Published in the Straits Times Forum page
MR GIDEON Lee ('Buyers, not agents, decide the products they want'; last Friday) asked why I am advocating term insurance when the insurance cooperative that I headed had been selling whole-life and investment-linked policies for 30 years.
During my time, the whole-life and endowment policies were sold with distribution costs that were much lower than comparable products in the market. The effect of deduction was about 20 per cent over 25 years, compared to the 40 per cent for most policies today.
In the past, the cooperative also distributed high rates of bonuses out of the surplus, giving a high yield to policyholders on these old policies.
The letter writer quotes the example of a term insurance premium that charges $200 a month. This is an exaggeration. A young person can buy $300,000 in sum assured under the Singapore Armed Forces (SAF) group insurance scheme and pay only $38.40 a month. This is available to SAF soldiers and operationally ready national servicemen, and their spouses. To buy this amount of protection under a whole-life or unit-linked policy, the consumer usually has to pay a premium that is 10 to 20 times higher.
Some dishonest agents deliberately quote a higher cost for term insurance to persuade the consumer to buy the alternative policy that charges a higher premium and pays a fatter commission.
Mr Lee said correctly that the distribution cost is not paid entirely as commission to the agent. Part of it is paid to the agent's manager and spent on lavish overseas trips and other sales incentives. Regardless of how the money is spent, the consumer does have to pay the total distribution cost.
The writer said the commission is given for selling the product and not for advice. If this is the case, why are these people called financial advisers, consultants or other impressive names and not life insurance salesmen?
The writer is wrong in saying that I am advocating a one-size-fits-all solution. My aim is to educate consumers
to invest their savings in a low-cost investment fund, rather than a life insurance policy, to earn a better long-term yield and achieve greater flexibility.
Tan Kin Lian
My guidance on how to invest savings in a low cost investment fund, and why this is more flexible to meet the changing needs of consumers is explained in my book, Practical Guide on Financial Planning, available here.
- ► 2020 (752)
- ► 2019 (1839)
- ► 2018 (1406)
- ► 2017 (1258)
- ► 2016 (828)
- ► 2015 (691)
- ► 2014 (144)
- ► 2013 (501)
- ► 2012 (1269)
- ► 2011 (1873)
11/14 - 11/21
- Read my book - Practical Guide on Financial Planning
- Business Times: UBS takes on couple in $9m lawsuit
- Large increase in membership of FISCA
- Garrett Goh's original letter
- Garrett Goh: Strategy behind buying term insurance
- Motor claims - protect consumer who make third par...
- Motor insurance premium
- Why Investment Linked Policy make a bad investment
- Myths about Private Shield
- Election is coming - read SGEP
- Lim Pueh Joo: Investment-linked policy works best ...
- Medical insurance for elderly people
- Buy 2 get 1 free
- Ask Mr. Tan - Low cost investment fund
- Pretty good for Government work
- Shape Quiz (bundle of 10 minipaks)
- Intelligence Quiz - vol 1, 2 and 3 (bundle)
- Wisdom on How to Live Life (Book 3)
- USB Charger
- Articles in SGEP
- SCMP:Bank officer charged over minibond investments
- Living on accumulated savings - DIY
- John Bogle - Investing in indexed fund
- Warren Buffet on Low Cost Investment Fund
- Dave Ramsey on Life Insurance I
- Suze Orman - Life Insurance is a bad investment
- FISCA talk - Insuring your Financial Security
- FISCA Talk on Financial Planning
- Costly rider to cover critical illness
- Financial Calcuation with Excel
- Choose a good life insurance company
- Living on your accumulated savings
- Suzy Orman - Cash value and Term Life Insurance
- Poor deal from a life annuity
- Economic Growth and Equity
- Donation to FISCA
- Suzy Orman on Life Insurance
- Existing life insurance policies - continue or ter...
- 33.3% discount on Financial Planning book
- Why only term insurance plans make sense now
- Life insurance - agent and consumers
- Misconceptions about insurance
- Noisy carnival at Bishan
- Gold investment scam?
- Interesting articles in SGEP
- Sound policies, impressive candidate for General E...
- Get a Fair Deal
- Vitamin Account (6 year SGD equity linked structur...
- Be prudent in buying insurance
- FISCA analysis of DBS preference shares
- ▼ 11/14 - 11/21 (50)
- ► 2009 (1654)
- ► 2008 (2104)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)