Advice on ILP

[LegendZenify]

Hi,

I'm holding a ILP policy from great eastern for a year and i already paid a premium of $1.2k ($100 a month) . After reading some of the discussions here, i'm slightly worried that i might have made a huge mistake on my part by taking up the policy.

I need some advice. Should i surrender my policy now and cut my losses to $1.2k, or just continue with the policy? ( i'm one year into my policy so its quite early if i want to cut losses)

Because i'm not holding any other life policies, i initially thought it was a good idea to take up this plan to be able to insure my life as well as do some investment and i was never aware of the high costs involved with ILPs. However, it might take me at least 20 years to be able to breakeven.

I'm 19 this year (female, non-smoker) so i understand that the insurance costs now would be relatively cheap which might be a reason to continue with the policy. If i terminate the policy i would lose my premium as well as not being insured at all.

Any advice?

 

[HWZ1973]

Hi,

I'm holding a ILP policy from great eastern for a year and i already paid a premium of $1.2k ($100 a month) . After reading some of the discussions here, i'm slightly worried that i might have made a huge mistake on my part by taking up the policy.

I need some advice. Should i surrender my policy now and cut my losses to $1.2k, or just continue with the policy? ( i'm one year into my policy so its quite early if i want to cut losses)

Because i'm not holding any other life policies, i initially thought it was a good idea to take up this plan to be able to insure my life as well as do some investment and i was never aware of the high costs involved with ILPs. However, it might take me at least 20 years to be able to breakeven.

I'm 19 this year (female, non-smoker) so i understand that the insurance costs now would be relatively cheap which might be a reason to continue with the policy. If i terminate the policy i would lose my premium as well as not being insured at all.

Any advice?

Cut your losses... Cancel immediately

 

[LegendZenify]

Cut your losses... Cancel immediately

Is there really no benefit in holding it?

I've been thinking if i hold on to it for 20-30 years, i will be insured and be able to take the sum back later (hopefully).

 

[blurpandasg2014]

U should stop paying the plan and let it go into premium holiday. Otherwise, if u want, u can surrender it and cash out that little bit money it has left.

 

[blurpandasg2014]

Is there really no benefit in holding it?

I've been thinking if i hold on to it for 20-30 years, i will be insured and be able to take the sum back later (hopefully).

The charges are way to high to have any benefits. I also just surrendered mine

1) Allocation charge alone can make up 150% of ur yearly premium
2) Bid offer spread is 5% which means that everytime you buy, u lose $5
3) On top of that, there is another fee called processing fee ...which i think is another $5


All in all, even after the allocation reaches 100%, you still lose 10% everytime u buy units. Do u think ur investment can yield 10% year on year?

 

[LegendZenify]

U should stop paying the plan and let it go into premium holiday. Otherwise, if u want, u can surrender it and cash out that little bit money it has left.

Whats the maximum period it can be put on holiday?
Considering that i'm only one year into the policy, will there be any consequences if i were to do so?

 

[LegendZenify]

The charges are way to high to have any benefits. I also just surrendered mine

1) Allocation charge alone can make up 150% of ur yearly premium
2) Bid offer spread is 5% which means that everytime you buy, u lose $5
3) On top of that, there is another fee called processing fee ...which i think is another $5


All in all, even after the allocation reaches 100%, you still lose 10% everytime u buy units. Do u think ur investment can yield 10% year on year?

Wow, how much of a loss did you make by surrendering?
I understand the high charges incurred, when i tried to ask my agent about it, he kept avoiding the topic and kept insisting that the cost isn't very high and sure will make money.

On a side note, what about the life insurance aspect? I don't hold any other life policies. Is it wise to hold on to this for the coverage?

 

[limster]

Is there really no benefit in holding it?

I've been thinking if i hold on to it for 20-30 years, i will be insured and be able to take the sum back later (hopefully).

If you were aware that the policy will only break even after 20-30 years, maybe you shouldn't have signed up in the first place.


Maybe you could have asked why the surrender value of the policy is so terrible, 20+ years never breakeven. Where did all your money go? If you see your agent driving past in his new BMW, maybe you can ask him. If you shop around you will find that there are policies that break even much earlier.

You are lucky that you are only losing 1 year of premiums by surrendering.

By the way, to be fair to your agent, he's not lying when he says you will eventually make money with ILP. ILPs do manage 2-3% return eventually after crossing the 20-30 year breakeven point. Not all DIY investors will be able to beat this 2-3% return.

 

[Jazzbie]

Is there really no benefit in holding it?

I've been thinking if i hold on to it for 20-30 years, i will be insured and be able to take the sum back later (hopefully).

What benefits are you looking for?

1) Maximising returns while being insured at the same level - buy term, invest the rest. Can cut loss asap after getting the term insurance.

2) Life insurance with forced savings - hold for long term till you break even (or even small gains) before you surrender for another insurance plan if you wish to.

Whatever you do, at least you learnt something from this and won't repeat this mistake of buying ILP again.

 

[LegendZenify]

If you were aware that the policy will only break even after 20-30 years, maybe you shouldn't have signed up in the first place.


Maybe you could have asked why the surrender value of the policy is so terrible, 20+ years never breakeven. Where did all your money go? If you see your agent driving past in his new BMW, maybe you can ask him. If you shop around you will find that there are policies that break even much earlier.

You are lucky that you are only losing 1 year of premiums by surrendering.

