Tan Kin Lian's Blog: Single Premium Heritage Plan

Thursday, January 27, 2011

Single Premium Heritage Plan

Dear Mr Tan
I will like to ask you on your opinion on Single Premium Heritage plan from Manulife Financial. Please advise if it a good plan for investment.

REPLY
I find the policy to be quite complicated and not easy for me to understand. My advice to you is never to buy a policy that you do not understand, especially when you are putting in a large single premium.

It is the job of the agent to explain the policy to you. As the agent can earn a big commission by selling the policy to you, you should be wary that the agent may not tell you the full picture, so you should not invest your money until you are completely satisfied and has verified the details.

I saw that the distribution cost (i.e money taken from you) is more than $100,000 and the effect of deduction could be more than $1 million. Are you sure you want to give away so much money?

3 comments:

Spur said...: Heritage is universal life for HNWI with US$5mil or more of assets. With that kind of money, you should hire a lawyer and a true independent financial planner / investment advisor to analyse, investigate past & present underlying assets, calculate performance, run customised financial models, and to scrutinise the contract fine prints.

I would love to tell you to just go ahead to buy... Btw, MFC have been reporting lots of losses over past 2 years. But at least their stock price is breaking out. Whether sustainable or not I dunno.; January 27, 2011 5:25 PM
Vincent Sear said...: Policies with names like "heritage" or "legacy" already should ring an alarm bell. It's usually packaged and embellished to look like a bequest to loved ones. If that's the purpose, then a simple balanced fund SP-ILP will do, at straight forward commission of 5% or less (one-off, non-recurring).

The purpose for designing such "heritage" or "legacy" policies is for the insurers and agents to take hefty first bites from the pie of your bequest.

That said, if a specific bequest is intended to be endowed, do use insurance policies, but simple and cheap ones like SP-ILP as mentioned above. Don't use shares or even unit trusts where the legal process and costs (even with a will) would be very tedious and expensive. Insurance beneficiaries (beside CPF nominees) are among the fastest and cheapest way of conveyancing bequests as intended.

Most unit trusts accept joint accountholders. This is a good way too, working just like the common joint bank accounts where survivor is automatic beneficiary. But one must bear in mind, once joint name, one can't remove the other name except by closing account.

Exchange traded shares don't allow joint account ownership.; January 27, 2011 5:49 PM
zhummmeng said...: It is a UWL product another WL variation scam from US purportedly meant to 'guarantee' insurance for life. The catch is if the cash value is depleted through borrowing or not enough it will lapse. It is rubbish product that guarantees 3-4% return on the single premium.
Commission is hefty, you bet it.; January 27, 2011 6:35 PM