Why you should not buy a life insurance

[HWZ1973]

The NTUC don't cover critical illness.
Any recommendations?

 

[makav31i]

The NTUC don't cover critical illness.
Any recommendations?

I thought critical illness coverage is a rider policy..

 

[manu2000one]

wrong again...if you paid 34.9k or even lesser,when something happened to you,insurance company pays you more than your original coverage of 38k.

I am comparing the 'guaranteed' surrender value of GE, with what would be in a saving account (also guaranteed). Difference is 15K
The 'more than your original coverage of 38k' is the so-called cash bonus, which isn't guaranteed.
If you want to count the cash bonus, then let's compare with a 5% investment. After 10 yrs, the death benefit of a cheap NTUC term + 5% investment ($3.49k/yr - term premium) would be 55K, which is dramatically more than the GW death benefit even when including the cash bonus.
I am still looking for the 'projections' used by the insurance agent to calculate the 'non-guaranteed' death benefit. It will be definitely much less than $55k after 10 years.

 

[aster1]

But indeed the life insurances should be the most profitable products for these company, that's why the agent commission is so high on life insurance plan.

Is this judged purely by looking at the distribution cost?

 

[aster1]

I thought critical illness coverage is a rider policy..

There are a number of stand-alone CI products on the market, the main ones being from the likes of TM, Pru, AXA, even HSBC has their own.

Find some of the fine print strange though, like "moderately severe" for something that is not 'end', 'intermediate' but 'early' stage for instance.

 

[manu2000one]

Is this judged purely by looking at the distribution cost?

The conclusion is derived by looking mostly at the cost vs the coverage & returns of the policy.
Two comparisons:

• Guaranteed surrender value vs 0.25% Savings account.
• Non guaranteed Cash Value (incl. Cash Bonus) vs a 5% investment.

In both comparisons, purchase a term insurance so that the death benefit is identical to the GE policy, deduct the premium from the savings or 5% investment.

I also know that the agent commission on this product is 30%.

 

[Asure7]

TS, i think the problem is you chose to compare a Life policy with low guaranteed surrender value in exchange for a higher non-guaranteed portion.

Different companies have different values for both the guaranteed and non-guaranteed. My experience is the big names usually have v low guaranteed value.

I knew one that is the opposite. Very low non-guaranteed value, but the guaranteed value is almost the same as the premium paid (but not 10 years, "break-even" should be around 20 years). Not sure if the same projection still exists though.

Of course self investment will probably get you a higher yield provided you can constantly hit your profit target, but that will fall into the "non-guaranteed" portion too. Some people do not want to take the risk, and want a "guaranteed" number.

 

[manu2000one]

TS, i think the problem is you chose to compare a Life policy with low guaranteed surrender value in exchange for a higher non-guaranteed portion.

I compare a low guaranteed value with leaving the money in savings.
And the so-called "higher" non-guaranteed portion with a 5% investment.
In both scenarios putting money in the life insurance = losing money.

I knew one that is the opposite. Very low non-guaranteed value, but the guaranteed value is almost the same as the premium paid (but not 10 years, "break-even" should be around 20 years). Not sure if the same projection still exists though.

Break-even after 20 years is still pathetic. With a 5% investment minus a 40K term, you break even after 2 yrs...

Of course self investment will probably get you a higher yield provided you can constantly hit your profit target, but that will fall into the "non-guaranteed" portion too. Some people do not want to take the risk, and want a "guaranteed" number.

The only number that is "guaranteed" in life insurance policies is the surrender value... So choosing a life policy because you want a guaranteed number doesn't make sense. Choosing for the potential cash bonus also doesn't make sense because even the best case scenarios returns (targets are usually not hit anyway) are pathetic as well.

Note that you can get a 2.5% guaranteed return in CPF OA.
Using CPF money to repay a home loan at < 1.5%, then using cash to buy a life insurance premium is therefore very unwise... Even people who want guaranteed numbers without taking any risk, should stay away from life insurance, and leave as much money as possible in CPF.
If you know of a life policy with guaranteedreturns of 2.5% per annum, please let me know which one. I will sign up.

So far i only know about life insurance with low guaranteed surrender value, low non guaranteed portion and high (or higher) sales commissions.

 

[Panerex]

Mortgage insurances are very different. You can cover a very high amount for a very reasonable cost. If you have a home loan, I strongly encourage you to take a mortgage insurance.

May I know is it advisable, instead of a mortgage insurance which is reducing in nature, to cover my housing loan with a fixed sum assured term life insurance instead?

 

[kebinu]

May I know is it advisable, instead of a mortgage insurance which is reducing in nature, to cover my housing loan with a fixed sum assured term life insurance instead?

Both are ok as long as you know the premium and sum assured over the years. It's really about personal preference here.

 

[Knight_Rider]

Life insurance is about leaving a legacy when you die. Good luck to your loved ones when you pass on and market crash.

 

[manu2000one]

Life insurance is about leaving a legacy when you die. Good luck to your loved ones when you pass on and market crash.

To protect my loved ones, i have purchased a 2nd property with a mortgage insurance.
Compared to this, the level of protection offered from a life insurance is very pathetic. It's true that with a life insurance, the legacy will increase over time, but so should the property investment.

I do not play with the stock market and do not touch CPF money, and put the rest of my savings in a very diversified portfolio of unit trusts of bonds and stocks, which so far has withstood and recovered from previous crashes...

I still fail to see how life insurances the way they are currently offered help with leaving a legacy. If the market crashes like you say, there wont be any cash bonus for a while and the so-called legacy will end up being somewhere between the surrender value and the paid premium if you live and the death benefit if you pass on. Meaning the legacy would have been more or less the same had you left the money in your savings account... So why lock yourself into a life insurance policy when there are so many other options?

