Crossroad to decide regarding ILP

[simwb90]

I'm a young adult, 25 this year and have been in the workforce for 1 year.
I currently have a ILP which i bought back in 2011 when I was still an undergrad.
i am paying appx $300-400/mth for the premiums.

Back then i was not as interested in financial literacy so i did not find out much. However, after graduating, and earning a decent sum per month, i decided to venture into investments which are mostly blue chips, local markets and STi.

i have only recently started on my investment journey and learning along the way, either through more reading, advices or just getting my hands dirty and risk getting burnt.

i am investing for dividends as my job does not allow me the luxury of time to monitor and do trading. neither am i interested in doing trading. so that's my investment profile.

as you can see, i have paid for my ILP for appx 4 years.
i only recently read up on Term Insurance which can provide me the same coverage as my ILP. below are the 2 policies i am looking at.

my current ILP:
Prulink Protection Account (can't find the policy on comparefirst)

term life product that i am considering to replace ILP:
Pruterm Vantage (http://www.comparefirst.sg/wap/productDetailsEvent.action)

i can provide more details if necessary.

tldr, is it advisable to replace my ILP with term life product?
my agent is someone whom i've seen rise through the ranks from a consultant to now a manager. first contact point was in 2010.

 

[NiteX2]

Personally, I'm not a fan of ILP. It depends more on whether you are ready to accept the losses incurred thus far rather than advising you to terminate it. I have clients that terminate their ILPs after explaining to them the plan itself and there are a few who can't bear to incur the losses and kept the ILP running.

If you are happy and comfortable with your current agent, then by all means continue doing your financial planning with him. If not, you can consider others like me as well if you think that me from an IFA is able to value add to you more in the long term. Feel free to send me a PM if you need anything =)

Lastly, if you do decide to replace your ILP with another plan, do it ONLY after you have incepted your new plan.

 

[Shiny Things]

my current ILP:
Prulink Protection Account (can't find the policy on comparefirst)

term life product that i am considering to replace ILP:
Pruterm Vantage (http://www.comparefirst.sg/wap/productDetailsEvent.action)

i can provide more details if necessary.

tldr, is it advisable to replace my ILP with term life product?

Yes. On the one hand, you've already paid a big chunk of fees - but on the other hand, you're going to keep paying those fees in the future. Even if you kept the ILP going, the huge annual fees they charge mean it's still cheaper to cancel the ILP and start a buy-term-and-invest-the-rest policy.

It's an expensive lesson, but at least you've caught it now instead of paying too-high fees for twenty or thirty years.

 

[simwb90]

i've met with my advisor once already regarding my thoughts on cancelling the ILP but she advised otherwise.
i am comfortable with the idea that insurance is an expense and that i will only get money from term insurance if i die, or at least that was what she told me about term insurance.

@NiteX2, do you mean i should start my term insurance before cancelling my ILP?
currently i have an savings plan that will mature in another 20 years along with this ILP. this puts my monthly insurance premium at close to 600, which is about half my monthly expense. just wondering why you would suggest doing so. im not particularly fond of increasing my monthly expenses especially since i am still single. it's a good time to accumulate wealth.

 

[oceanicmanta]

If I were you, I will cut loss & terminate, after signing up for a term as advised.
You are still young & your investment horizon is still very long. You can make up for the loss easily with your income & investments.
You dont want to be tied to an ILP that will become a very long term commitment. I just dont think you can get subjective & independent financial advice from the agent as the conflict of interest is undeniable ... IMO, from one who have held an ILP for 21 years.

 

[wts2013]

i've met with my advisor once already regarding my thoughts on cancelling the ILP but she advised otherwise.
i am comfortable with the idea that insurance is an expense and that i will only get money from term insurance if i die, or at least that was what she told me about term insurance.

@NiteX2, do you mean i should start my term insurance before cancelling my ILP?
currently i have an savings plan that will mature in another 20 years along with this ILP. this puts my monthly insurance premium at close to 600, which is about half my monthly expense. just wondering why you would suggest doing so. im not particularly fond of increasing my monthly expenses especially since i am still single. it's a good time to accumulate wealth.

care to share what the ILP covers, what's the underlying assets, what's the market value, how much will u lose/gain, why your agent say dun cancel.

