I have an AIA pro lifetime protector - max (7200 paid annually). I am currently 26 and have paid the premium twice. Now I am struggling to pay, should I surrender the plan? - Seedly
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Lola

Asked 2w ago

I have an AIA pro lifetime protector - max (7200 paid annually). I am currently 26 and have paid the premium twice. Now I am struggling to pay, should I surrender the plan?

My premium of 7.2k gives me 300k sum assured for death, 300k for total disability accelerator, and 300k for total critical accelerator.

The funds invested in includes AIA global property returns fund, growth funds, regional equity fund, global equity fund, emerging markets equity fund.

I am not sure when I will get my investment back and will only get 2k if I surrender now. Contract says term 77 years, does that mean pay 77 yr? Premium holiday is chargeable at $50/month. Should I surrender?

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Hi Lola,

I would advise against surrendering the plan prematurely as it currently provides you with protection.

It looks like your original intention of getting the plan was to get coverage for yourself on Critical Illness, Death/TPD. I would suggest that you need to set up alternative coverage arrangements for yourself, and get past the waiting period if any (you can go on premium holiday temporarily while waiting). If you are looking at Critical Illness, you probably want to consider a limited payment whole life plan which will cost a lot lesser than $7200/yr for $300K coverage till age 70 at least, and only come with a 25 year payment term at most.

Yes, the 77 year payment term means that you will have to pay this plan for 77 years or until you pass away, however, it is more likely that the plan will self terminate in your retirement years due to the exponentially increasing mortality charges (these charges are guaranteed, unless you want to drop the coverage). These charges will be deducted from your fund returns, and as we know, fund returns are hardly exponential, and never guaranteed. So your portfolio value will de-ccumulate at a rapid pace after a certain point and go to zero eventually.

In view of the long term commitment of insurance policies, a premium holiday of $50/mth may actually not be a bad thing if you have a better alternative that will eventually still give you the coverage you are looking for, and yet cost a lot lesser in the long run due to a shorter payment duration. We need to look at the total costs as well.

Again, please do not surrender right now, and have a chat with an advisor to determine your next course of action.

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Raja Er
Raja Er

10h ago

Hi Evening to all, I want to check with you all, I went back to DBS bank last week for a saving /Investment plan inquiry, The planning manager suggested me to do Manulife Smartwealth II fund allocation with 1. Franklin US opportunities 2. Schroder Asian growth fund SGD 3years plan.Can get minimum interest 4 to 8%. Is it a good plan for investment //
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Hey there!

AIA Pro Lifetime Protector is a protection based ILP. This means that not all your premiums are invested into the funds as mentioned. The cash value largely depends on your portfolio value now. You can ask your agent what is the portfolio value or log onto the myAIA app.

Whether to surrender it or not will depend on your cash flow now. In general, I do not advise people to get protection based ILPs due to the high mortality charge with it at some point. The good thing is that you only paid for two years do cutting loss is a viable option for you Since there will be opportunity costs incurred if the money isn't put to work properly.

The premium holiday option is there in the event you want to resume the plan but do note that it may be likely that early Termination may come With charges.

May need to have a proper chat to find out where you're at now to further advise you.

You can reach me here for anything advisory related.

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Hi Lola,

Yes you are correct. ILPs are payable for whole life, even in your retirement. Based on my understanding, the premiums you are paying today are on the higher spectrum for your policy benefits.

Your investments are directly tied to your surrender value. The reason why its low, is due to the lower premium allocation for ILPs, in the first few years of the policy. Some of the suggestions is that if you have no other insurance coverage, you can reduce the premiums on your policy or reduce the sum assured. That will make the policy more affordable.

If you do not wish to pay, but continue with the policy, you can go on a premium holiday, for which the $50 will be deducted via your unit value monthly.

There are many ways to go about it, but the key question is to try and remember what made you want to take up this policy in this first place. If it does not fufill this objective, you will need to speak to your current financial consultant to ascertain what went wrong.

Hope i was able to shed some insight. If you require assistance, please drop a message!

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