Term VS Life Insurance?

[teejaywai]

Hi people,

There is an article on Sunday times under INVEST that talks about Life Insurance.
That may be a good read for those who wish to know more.

Cheers and have a good day

 

[w1rbelw1nd]

Hi people,

There is an article on Sunday times under INVEST that talks about Life Insurance.
That may be a good read for those who wish to know more.

Cheers and have a good day

I don't think its a good read at all. As with all newspaper articles on investment and insurance, the journalist seems to be more inteeested in not offending insurance companies (who happen to be their paymasters through advertising) than giving objective information.

If you notice, they provide a mix of opinions rather than giving actionable facts. Gave up on traditional media long long time ago.

 

[w1rbelw1nd]

To be strategy neutral, it means the pros and cons also have to weighted carefully. Insurance and investment are very simple. You pay money, and you get money. It is a trade of money for money. Hence, weighing the options are very easy, you simply take the option which provides the higher value.

Buy Term Invest The Rest(BTITR) generally argues on numerical superiority, in that the option provides better value. On the other hand, The pro-wholelife seems to argue on non-numerical factor, which ntucagent quoted an argument based on sunk cost. Sunk cost is a known logical fallacy.

A lot of things are bought on logical fallacies, and sellers are glad to sell too. The choice is yours.

Can't agree more with the point on numerical superiority. Insurance companies can claim that they are "fulfilling our needs" by financial engineering the cashflows and tweaking certain terms, but the numbers shown by many thought leaders have proven otherwise.

 

[limster]

Insurance agents are in a difficult spot, because the main reason for explaining why expensive ILP and WL policies are "suitable" for some investors may not be accepted by potential clients.

ILP and WL policies are suitable for:

• those who do not want to spend any time managing their finances (even though they spend hours researching their next car or handphone)

• the gullible people who would otherwise invest in things like Gold Scheme - for example, Ch8 TV interviewed the family that invested nearly $1m in TGG

• the gamblers who would otherwise gamble away their money

• the incompetent investor who thinks his investing strategy is 'sure win' but in fact is 'sure blow up eventually

If you dont' fall into the above list, you can do some homework and then buy term and invest the rest. And frankly, buying a term policy which is paid by GIRO, and once a quarter going into online trading to buy ETF. How much time does that involve?

If you really don't want to go "in-all" the BTIR route, you could possibly consider buying the smallest possible WL policy ($50k sum assured) as a security blanket while you start your investment journey. You can then compare the performance of your insurance policy against your BTIR portfolio. If your investment portfolio takes off, then the $50k policy is all you buy.

If after a few years of investing, you turn out to be a gambler or incompetent investor and make big non-systemic losses, then yes, you fit in the above categories so you can adapt your strategy and start channelling more of your investment funds to insurance.

 

[DevilCurseYou]

Insurance agents are in a difficult spot, because the main reason for explaining why expensive ILP and WL policies are "suitable" for some investors may not be accepted by potential clients.

ILP and WL policies are suitable for:

• those who do not want to spend any time managing their finances (even though they spend hours researching their next car or handphone)

• the gullible people who would otherwise invest in things like Gold Scheme - for example, Ch8 TV interviewed the family that invested nearly $1m in TGG

• the gamblers who would otherwise gamble away their money

• the incompetent investor who thinks his investing strategy is 'sure win' but in fact is 'sure blow up eventually

If you dont' fall into the above list, you can do some homework and then buy term and invest the rest. And frankly, buying a term policy which is paid by GIRO, and once a quarter going into online trading to buy ETF. How much time does that involve?

If you really don't want to go "in-all" the BTIR route, you could possibly consider buying the smallest possible WL policy ($50k sum assured) as a security blanket while you start your investment journey. You can then compare the performance of your insurance policy against your BTIR portfolio. If your investment portfolio takes off, then the $50k policy is all you buy.

