmen understand investment? If they do they should not be selling and con people.This is conscience. Those who already sold lack it.
Recall the ID2 ideal plan? They already had problem trying to explain the 45%, now the problem is even bigger to explain the 150% lost in charges. But the good ' magic stone' salesmen and women should be able to find a way around it, right?