Advice please

[djchris]

I am also considering between wholelife insurance and ILP by AXA.

AXA inspire Flexisaver projects 8% returns a yr, frankly it sounds too good to be true to me..

As for wanting to get a wholelife insurance, my concern is just coverage for early CI. Is it worth it to get wholelife insurance for early CI coverage? AXA life exential prime covers till 70yo, and can draw 2 times for 2 different CI up to $75k each time.. How much is a term insurance that covers early CI?

Anyone has any views on this?

If you look at your own insurance coverage, are you getting this policy just for early CI? Or for more coverage overall?

When your doctor tells you that you have early stage cancer (just for example) and you spend that period of time treating the illness and not making money, early CI protection comes in as a payout to cover your expenses and liabilities while you focus on recovering.

If you are just looking to get early CI coverage alone and your existing insurance coverage is sufficient for everything else, you can look at getting a pure CI policy.

For Singaporean men, can consider Aviva SAF Living Care Plus. I just got that myself and it's just $10 per month for 100k coverage.

For others, I'm sure there are insurers who do term early CI policies. But I don't have knowledge of those plans.

 

[Expert]

think people repeat the buy term invest the different theme till SIBEI SIAN liao.

u ask N times, u will get 1 answer.
term and invest the rest is always cheaper- no matter what other fanciful CI, limited, special CI, multi CI, 1-2-3-4 CI, or ABC CI.

u want a different answer, try asking the insurance agent lor... sure got colorful answers why u should pay money for their products.

Yes bro i know hahaha..

Hence i give up on ILP alrdy. Now purely focusing on pure protection, mainly early CI.

 

[Expert]

If you look at your own insurance coverage, are you getting this policy just for early CI? Or for more coverage overall?

When your doctor tells you that you have early stage cancer (just for example) and you spend that period of time treating the illness and not making money, early CI protection comes in as a payout to cover your expenses and liabilities while you focus on recovering.

If you are just looking to get early CI coverage alone and your existing insurance coverage is sufficient for everything else, you can look at getting a pure CI policy.

For Singaporean men, can consider Aviva SAF Living Care Plus. I just got that myself and it's just $10 per month for 100k coverage.

For others, I'm sure there are insurers who do term early CI policies. But I don't have knowledge of those plans.

Yes bro, i am actually thinking to get the insurance for early CI only. For death/TPD/terminal illness, i plan to get another term plan to cover.

 

[Expert]

Okay i have checked aviva saf group term life.. Am i right to say if i take:

1. term insurance for death/TPD, my premium for SA $200k: $25.60/mth till 65yo

+

2. Living care (rider for CI) SA: $200k
26-45: $20/mth

+

3. Living care plus (rider for early CI) SA: $200k
26-45yo: $20/mth

= $65.60/mth

Ps: it gets really expensive for Living care (rider for CI) after 45yo sia.. Anyone calculated the cost till 65yo?

Need to really come out with an excel sheet to see clearly..

 

[Futureskid]

Wow this sounds almost exactly like what an insurance agent will say... so persuasive, my willpower is weakening... quick, I need to chant the magic words .... FA ... TA... FA .... TA.....

This is why I say that the above sounds like what an agent will say:
(1) quickly dismisses low-commission term plans with "no cash value" and "don't cover with life." Ignoring the concept of "buy term and invest the rest."
(2) instill fear into client with stories of dread disease and illness, perhaps tell stories about some fictitious relative or client.
(3) the overly expensive ILP suddenly looks 'affordable' when compared to the prospect of having critical illness and no insurance.


All of this has been discussed before.
A "dividend warrior" investment plan + Term + hospitalisation is a better alternative for those that are willing to learn to DIY. With the power of CD/compounding/and occasionally lucky capital gain, a $1m share portfolio yielding $4,000 a month dividends is achievable.

Inflation will quickly destroy the value of your whole life policy - use your calculation - Life policy with sum assured of $200,000 seems big (actually its the premiums that seem big), but factor in 5% inflation, how much will $200,000 be worth when you are 65? Yes you get bonuses but they won't match inflation. I confess, I have a small life policy, got conned when young into signing, so I can see the bonuses added to the sum assured, don't add up to much.