If after a few years of investing, you turn out to be a gambler or incompetent investor and make big non-systemic losses, then yes, you fit in the above categories so you can adapt your strategy and start channelling more of your investment funds to insurance.

insurance agent is one of the most conflicted salesperson. In other sales line, like a fruit seller, they can emphasise on intangible, like how sweet or crunchy the apple is, to market their product for higher price. But for insurance, they are essentially selling money for money. an insurance buyer is looking for payout, and if an agent is to increase their income by selling poorer policy, it comes at the expense of client financial well-being. this will be a direct contradiction of what a financial consultant set out: to improve the financial well-being of their client.

my default investment in BTITR will be STI ETF through the banks. Although you have to pay a higher transaction fee of 1%, compared to 0.22%, I think the premium is worth it, for the ill-discipline of layman.

Singaporeans can be rather ill-discipline with finance. Just look at the number of people in credit card debt, people living paycheck to paycheck, people who buy high sell low(blumont). Hence, getting them to buy ETF mechanically may be a problem, and the small premium is worth it.

By signing up an additional giro plan with the banks for ETF, BTITR will also be able to cover the 4 groups of people you mentioned. It would offer discipline and still numerical superiority. sadly, banks are not able to pay out a rich commission to agents because their margin on these product is horrible.

 

[Mecisteus]

Another dig by a fresh blood.

 

[Perisher]

1. There are many types of life insurance. Term, Whole life, Accident plan, ILP, retirement plan, endowment plan, Integrated plan etc

2. There are many resources to find out information. Life Insurance Association (a regulatory body for life insurance in SG) have FAQs sections and guides for consumers to read and equip them with the relevant info.

3. Life plan premium do increase in age. But do think about your financial needs and priority before getting them. You would not want to worry about your finances, affordability after purchasing them. Ultimately, insurance is about giving you a peace of mind.

All the best in your search for these answers

Do kindly stop digging threads.

 

[Bwjx94]

Another dig by a fresh blood.

The readers on the forum have eyes to see and minds to think. It does not make you any smarter to point out to ppl that I'm a fresh blood.

As I pointed out to another person in another post, I'm used to but no longer an intern working in a financial advisory firm. I no need people to judge on my character.

What I'm shocked is that the some of the users here lack basic courtesy and respect for what people post and beat a round the bush to scold ppl and make sarcastic remarks. Don't you think that your actions are overboard?

Is that the culture that a forum like hardwarezone should have? I don't mind being suspended or getting infractions. I just hoped this people exercise a bit of mannerism. If you don't like the post I'm giving, kindly point out to me and I will remove it (which i have already done so).

 

[xdemolicx]

I just calculated the Aviva Term Insurance Premium.. I did some calculations and would like to seek the advice of other brudders here.

My comparison is taking Term VS WL VS Hybrid(Term + WL) to see which method is "better".

I use the difference in the premium of whichever plan to put inside investment, assuming a 3% return excluding any potential capital gains or losses. (I think this is pretty reasonable)

28 Male Non-Smoker, Coverage $300000, Till 80 years old

Term VS WL Results (Aviva Group Life + CI 300k VS WL + CI 300k)

Coverage of Term is equivalent to my investments since essentially, it means I have no coverage and can only rely on my investments as protection.

Investment returns will appear lesser because of the Aviva premium getting very expensive from 65 onwards for Life + CI.

Results: Term wins.

Term VS Hybrid Results (Aviva Group Life + CI 300k VS WL + CI 150k and Term 150k)

I took into consideration of my own term policy which covers till 75 years old.. hence I am still paying premium then.

Since after 75, my multiplier will drop to 50k, the coverage is 50k + my investment returns which started late because for Hybrid method, it is only after paying fully my WL premium will there be a positive gain as compared to Aviva Term.

Again, investment returns will appear lesser because of the Aviva premium getting very expensive from 65 onwards for Life + CI, but the other Term is a leveled premium throughout.

Towards the end, my dividend end up goes to paying for Aviva premium instead of reinvesting.

Results: Hybrid wins.

I feel unless you are confident of getting at least a 4-5% return on your investments.. Hybrid seems like a better choice?

 

[kuehteow]

It seems as though there are 2 kind of life insurance, a Term life insurance and an ordinary insurance?

I'm fairly new to these insurance policies out there, but what are their differences? I'm confused about them.

I've only started working and was told that I should sign up for a life plan when I'm still young before the premium gets too expensive when I'm older.

A term insurance, also known as rider, is the kind of insurance that can only be purchase on top of an existing ordinary insurance. You cannot buy term insurance by itself from my understanding. I am not sure whether the rule and policy still apply from the time i purchase 15 years ago.

