Monday, September 06, 2010

Buy Term and Invest The Rest

A consumer ask why some people are recommending to "buy term and invest the rest". He was told that it is better to buy a whole life policy, as the premium will not increase as one gets older. The answer is given in this article.

www.tankinlian.com/latest.asp, search for "Buy Term".
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1 comment:

Spur said...

That consumer is conned by his sincere financial consultant, who must have shown him yearly-renewable term instead of the usual 25yr or 30yr term, where the premiums are the same throughout the 25yrs or 30yrs.

Another fallacy regarding wholelife is that premiums are "fixed". All wholelife has the fine print that premiums are not guaranteed and can be increased if too many people start claiming from the insurance company. Especially for Critical Illness like cancers and heart disease. Actually this is not even fine print --- it is printed in normal font size in the last few pages of every BI.

And as many other knowledgeable people have already pointed out, the hidden insurance cost (mortality & morbidity) of wholelife keeps going up year after year, and accelerates upwards exponentially after 60 yrs old. This is even when the premiums you pay stays the same or you have already finished paying the limited premium term. The insurance company deducts this costs silently from your cash value and/or the returns from your share of the par fund. Actually this can be deduced from doing some calculations from the Table of the Effects Of Deduction. But 99.99% of financial consultants won't be able to calculate. They will be fumbling with their financial calculators with trembling hands! And finally show you some nonsense numbers to pacify you.

Finally, the worse reason for wholelife is the insufficient protection you get, during the period of your life when you & your dependants need it the most! To get sufficient protection from wholelife, you will need to spend your entire salary to pay for the wholelife.

September 06, 2010 2:10 PM

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