 

[simwb90]

for all who are asking about my ILP details, i will post them over the wkends. need time to dig out the stuff.

@wts2013 she told me not to cancel becuz i am supposedly able to get back money due to the investment portion. after much thinking, even without the number crunching, i feel it doesnt make sense unless the investment can exceed the amt of premium im paying...which is unlikely given that the underlying asset is local and solely one company.
she says my ILP is like a savings plan rather than an expense so i shouldn't consider it an expense.

the reason why i am now considering to drop my ILP is becux
1. i found out about term and i find that it makes more sense
2. i prefer to maintain cash so i can choose wat i want to invest in. the premiums i can potentially save can give me that choice
3. i enforce a 50% savings rule on myself which a small portion of it goes to my warchest in the event i want to go all in on a certain stock. i have emergency funds already prepped so it's not an issue.
i am still abit unsteady and prefer to keep cash for the liquidity while i am still learning how to invest.

 

[doody_]

Whatever you have paid for your ILP is a sunk cost. You should compare the value of the $300-400/month premiums being placed into your ILP vs you taking it to invest. You haven't shared details but I'm 90% sure you can do better if you invest the money yourself.

For comparison, I spend $100/month which covers me for 500k - GEL's Supreme Living Term which covers death, TPD and CI. It will run until I'm 65, by then life is more or less settled and there's no need for a 500k payout. Though in future I might decide to get another plan that can cover me a little after 65, just in case of prolonged illness which is the real money drainer.

 

[Mecisteus]

you are still in the early stage of your policy and you are paying too much per month for so little coverage.

my advice is to bite the dust, cut loss early and DIY since you have started educating yourself. if you learn fast, you can earn back your tuition fees paid.

 

[chuanz]

I bought AXA TargetSaver policy in Nov 2013 with the aim of saving for my kid's future education purpose. That time really blur blur my investment eyes not open yet and didn't surf Money Mind forum...

The policy annual premium is almost $6.5k with guaranteed payout of $132k at the end of policy year 21, with potentially more upside IF the underlying fund (selection = Pacific Equity Fund) performs after deducting blood sucking expenses. Out of the $6.5k annually, about $1.2k goes to the ILP portion, and $5.3k is basically a dirt cheap loan to AXA.

If I axe the plan at the upcoming end of policy year 2, my current loss is almost $13k!!! Can BTIR + DCA save my arse? Investment horizon is ~16-18 years.

(110 - age) probably does not apply for this? What's a good ratio to use for "education" investment? 50-50?

 

[limster]

Can read this. You are not alone:

http://www.straitstimes.com/lifestyle/retirement-planning-blues

 

[Mecisteus]

If I axe the plan at the upcoming end of policy year 2, my current loss is almost $13k!!! Can BTIR + DCA save my arse? Investment horizon is ~16-18 years.

(110 - age) probably does not apply for this? What's a good ratio to use for "education" investment? 50-50?

16 to 18 years is a very long period of time. there are likely to be at least 1 or 2 financial crisis during this period.

1) buy a $10 to $20 term insurance to hedge against your life
2) save the remaining dilligently on a monthly basis. accumulate these savings. monitor the stock market index. once major index hit a 30% fall from peak, you can start to do a dollar cost averaging on a broadly focus equity index fund.

tada... you have your own cheaper and DIY version of an endowment plan.

PS: You need lots of discipline to carry out this strategy.

 

[oceanicmanta]

she says my ILP is like a savings plan rather than an expense so i shouldn't consider it an expense.

/QUOTE]

she failed to mention it is also a cash register for her ??

And having clients terminate early into the policy term puts quite a blemish on the agent's record (from employer & regulator's point of view).

 

[NiteX2]

i've met with my advisor once already regarding my thoughts on cancelling the ILP but she advised otherwise.
i am comfortable with the idea that insurance is an expense and that i will only get money from term insurance if i die, or at least that was what she told me about term insurance.

@NiteX2, do you mean i should start my term insurance before cancelling my ILP?
currently i have an savings plan that will mature in another 20 years along with this ILP. this puts my monthly insurance premium at close to 600, which is about half my monthly expense. just wondering why you would suggest doing so. im not particularly fond of increasing my monthly expenses especially since i am still single. it's a good time to accumulate wealth.

