Saturday, June 13, 2015

Summary: Investment Linked Plan/ Endowment Plan / Whole Life Insurance

After writing 3 articles about ILP, Endowment Plan and Whole Life Insurance in one day, it seems like many people are still confused about the three products. Hence, I shall draw summaries and key takeaways for these 3 products.

 Investment-Linked Plan (ILP)
Investment-Linked Plan performance is purely based on your selected funds. You can buy Singapore Growth fund, Asia Growth fund etc. You can also split your monthly payment, 50% into Emerging Country fund or 50% into China fund. So, your fund performance is solely depends on the funds you have picked. The projected 5%, 9% returns of course are non guaranteed portion. That is just an illustration if your fund yields a 5% return or 9% return. That is why there WILL NOT be any guarantee portion. How can an insurance company guarantees such guarantee returns regardless of the funds you have chosen? It does not make sense.
Endowment Plan

As for Endowment Plan, there is no fund for you to choose from. You just buy and wait for the performance of the investment of the insurance company. Of course, they also take your monies and invest but you have no control, they have. Therefore, they do have guarantee portion for Endowment plan and as well as non guarantee portion. Usually, with endowment plan, the insurance company tends to be more conservative in investing because they need to make sure they are able to pay the guarantee portion. They will not bet your monies into high risk products or buying volatile stock like Genting share. Usually, people are buying Endowment plan for the purpose of discipline saving for certain purpose, for example, kid education fund, or even save money to have a certain lump sum pay out at certain age. This is the lowest insurance coverage plan, people will not buy Endowment plan for the insurance coverage as their objective.

 Whole Life Insurance

As for whole life insurance, I do not understand why people are extremely sceptical about the performance of Tokio Marine by hitting the projected bonuses every single time. Well, maybe it just sounds too good to be true. There are some voices saying, if that is true, why they have this non-guarantee portion too. Well, we are in Singapore, every single product is regulated in the same manner/format. I would believe this is the regulation of MAS, I don’t know. This is the norm for every single insurance company to declare in such format, guarantee and non guarantee. Please don't ask me why, ask PAP. If you check carefully, Tokio Marine seems to give conservative non guarantee pay out compared to the rest of the insurance companies, simply because, I believe, they want to achieve that non guarantee pay out every single year as their trademark of the product. So they can’t just put a handsome number and then not hitting the mark at the end, just like many other insurances companies. Well, even for the marketing material advertised at the Straits Times, it has to be a true fact. If you doubt that, you can always check the figures yourself or even ask any insurance agents, they are all trained and they know all the truth and figures. Just ask a simple question, why the other insurance companies don't advertise in that manner? The answer is simple. They didn't meet the projected bonuses every single year. If they did, you think they don't want to advertise that too? Of course, other insurance companies will tell you the list of pros and cons for every single companies. Anyway, for whole life insurance, there is no funds for you to choose too. Insurance companies will take your monies and invest somewhere as well. They cannot place your monies in the bank and give you guarantee and non guarantee pay out, right? It is common sense that all insurance plans required certain type of investment to generate incomes.

Besides these 3 insurance products, there are other insurance plan namely, term insurance, hospitalization & Surgical insurance(H&S) and travel insurance. They are all the same “categories”.
Continue to pay money and no surrender value, zero value.
You just keep paying for the insurance coverage. That’s it. We all know many people prefer term insurance, because the premium is cheap or much cheaper than whole life insurance and the coverage is much bigger.
They will tell you the cost differences and the extra monies can be handled by themselves to do investment and generate better returns. That is one way of course. I do other investment myself too but I don’t like term insurance simply because I do NOT like the idea of ZERO value.

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