Saturday, October 13, 2012

Buy life insurance as early as possible (Revision 02)

Revision 02 (last paragraph): updated on April 8, 2021.

We all know it is good to buy life insurance as early as possible, why ? It is because the premium is much lower if you start young. So, what about buying at age 1 month old ? That's perfect.

All right, I had signed a Tokio Marine TM Legacy Plus (LP) plan for my baby boy, Micah, today. It is a wonderful plan from Tokio Marine. It was launched last year (LP) with minimum benefit of 2.5 times of the Sum Assured. To make it simple to understand, I purchased a Sum Assured of S$200,000 for Micah and now the minimum benefit is actually S$500,000 from age 1 month old all the way to age 70. Thereafter it will be an exponential curve, just as any other life insurance plans. What's the price tag?

I chose TM Legacy Plus plan with:
(1) 5 years payable term
(2) Annual payment
(3) TM Legacy Plus (LP) Basic (whole life): S$5,428
(4) Dread Disease Accelerator Rider (critical illness): S$1,174
(5) At last minute, I decided to remove the enhanced payer benefit rider for myself (proposer) and also spouse because I believe me and my wife will be in good health for the next 5 years.

Effectively, I will pay S$5,428+S$1,174 = S$6,602 per year x (5 years total) = S$33,010 by the end of year 2016.

And this is it ! Micah is well covered for life. When he starts to work, he does not need to sign up for any life insurance because his dad had paid everything for him in year 2016. This will make his life easier next time.

Take a quick look at the table below to appreciate why we should shorten the payable term to the shortest possible and also in annual payment mode. The returns are simply beautiful irregardless of how many term (years) you choose, e.g. 5 years, 10 years, 15, years, etc.

Of course, this will add burden to my financial commitment. I can foresee my future in the next 5 years. But I cannot imagine to support this insurance for 20 years, 25 years (what if I don't have a job or retrenched?). That is too long for me to pay for 20 years Needless to say, I have my own life insurance, investment-linked, endowment plan, hospitalization plan to pay too.

Buying a life insurance is for the beneficial for your next generation. You should not surrender the life insurance but "purposely" leave the life insurance for your next generation. Then, the benefits payount will be the biggest sum of all. That's why it is called "Legacy" plan.

Nevertheless, if you intend to surrender the life insurance, please make sure you surrender the plan as late as possible. For example, if Micah decided to surrender this life insurance at his age of 66, he can receive a payout of S$368,309. To compare with my payable of S$33,010 initially by year 2016, that is 1,010% return. Not to mention, the life insurance has protected you all the way from 1 month old to age 66 with sum assured of S$500,000 for life or dread disease. Nice!

The most interesting fact is Tokio Marine never cut bonuses since year 1948. You can be rest assured that what you see in the policy surrender value (in the higher projected 5.25% non-guaranteed) is the money that you are going to receive in the future when you surrender the policy or the policy redeeemed. Please take a look at the big advertisement below published at The Straits Times, dated September 26, 2012.

After reading this blog, I hope you agree that buying life insurance for new born baby is a very good move. Spread the good news ! I had compared many life insurance policies in Singapore and Malaysia but Tokio Marine turns out to be the best.

If you are interested in Tokio Marine insurance policy, please feel free to contact my agent, Elaine Chiang,

P/S: You can only pay the first year premium by credit card, so use your Standard Chartered Manhattan credit card, with cap of 5% cash rebate of S$4,000 per quarter cycle, you already gain cash rebate of S$200 for your first year premium. That's great!

Question: What do you mean by Tokio Marine never cut bonuses?

Updated on April 8, 2021:

Tokio Marine cut bonus for the first time in year 2020 since year 1948!

Only two products are affected, Asia Hi-Saver and Asia Education plan, which comprising around 2,000 policies

That says TM Legacy Plus plan is not affected.

"The cuts mark a first for TMLS, formerly Asia Life, which had proudly maintained a history of no bonus cuts. Two products are affected - Asia Hi-Saver and Asia Education plan - comprising around 2,000 policies, which had "weak trends of performance''. The firm said in a statement in June that after the bonus revision, the projected annual maturity yields remain attractive in today's low-rate environment.

Said Christopher Teo, TMLS chief executive: "To manage the participating business effectively, it is necessary for any life insurance company to take prudent measures to periodically review its par fund performance and the declaration of bonuses and dividends to ensure overall long term sustainability. While this revision affects less than 2 per cent of our par portfolio, it is also the first time TMLS has taken to revise the bonus rate.''

Read the news at the link below:

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