Term insurance is usually cheaper as the name rider suggest, it rides on your existing insurance policy to provide you with a larger coverage at a lower premium without any returns at the end of the term insurance.

E.g. You have an ordinary policy coverage of 100K for 300 every month.
You just pay another 50 dollars and you will get 150K coverage if anything happens to you e.g. critical illness.

For your 100K coverage if nothing happens to you, usually you will be guarantee an incremental sum e.g. 120K after maybe 30 years. But for the additional 50 dollars that you have been paying for term insurance, there are no return at all and it will ends at a certain age say 65 yo.

I am not an insurance agent so I cannot be 100% sure that what my understanding is correct. My understanding is from my personal payout experience from the term insurance that i purchase previously.

Remember insurance is meant for protection not for investment, so you should try to leverage term insurance and maximize your coverage if possible.

I hope it helps.

 

[akwl88]

A term insurance, also known as rider, is the kind of insurance that can only be purchase on top of an existing ordinary insurance. You cannot buy term insurance by itself from my understanding. I am not sure whether the rule and policy still apply from the time i purchase 15 years ago.

Term insurance is usually cheaper as the name rider suggest, it rides on your existing insurance policy to provide you with a larger coverage at a lower premium without any returns at the end of the term insurance.

E.g. You have an ordinary policy coverage of 100K for 300 every month.
You just pay another 50 dollars and you will get 150K coverage if anything happens to you e.g. critical illness.

For your 100K coverage if nothing happens to you, usually you will be guarantee an incremental sum e.g. 120K after maybe 30 years. But for the additional 50 dollars that you have been paying for term insurance, there are no return at all and it will ends at a certain age say 65 yo.

I am not an insurance agent so I cannot be 100% sure that what my understanding is correct. My understanding is from my personal payout experience from the term insurance that i purchase previously.

Remember insurance is meant for protection not for investment, so you should try to leverage term insurance and maximize your coverage if possible.

I hope it helps.

Er............

 

[kuehteow]

Er............

Am i misleading something? I hope not.

Anyway this is from my own understanding by trying to explain in layman term. I am sure there are insurance ppl around the forum that can correct me if my understanding is wrong.

 

[01asdf]

Am i misleading something? I hope not.

Anyway this is from my own understanding by trying to explain in layman term. I am sure there are insurance ppl around the forum that can correct me if my understanding is wrong.

There are a LOT of standalone term insurance out there. Has been for decades.

Nothing to do with riders.

 

[dendii]

A term insurance, also known as rider, is the kind of insurance that can only be purchase on top of an existing ordinary insurance. You cannot buy term insurance by itself from my understanding. I am not sure whether the rule and policy still apply from the time i purchase 15 years ago.

Term insurance is usually cheaper as the name rider suggest, it rides on your existing insurance policy to provide you with a larger coverage at a lower premium without any returns at the end of the term insurance.

E.g. You have an ordinary policy coverage of 100K for 300 every month.
You just pay another 50 dollars and you will get 150K coverage if anything happens to you e.g. critical illness.

For your 100K coverage if nothing happens to you, usually you will be guarantee an incremental sum e.g. 120K after maybe 30 years. But for the additional 50 dollars that you have been paying for term insurance, there are no return at all and it will ends at a certain age say 65 yo.

I am not an insurance agent so I cannot be 100% sure that what my understanding is correct. My understanding is from my personal payout experience from the term insurance that i purchase previously.

Remember insurance is meant for protection not for investment, so you should try to leverage term insurance and maximize your coverage if possible.

I hope it helps.

Hmm.. this is very wrong and not true at all. Standalone term has been around for the longest time and not as a rider.

 

[kuehteow]

Hmm.. this is very wrong and not true at all. Standalone term has been around for the longest time and not as a rider.

In the past, when I ask my agent, what is the difference between term and rider I was told that they are similar so I always assume that they are the same. Will clarify with my agent in future.

As I had already claim off my critical illness policy with rider, the only regret I had is that I should have buy more rider on top of my policy. Actually I do not have any term policy, what I had is only rider with my existing policy.

In my opinion, the rider is an important component that will significantly increase your payout at the end of the day if anything happens which is what insurance is for. But I remember there is a cap for rider as well.

