Sunday, August 22, 2010

Mortality charge

Does an investment-linked policy charge a fair rate for mortality? Do the mortality charge increase when one grows older? How can one avoid paying too much in mortality charge? Read "Investment linked policy" in www.tankinlian.com/ask.aspx or click on "Ask Mr. Tan" at the top of the right panel.
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2 comments:

zhummmeng said...

Not only in regular ILPs but also in whole life products .Insurance agents who sell WL or limited payment WL condemn regular ILPs for the increasing mortality charge.But in WL the agents and the company cover up this incremental mortality charge.They cheat the customers by saying "your premium doesn't go up" and this is only HALF TRUTH. In reality mortality cost goes up in whole life product at the same rate as the regular ILPs if they are both taken from the same company.Like the ILPs a BOMB is also awaiting at the old age except that in WL the policyholder is not told whereas the ILPs it is reflected in yearly statement. In the WL the company steals from the cash value to pay the difference between the mortality cost and the premium and bceause the policyholders are not told they think or labour under the illusion that the premium has not increased.
This is cheating.
MAS should make the insurers disclose the mortality charge at every age of the policyholders especailly at old age in wholelife products.
You will be shocked if the insurance companies are made to disclose a lot of things you will then know that you have been conned by both the insurance agents and the company , both in cahoot.

August 22, 2010 10:51 AM
Spur said...

You can actually see the hidden mortality charges at work for wholelife or limited wholelife plans. Simply compute the yields if you surrender at 65 versus if you surrender at 85. Just use the figures from the BI (bullshit info).

You will find out that the yield you get for surrendering later e.g. at 85 yr old, is actually less than the yield if your surrender at 65 yr old. How come? Coz the mortality charges are increasing as you get older and is eating into your cash value.

The big problem is that ALL agents / consultants / advisors DO NOT wish to disclose this fact to their customers. The whole insurance industry also maintains and encourages the impression of "premium never increases" and to buy as young as possible in order to "lock-in low premiums".

The other big problem is that 99.99% of the agents / consultants / advisors don't even know how to calculate the yields even if you tell them in their face to calculate for you.

August 22, 2010 4:08 PM

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