Term Life Insurance
Whole Life Insurance
Asked on 07 Jan 2020
How do you know if an insurance agent is really helping you the find the best insurance for your needs, or just trying to sell you a plan that would be the most profitable for them?
You'll have to compare across the various companies to see if you're getting the best value for a particular policy.
One easier way is to go to an independent firm (a.k.a. distributor) first. Usually, they will also have their own agenda, but at least you get them to present a few across a few companies...as compared to just an agent representing 1 company (AIA, GE, NTUC, etc.)
There are term plans where the commissions are higher than life policies. Ultimately it boils down to the need of the individual, some prefer to sell life plans because of the cash value compared to term plans while others prefer to sell term as they believe in “buy term invest the rest” strategy.
Ask the agent to explain the basis of their recommendation to you on why they recommend this product and why not the other.
The role of an insurance agent or self-proclaimed "financial advisor" is to help insurers sell products in return for commissions.
There is no way to know so you have to be financially literate.
No one cares about your money than you do.
If I have to put it objectively.
Term insurance has higher commission % on the premiums. But lower premium value.
Whole life insurance has lower commission % on the premiums, but higher premium value.
So there is some sense of truth if you are PURELY looking at the premium value.
However, it is UNFAIR to blanket assume all insurance agents are trying to do that. Some do look through and do a balance of term and whole life (and its below 10% of your take home pay). That is fair and balanced approach to planning.
Looking at Facts and Figures, if you are confident of achieving 5% returns and above, term life is the best bet.
Term life leverage the most for highest coverage. which allows you to have more dry powder for investment.
Whole life is used only if you believe you cannot beat 5% returns. (and this may change into buyers regret). But also, the older you chagne to whole life, the worse the returns become.
There is no simple answer, unless you are clear of your direction and what you want, vs what you can achieve.
The best is always Term up to 65-70 year old and you invest the rest. Whole life basically do that for you in a wrapped product but charges are high and gains/losses are capped.
Both question and answer is in whether people bother to do the work themselves to min/max losses/gains.
You ask them. They are actually obligated to reveal to you the specifics of their commissions.
In my experience, most of my term policies command a higher commission percentage than whole life, but whole life policies are usually more expensive.
Sometimes you need a more expensive policy because it makes a lot of sense. Other times, you don't. And you have to keep in mind that whole life policies have so many useful features and variants that not 'investing the rest' is a very ineffiient move, let alone having any actual investment ability or experience.
I would suggest you use this as a starting point.
And remember - an insurance agent isn't generalized. They're human like you. Have a conversation with them and if you don't like the conversation, walk away. If you do, stick around and see how you can get a win- win.
21 Jan 2020
23 Jan 2020
An insurance agent works in your best interest if he/she has the following three I's:
Oh it's true, it's true!
That's a very big statement and I think we need to understand the difference between term and whole life policies before coming to such a conclusion.
Term insurance is usually cheaper, yes but the question is always whether it suits your needs. A term policy is one where you the insurer gets to choose how long you would like the policy to run for. The worry in this is, what if in the event some thing only happens to you after the term policy? Will you as the insured be okay? Cause I think for agents, most of us would feel really bad if such an incident were to happen.
Also, in regards to whether you know if an agent is helping you, I think it's a matter of trust and chemistry, there needs to be a clear and honest communication between you and the agent, and from the advice you have received, you can see if it's of good value to yourself.
This is my 2 cents worth and honest opinion, do reach out if you have more quires
Instead of spending time to focus on the agent, use the effort to understand more about yourself and your needs. For the most part, a capable agent is able to help you create goals that you want for your future and to strategise ways to achieve it.
Professionally, I find more value in spending quality time to understand my clients' existing portfolio first. Through this process, it allows us to understand the coverage that we have, any financial gap, as well as to find out whether we are overpaying for our insurance policies. I have highlighted the rest of the reasons here: https://www.blog.pzl.sg/why-every-client-needs-an-insurance-policy-summary/
Next, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/
Once the two steps are completed, here is the general rule for life insurance.
10% to 20% of your annual income on healthcare insurance and life insurance
Basic Life Cover = 10 times your annual income
Critical Illness Coverage = 5 times your annual income
From the above, it can be seen that term or life insurance doesn't matter. Most importantly, the plan must be able to fit into your financial needs and goals. For instance, let's say you get a term plan that covers till age 55 (because it is cheaper) but you have a mortgage running till age 65. In the event of a crisis, how? With this in mind, a capable agent is able to brainstorm and discuss with you the potential problems and ways to overcome it.
In case you are wondering, here is a general comparison between a term and a whole life insurance policy in Singapore: https://www.blog.pzl.sg/term-vs-whole-life-insurance-singapore
Here is everything about me and what I do best.
There are term policies that carry higher commissions than whole life policies and vice versa. I think what's most important is that you understand the rationale for that recommendation and the other options that are available to you. At the end of the day, Financial Consultants should educate and recommend, but the decision is ultimately left to you - since these are your policies and your plans. :) Hope this helps!
Financial advisor, planner, agent, different hats for the same job.
At the end of the day, you simply had to go down face-to-face and hear what she/he had to say and offer. Then use common sense & independent thinking to decide for yourself
Well that's a sweeping statement. Any salesperson would want you to buy the most expensive product. But an advisor would make sure you buy what you need at the best price.
There's always a place for term cover and whole of life cover.