On the other, the share portfolio is likely to grow and match the inflation rate. This is because large corporations and reits are able to raise prices to match inflation and thus their revenue will match inflation.

Finally, the share portfolio can be handed over to your children and the stream of dividends is forever. The stream of income/annuities/payments from insurance policy stops on death of the insured.

If u think u got conned when you are young, so do you think whether you still get conned even now?

Using the same analogy: Do not mix investment with inflation.

 

[simon_84]

1. term insurance for death/TPD, my premium for SA $200k: $25.60/mth till 65yo
+
2. Living care (rider for CI) SA: $200k
26-45: $20/mth
+
3. Living care plus (rider for early CI) SA: $200k
26-45yo: $20/mth
= $65.60/mth

the concept with insurance is similar to shares, buy only what you can afford.
the additional rider can terminate during every oct/nov of each policy year.

i took up the living care rider at an additional 10 bucks for 100k.
not really bothered with early CI as i got a separate hospitalization plan.
though the CFP books in unisim taught me that the guideline for income coverage should be 10 or 15 times of your annual income.
but you also need to think whether you can afford coughing out the premiums for more intensive coverage.

 

[Expert]

the concept with insurance is similar to shares, buy only what you can afford.
the additional rider can terminate during every oct/nov of each policy year.

i took up the living care rider at an additional 10 bucks for 100k.
not really bothered with early CI as i got a separate hospitalization plan.
though the CFP books in unisim taught me that the guideline for income coverage should be 10 or 15 times of your annual income.
but you also need to think whether you can afford coughing out the premiums for more intensive coverage.

I can afford those premiums, but maybe come 45yo i will decrease the SA for Living Care CI rider to 100k.

 

[djchris]

I saw the prices as well. It's most likely that I will reduce my overall coverage when I reach 45 because my liabilities would be largely reduced by then (plan to fully paid up my HDB or at least 90% by then).

Your mindset should not be, "Oh I don't buy a $200 life plan, get $20 term plan and spend the rest." It has to be, "Oh now I get a $20 term plan instead of $200 life plan, and how do I invest the remaining $180?"

Because in the long term, we have to either reduce coverage, or increase premium. We need to think about how are we going to fund it.

 

[torrent06]

Limster, what are you trying to imply? I am not trying to sell you anything. I am merely sharing my true life experience with TS who is young and whatever decision he makes now, he should be aware of the options available and their pros and cons.

Archcherub, true, you can prepay your term premiums to prevent it from lapsing but who will truly do it? Nobody thinks they will run into financial difficulties until it happens and when you have problem paying your bills and putting food on table, guess which will be sacrificed first? If you are disciplined and a forward planner, good for you. i don't think it is practical for everyone though and I believe in diversifying. So some I put in insurance and some I put in stocks. For every one person who will continue paying his premiums despite financial difficulties, there may be several who just end up losing their insurance coverage.

 

[torrent06]

Limster, your talk about share portfolios growing is simply based on theory. It is not guaranteed. Hasn't it been said many times here that money invested in shares has to be money one is comfortable losing. Because you can lose money. For people who prefer guarantees, savings via insurance is just one alternative. I would not dismiss it entirely just as I would not dismiss term insurance outright.

 

[Darkzi0n]

Investing through insurance coy is ALWAYS more expensive. Other than the fees associated with the underlying mutual funds. U will have to pay additional admin fees and commissions. They will also throw in some negligible coverage so that they can charge u even more.

 

[dork32]

For people who prefer guarantees, savings via insurance is just one alternative.

insurance also have non-guaranteed portion.

if you just consider the guaranteed portion, you are guaranteed to lose money.

 

[limster]

Limster, your talk about share portfolios growing is simply based on theory. It is not guaranteed. Hasn't it been said many times here that money invested in shares has to be money one is comfortable losing. Because you can lose money. For people who prefer guarantees, savings via insurance is just one alternative. I would not dismiss it entirely just as I would not dismiss term insurance outright.

People who prefer guaranteed return are guaranteed to get very low returns and lose money every year slowly to inflation.


You are right that I should not dismiss investment-linked insurance.

(1) They are ideal for people who do not want to learn how to DIY their own investment portfolio.