By the way, to be fair to your agent, he's not lying when he says you will eventually make money with ILP. ILPs do manage 2-3% return eventually after crossing the 20-30 year breakeven point. Not all DIY investors will be able to beat this 2-3% return.

Yeah i'm starting to regret even signing up for it. I asked him about the breakeven portion, he said he depends on the market and i should able to breakeven in 15years. However, i think that is assuming there is 8% return (from the table), which i think it is highly unlikely as the risk i chosen is only moderate to low risk.

Still thinking if i should just hold the policy and see how it goes...

 

[Shiny Things]

Tear it up.

You're nineteen. You don't need life insurance in the first place. You're not supporting anyone - if (god forbid) you were to get hit by a bus, the rest of your family would be able to get by without you.

Life insurance is for people who are supporting a family, or supporting a parent who can't work any more.

And you're right that the fees on an ILP will eat up all your returns. If you tear up the policy and put that money into investment (actual investment, not ILP "investment"), you break even immediately. You've put $100 in; you own shares worth $100. Bingo, you've broken even and it's all upside from there.

If you hang on to the policy, you'll just be pumping money into it for the next fifteen or twenty years and you'll never get any meaningful return. You're going to be forty years old before it breaks even. That's pretty crappy.

Tear it up.

 

[LegendZenify]

What benefits are you looking for?

1) Maximising returns while being insured at the same level - buy term, invest the rest. Can cut loss asap after getting the term insurance.

2) Life insurance with forced savings - hold for long term till you break even (or even small gains) before you surrender for another insurance plan if you wish to.

Whatever you do, at least you learnt something from this and won't repeat this mistake of buying ILP again.

Actually, i like the idea of both.

These are my concerns:

Buying term and investing the rest is the ideal solution as pointed out by most of the forumers here. However, i'm not that confident with investing myself (as of now). I'm thinking maybe i can just throw in some bluechips and etfs which might reap a stable return.

The latter idea, ILP only covers death and critical illnesses so the coverage is not very ideal (considering i'm only 19). Also, taking into account the rate of inflation, breaking even is not an ideal solution either.

I know i might be slightly pessimistic on this issue, but i'm really facing a huge dilemma.

 

[LegendZenify]

Tear it up.

You're nineteen. You don't need life insurance in the first place. You're not supporting anyone - if (god forbid) you were to get hit by a bus, the rest of your family would be able to get by without you.

Life insurance is for people who are supporting a family, or supporting a parent who can't work any more.

And you're right that the fees on an ILP will eat up all your returns. If you tear up the policy and put that money into investment (actual investment, not ILP "investment"), you break even immediately. You've put $100 in; you own shares worth $100. Bingo, you've broken even and it's all upside from there.

If you hang on to the policy, you'll just be pumping money into it for the next fifteen or twenty years and you'll never get any meaningful return. You're going to be forty years old before it breaks even. That's pretty crappy.

Tear it up.

I have the same sentiments.
I'm just really disappointed in myself for not being able to see that a year ago and it's a rather expensive lesson.

Alternatively, i was also thinking of keeping it as a "backup plan" to hold my savings.

 

[Perisher]

I have the same sentiments.
I'm just really disappointed in myself for not being able to see that a year ago and it's a rather expensive lesson.

Alternatively, i was also thinking of keeping it as a "backup plan" to hold my savings.

There is a chinese saying, short pain better than long pain...
Don't delude yourself.
Be wise, be firm, be decisive.

Btw, take the $$ to get a term insurance and invest the rest.
Buying index doesn't require much other than consistency. Now is as good a time to cancel ILP and invest in STI ETF as any since STI ETF has fallen by nearly 20%.

 

[Shiny Things]

Buying term and investing the rest is the ideal solution as pointed out by most of the forumers here. However, i'm not that confident with investing myself (as of now). I'm thinking maybe i can just throw in some bluechips and etfs which might reap a stable return.

Yeah, I shouldn't have struck such a pessimistic tone in my post - that's what I get when I post before I've had my first cup of coffee.

But basically yes, investing isn't as hard or as scary as it looks!

Though, one thing - I'm not going to guarantee a "stable" return. Stocks aren't stable - they can go down by 20% in a year or up by 30%. But over the long term, they tend to go up, so as long as you just buy them and sit on it, they become safer the longer you hold them for.

That's why people talk about adding some bonds into your portfolio. Those give you a lower return than stocks, on average - but it's a boring, stable return.

The latter idea, ILP only covers death and critical illnesses so the coverage is not very ideal (considering i'm only 19). Also, taking into account the rate of inflation, breaking even is not an ideal solution either.

I know i might be slightly pessimistic on this issue, but i'm really facing a huge dilemma.

I don't even think you need term life insurance at the moment - like I mentioned earlier, you're not supporting anyone at the moment, so you don't need to insure against you falling off the perch. All you need is a hospitalisation plan in case you break a leg or something.

 

[AhPek_Lion]

Wow, how much of a loss did you make by surrendering?
I understand the high charges incurred, when i tried to ask my agent about it, he kept avoiding the topic and kept insisting that the cost isn't very high and sure will make money.

On a side note, what about the life insurance aspect? I don't hold any other life policies. Is it wise to hold on to this for the coverage?

I made a lost of 1330$. I took it as a very expensive insurance coverage for that 1yr.

I would suggest u use this 100$ that u use to buy ilp to upgrade ur medishield and add a full rider. Den sign up a life insurance or term plan for coverage