 

[soneat]

In the past, when I ask my agent, what is the difference between term and rider I was told that they are similar so I always assume that they are the same. Will clarify with my agent in future.

As I had already claim off my critical illness policy with rider, the only regret I had is that I should have buy more rider on top of my policy. Actually I do not have any term policy, what I had is only rider with my existing policy.

In my opinion, the rider is an important component that will significantly increase your payout at the end of the day if anything happens which is what insurance is for. But I remember there is a cap for rider as well.

I believe the type of rider you are talking about are term riders. As an example there are "term rider" (provides protection for death, tpd) and "living rider" (provides protection for death, tpd and CI). As am example, Income has such Term Rider and Living Rider which can be attached to any regular paying policies, or the ala-carte family policy.

Hence while some riders can provide term insurance type of benefit, the converse is not true, i.e. you cannot say term insurance is known as riders.

 

[xdemolicx]

Ish my thought process for this wrong or did i miss out anything

I just calculated the Aviva Term Insurance Premium.. I did some calculations and would like to seek the advice of other brudders here.

My comparison is taking Term VS WL VS Hybrid(Term + WL) to see which method is "better".

I use the difference in the premium of whichever plan to put inside investment, assuming a 3% return excluding any potential capital gains or losses. (I think this is pretty reasonable)

28 Male Non-Smoker, Coverage $300000, Till 80 years old

Term VS WL Results (Aviva Group Life + CI 300k VS WL + CI 300k)

Coverage of Term is equivalent to my investments since essentially, it means I have no coverage and can only rely on my investments as protection.

Investment returns will appear lesser because of the Aviva premium getting very expensive from 65 onwards for Life + CI.

Results: Term wins.

Term VS Hybrid Results (Aviva Group Life + CI 300k VS WL + CI 150k and Term 150k)

I took into consideration of my own term policy which covers till 75 years old.. hence I am still paying premium then.

Since after 75, my multiplier will drop to 50k, the coverage is 50k + my investment returns which started late because for Hybrid method, it is only after paying fully my WL premium will there be a positive gain as compared to Aviva Term.

Again, investment returns will appear lesser because of the Aviva premium getting very expensive from 65 onwards for Life + CI, but the other Term is a leveled premium throughout.

Towards the end, my dividend end up goes to paying for Aviva premium instead of reinvesting.

Results: Hybrid wins.

I feel unless you are confident of getting at least a 4-5% return on your investments.. Hybrid seems like a better choice?

 

[kuehteow]

I believe the type of rider you are talking about are term riders. As an example there are "term rider" (provides protection for death, tpd) and "living rider" (provides protection for death, tpd and CI). As am example, Income has such Term Rider and Living Rider which can be attached to any regular paying policies, or the ala-carte family policy.

Hence while some riders can provide term insurance type of benefit, the converse is not true, i.e. you cannot say term insurance is known as riders.

Liao Gai.... My mistake.... Apologize.

Anyway my point is whatever we get we should always get the riders to increase the coverage with a minor increase in premium.

I believe what I got previously is living rider as I claim everything under CI and I also don't recall I bought any term policy in the past.

 

[soneat]

Liao Gai.... My mistake.... Apologize.

Anyway my point is whatever we get we should always get the riders to increase the coverage with a minor increase in premium.

I believe what I got previously is living rider as I claim everything under CI and I also don't recall I bought any term policy in the past.

No worries.

That living rider is actually a term insurance that covers for death, tpd and CI. Term insurance can have fixed (level) or variable (eg. decreasing) payout as well.

Usually, when people talk about riders attached to a policy, it means additional benefits attached to the policy and it can be those that accelerates the protection payout (eg CI or ECI riders attached to a whole life policy that accelerates the death benefit) or enhance the protection payout (eg level/decreasing term) or protects some other event (eg payor benefit in the event the policyholder suffers from CI).

 

[Maeda_Toshiie]

Liao Gai.... My mistake.... Apologize.

Anyway my point is whatever we get we should always get the riders to increase the coverage with a minor increase in premium.

I believe what I got previously is living rider as I claim everything under CI and I also don't recall I bought any term policy in the past.

Please note one thing regarding riders: if and when the main policy (whatever it is) ends, the riders end as well.