(2) They are also ideal for people who would otherwise spend their money on dubious investment schemes. Like the family interviewed by the news in Hong Lim Park after a gold scheme went bust. The family claimed they invested nearly $1m in the gold scheme. If they had bought ILPs with the $1m, they would have been much happier (and their insurance agent would be driving a new Mercedes)

 

[torrent06]

You are right that I should not dismiss investment-linked insurance.

If you read my post carefully, I was never talking about ILP but whole life insurance. There is a non-guaranteed portion to any insurance but for traditional plans, the majority of the fund will be in safer instruments like bonds and fixed income. You are less likely to lose your capital compared to equity. Equity has growth potential but it can also end up in the negative. All I am saying is don't put everything in one basket. Singapore government bonds are very safe but how many people have the capital to invest in it on their own and the coupon is not likely to beat inflation either. Does that mean people should not invest in it?

This is an open forum for people to share their experience and opinions. You don't have to change your opinion but neither do you have to bash mine.

 

[limster]

the majority of the fund will be in safer instruments like bonds and fixed income. You are less likely to lose your capital compared to equity.

You are absolutely correct in pointing out that insurers hold a lot of bonds and fixed income.

From an investing perspective, one should have a view as to where interest rates are going, and where inflation is going. Both will affect the returns from bonds and fixed income (and the returns are low enough already).


If you believe that interest rates will go up and inflation will be around 3-5%, this means that the insurer, by holding "majority" bonds and fixed income, is eroding the value of your capital. In an environment of rising interest rates and sustained inflation, a "guaranteed" investment usually means "guaranteed to slowly lose money."

You can of course disagree with the statement and show me how insurers, by holding majority of bonds and fixed income, will be able to deliver on their projected bonuses once interest rates rise? Most likely you will receive a letter from insurers apologising for failing to meet projected bonus targets once interest rates rise.


Since I genuinely believe that interest rates will rise and inflation will be around 3-5%, this means I genuinely believe that insurance policies who asset pool is based on large amounts of bonds and fixed income will lose out and the so-called projected bonuses are unlikely to materalise.

The insurer of course does not lose out because it subtracts its management fee every year. Worse still, I have heard of some insurers not investing the money directly but giving it to another fund manager, so you get hit by a double subtraction of management fees?

 

[simon_84]

Singapore government bonds are very safe but how many people have the capital to invest in it on their own and the coupon is not likely to beat inflation either. Does that mean people should not invest in it?

sgs bonds is only safe in a subjective manner.
govt also can default from paying out periodic payments though another method is that they print money and risk depreciating the currency.
sg will always be in an inflationary environment, i'm sure MAS will want to control the supply of money printed and at the same time appreciate the currency slowly so as to control inflation.
should expect inflation rate to hit around 5% to 6% next year.

and the low interest rate won't stay low forever, it has to go up somehow by next year depending on the fed announcement.
so fixed income securities like bonds will be affected by interest rate risk and reits in some extend, will also be slightly affected.

 

[torrent06]

Default risk for SGS is considered very low. I you can't trust SGS bond, you better keep the money at home. Unlike other governments, Singapore doesn't issue bonds to raise money. Interest rates can increase but it won't stay high forever. What goes up will come down. The market is a cycle and I never said put all your money in bonds. It is just one way to mitigate risks.

 

[Expert]

I tried to do an excel sheet with the values for my case, Aviva term vs AXA Life Exential Prime. 26yo male, non-smoker. Any views/advices? Thanks!

Note:
- I did not add in the remaining cash value of the LEP, which estimated at 65 is $20k+.
- The AXA LEP covers basic SA ($50k) after 70yo till 99yo.
- The AXA LEP covers TPD/CI till 70yo.

 

[simon_84]

Interest rates can increase but it won't stay high forever. What goes up will come down. The market is a cycle and I never said put all your money in bonds. It is just one way to mitigate risks.

different age group have different needs.
with inflation at around 3~4%, bonds will form a major portion for ppl in their 50s who seek stable fixed income.
however for the younger age group is probably wiser to be more heavy on the equity side for their portfolios so that they don't not lose any purchasing power.
if not like what my lecturer mentioned, spend now or risk paying more in the future.

i see retail bonds as a slightly higher return than sg govt bonds.
the capitmall bonds in their minimum price of 2k, is designed to pool in retail investors.