First off, I can't believe the fact that your agent managed to close you for $600/mth case when you were still in school!!

With regards to your question, the main reason why you should secure yourself new coverage first before terminating your ILP is so that you will still be covered in the interim period. Usually application to inception still takes a week or 2.
You wouldn't want to risk the chance of any accidents which may happen during the few weeks that you will be without coverage after you have cancelled the ILP and applied for a new plan.

 

[simwb90]

First off, I can't believe the fact that your agent managed to close you for $600/mth case when you were still in school!!

With regards to your question, the main reason why you should secure yourself new coverage first before terminating your ILP is so that you will still be covered in the interim period. Usually application to inception still takes a week or 2.
You wouldn't want to risk the chance of any accidents which may happen during the few weeks that you will be without coverage after you have cancelled the ILP and applied for a new plan.

part time work and besides i hardly spend much in school so i felt 600 was alright then. but now even though i have a full time job, i've also read up a lot more and find the cost to be quite high. ironic, isn't it?

i see what you mean. to be honest, this ILP isn't my only policy.
my existing portfolio consists of
Pru FlexiCash, maturing in another 20/- years
Aviva, because all NS dudes have it
Pru MediShield or sth, paid using CPF

i don't have my policies on hand but i can list out the benefits/coverage when i get home, if that's going to be helpful.

 

[reinphd]

I've posted a detailed calculation and comparison of ilp vs BTIR.. BTIR owns ilp hands down. Better returns, lower insurance cost in the long run

Sent from Samsung SM-G900F using GAGT

 

[goldsilvercity]

ILP = Term insurance + Limited Selection of Insurer's fund for investment + Big Profits for Agent + Bigger Profit for Insurers.

Buy Term Invest the Rest (DIY you buy term at very cheap rate and take the rest of the difference to buy stocks, or ETF)
= Term + long term investments


You can skip the big profits for others and transfer those into your own pocket.
The difference can be hundreds of thousands by the end of the timeframe of 20, 30 years.

 

[wts2013]

ILP = Term insurance + Limited Selection of Insurer's fund for investment + Big Profits for Agent + Bigger Profit for Insurers.

Buy Term Invest the Rest (DIY you buy term at very cheap rate and take the rest of the difference to buy stocks, or ETF)
= Term + long term investments


You can skip the big profits for others and transfer those into your own pocket.
The difference can be hundreds of thousands by the end of the timeframe of 20, 30 years.

hahaha, u have btir, share how much is your term, how much u invest, how your investments are doing now.

Someone bought term 1.2/year cover 500k, so how much he got to invest to recover his 1.2/year by 55 or 99 years, assuming term is 99 years, hahaha

 

[simwb90]

care to share what the ILP covers, what's the underlying assets, what's the market value, how much will u lose/gain, why your agent say dun cancel.

PruLink Protection
monthly premium 383.04
Death 200k
Terminal Illness 270k
Crisis Waiver III 350.05
Crisis Cover Provider III 270k
TPD 270k
Early Stage Crisis Waiver 371.41

PruLink Singapore Growth Fund
current estimated surrender value 6k

current policy year 5
total premiums paid to date >18k

is this sufficient details?

 

[w1rbelw1nd]

hahaha, u have btir, share how much is your term, how much u invest, how your investments are doing now.

Someone bought term 1.2/year cover 500k, so how much he got to invest to recover his 1.2/year by 55 or 99 years, assuming term is 99 years, hahaha

Reposting what i posted previously.

Well, I did a spreadsheet on the returns, even if we were to assume that the STI returns is 2% lower (6.6% instead of 8.6%) return, IRR of a BTIR strategy is better than life insurance.

https://docs.google.com/spreadsheets/d/15LQOtpGs6bv-AVQ1dikoRptdTUXdlqD2m6Xhhhgosdc/edit?usp=sharing

Base assumptions:

25 yo male dying 30 years later, putting the same amount of money in whole life or BTIR.

Figures are obtained from:

http://www.comparefirst.sg/wap/homeEvent.action
http://www.spdrs.com.sg/etf/fund/fund_detail_STTF.html#

Do note that the returns from the whole life policies and BTIR STI ETF strategy is all not guaranteed