 

[lifeishard]

I am comparing the 'guaranteed' surrender value of GE, with what would be in a saving account (also guaranteed). Difference is 15K
The 'more than your original coverage of 38k' is the so-called cash bonus, which isn't guaranteed.
If you want to count the cash bonus, then let's compare with a 5% investment. After 10 yrs, the death benefit of a cheap NTUC term + 5% investment ($3.49k/yr - term premium) would be 55K, which is dramatically more than the GW death benefit even when including the cash bonus.
I am still looking for the 'projections' used by the insurance agent to calculate the 'non-guaranteed' death benefit. It will be definitely much less than $55k after 10 years.

previous post of yours said if you died after paying 34.9k,GE only pays your family original coverage of 38k,that is wrong. take out your policy and check under guaranteed death benefit after paying 34.9k. i wasn't talking anything about non guaranteed cash bonus under surrender value.

And oh,you sure you can consistently hit 5% investment return for straight ten years with yearly contribution of 3k+?can you invest for me?

forgot to add...rich people do not need insurance,only average or poor people need. hell,rich people doesn't even need shield plan if they aren't stingy with money.

 

[Panerex]

The other difference between term and life, is that if you save the difference between the premiums, you'll have much more money at the end. For my plan of around $300/Mth, the diff is $15k after 10 years.

Will this still be true if I compare a term to a limited pay life insurance? Over the long run, could the overall cash outlay for limited pay life exceed term only by a little but having cash value?

 

[Knight_Rider]

To protect my loved ones, i have purchased a 2nd property with a mortgage insurance.
Compared to this, the level of protection offered from a life insurance is very pathetic. It's true that with a life insurance, the legacy will increase over time, but so should the property investment.

I do not play with the stock market and do not touch CPF money, and put the rest of my savings in a very diversified portfolio of unit trusts of bonds and stocks, which so far has withstood and recovered from previous crashes...

I still fail to see how life insurances the way they are currently offered help with leaving a legacy. If the market crashes like you say, there wont be any cash bonus for a while and the so-called legacy will end up being somewhere between the surrender value and the paid premium if you live and the death benefit if you pass on. Meaning the legacy would have been more or less the same had you left the money in your savings account... So why lock yourself into a life insurance policy when there are so many other options?

Your wife use what to pay stamp duty to convert the estate to her name to able to sell? Only life insurance pays direct within one week to settle all your funeral expense/outstanding debts. Life insurance was never about fantastic returns. It's about money in your hands when you need it most. Good luck with your investment. At $3000psf I am not sure how you can leave a legacy of $5M each behind for all your loved ones.

 

[SpinFire]

A common question people ask about term insurance is this: After the term insurance coverage ends at age 65, I'll not have any insurance coverage anymore. How?

 

[makav31i]

To protect my loved ones, i have purchased a 2nd property with a mortgage insurance.
Compared to this, the level of protection offered from a life insurance is very pathetic. It's true that with a life insurance, the legacy will increase over time, but so should the property investment.

I do not play with the stock market and do not touch CPF money, and put the rest of my savings in a very diversified portfolio of unit trusts of bonds and stocks, which so far has withstood and recovered from previous crashes...

I still fail to see how life insurances the way they are currently offered help with leaving a legacy. If the market crashes like you say, there wont be any cash bonus for a while and the so-called legacy will end up being somewhere between the surrender value and the paid premium if you live and the death benefit if you pass on. Meaning the legacy would have been more or less the same had you left the money in your savings account... So why lock yourself into a life insurance policy when there are so many other options?

I find it very puzzling that you are against life insurance but invest in unit trust...to each his own..your unit trust earning 5%/annum?people buy life insurance is not because of the surrender cash value but because it covers you for life...if you buy term and the policy stop on your 65th birthday, 1 week later you passed on, your family is not getting a single cents...

I buy both term and life with more protection for term when I am younger and more on life when I get older...I think that you are mistaken that life insurance policy is for you to collect the surrender cash value at the end and not for the insurance coverage...

 

[antonpoh]

NTUC refuse to make a payout.

Yup, i don't trust insurance company. Especially ntuc. Heard that their motor insurance also hard to claim.

NTUC Income explains why it didn't make payment to Ms Wendy Tan | The Real Singapore

 

[manu2000one]

Your wife use what to pay stamp duty to convert the estate to her name to able to sell?

Here name is on the property title deed.

Only life insurance pays direct within one week to settle all your funeral expense/outstanding debts. Life insurance was never about fantastic returns.

I also mentioned that i purchased a $40K term life @ $3.60/mth. You mean only life insurance pays within one week, but not term?

 

[manu2000one]

I find it very puzzling that you are against life insurance but invest in unit trust...to each his own..your unit trust earning 5%/annum?

Life insurance sales charge = 30%
Unit Trust sales charge = 0.75%
The life insurance does NOT return 5%/annum. They only guarantee a fixed death benefit and surrender values.
There are some bond unit trust whose target is maintaining the capital with around 5% return.

people buy life insurance is not because of the surrender cash value but because it covers you for life...if you buy term and the policy stop on your 65th birthday, 1 week later you passed on, your family is not getting a single cents...

Not a cents from the insurance company, yes, but they will get the savings, which are more than the death benefit of the life insurance.
After 12 years of savings at 0.25%, you leave more money behind than what the life insurances pays up. This money does not have to be invested at 5%.
I put the detailed calculations tables on my blog, feel free to check them out and highlight if there is any inaccuracies or mistake.