Universal Life products
- Thread starter wongkc
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bigmice
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these are very good product, but only for the richman.
In the first place, what is the reason for buying this product? Usually people use this for legacy planning purpose.
If you think this is a suitable product that fits your needs, feel free to let me know and I could advice on what's the better products out there.
Regards,
Alex
Finexis Advisory
Shiny Things
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They're a complete waste of money.
As people have mentioned upthread, these are usually used for succession planning, to dodge inheritance taxes. Singapore has no inheritance taxes, so there's no need for the tax dodge.
Write a will instead and you'll save yourself a truckload of money.
For coverage and returns... and the relatively attractive point being that you can do financing for this. Eg 500K coverage abt 100K premium take up 70K loan... 30K cash upfront... the rest i just pay the monthly interest... monthly less than 100 bucks...
Can normal whole life policy with coverage of 500K premium at 100 bucks only?
Shiny Things
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Whoa, that sounds dodgy.
First, how long do you have to pay that loan for, and what's the interest rate? Fixed or floating? Saying "oh it's only $100 a month!" is a classic used-car-salesman trick to hide the interest rate on the loan.
Secondly, you're still handing over thirty grand cash for that coverage. Think about what you're giving up on that $30k - if you stuck it in an index ETF paying 3% a year dividends, the dividends alone would easily cover the cost of half a million bucks of 30-year term life coverage, and you'd get to enjoy the capital gains as well.
The loan is indefinite period... only servicing the interest only which explains why the monthly payment is so low... coz the principle amount is not being repaid... as and when can do lump sum payment to the principle amount... interest quoted to me is abt 1.2%
I am not very investment savvy... the ETF got 3% dividends? how is it different from stocks?
Shiny Things
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Huh. $100 a month on a $70k loan is 1.7% per annum. Someone at the insurance agent can't do math.
And you'll almost certainly find that that interest rate is floating, so if interest rates go up, you need to pay more to service the loan.
ETFs basically are stocks - they're just like unit trusts, except that they trade on the stock exchange and you can buy and sell them like stocks instead of having to wait for the end of the day. For the period of time we're talking about here - decades and decades - you'll make FAR more money by putting the cash into a sensible, boring stock ETF and buying term life with the dividends.
Put the money in stocks, and you'll get something like 5% capital growth a year on average; over 30 years you'll quadruple your money. Put it in a life insurance policy and you get zero capital growth.
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