Saturday, October 30, 2010

Looking for a good life insurance policy?

I advise consumers to look at the benefit illustration for a whole life or investment-linked policy and check that the effect of deduction does not exceed 20% of the accumulated premium at the end of 25 years. This article explains why I chose 25 years as a gauge and how I derive the benchmark of 20%. It also give the benchmark for other durations.

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4 comments:

yeo c y said...

Mr tan,

I bought aia usd whole life and endowment policies about 13years ago. Then the usd rates was 1.78 n i was attracted by the high interest rate. Now the usd rates is only 1.28,is it worthwhile to continue the policies or can i suspense the policy n keep it until usd rates goes up n cash in on it?

Regards,

Spur said...

Gone case liao. All options guaranteed lose money on your policies. The only way to take back more money is also big loss i.e. die or become TPD. Anyway if you're paying premiums in USD, then you also enjoy paying less in strong SGD right?

Endowment cannot stop paying, otherwise go into auto-premium loan, and your cash values drop month-by-month, until you end up with nothing within a few years.

Wholelife also you cannot just stop paying like that. It will also APL and you get zero after 7-8 years.
Wholelife you can convert to paid-up, don't need to pay anymore, but this means you sacrifice all your cash value and your insure coverage also will be very small.

At best is to minimise losses. You can ask insurer to reduce the insurance cover to the barest minimum, and you continue to pay much lower premiums. Or simply bite bullet now and cash out.

Use low-cost term insurance and shield plans for protection.

Why not you ask your agent and see what she/he says? The commissions she/he got in the first 5 years includes such servicing.

zhummmeng said...

Did your agent stress the currency risk or he or she only pitched you the high interest rate to exploit your greed?
Hoping that the dollar will appreciate to $1.78 is a dream..maybe $1.4. US has to keep it low becuase it has a huge deficit in balance of trade.

Unknown said...

I think the rate of interest is high and modification can be possible in benchmark if you insist your agent.

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