Recommended Investment Linked Policy as replacement for term/life insurance? - Seedly
 

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Asked by Anonymous

Asked on 12 Oct 2018

Recommended Investment Linked Policy as replacement for term/life insurance?

Recommended GE smart life advantage policy by agent when i am looking for coverage for CI,TPD and death.I am aged around 21+ and will not earn any income for the next 3-4 year due to studies.

When i mention that the 5% fixed bid spread meant that paying premium using the unit trust is more expensive compared to paying cash.I was told to look at it from the protection side.I was wondering if i miss out on some perspective in which an ILP is more suitable for me than Term insurance.

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Hey Anon, firstly, there are multiple ILPs with different purposes.

Purchasing a net sum at risk ILP (newer ones) is a road to self insurance. You choose a sum assured and start investing to hit that goal. Every year, when you pay for insurance, you'll pay the difference between your Sum Assured and your Investment Value, possibly paying less than the previous year and one day, hopefully 0.

However, ILPs have increasing cost of insurance for your coverage, unlike Term or Whole Life plans where your Cost Of Insurance is Level, or constant.

This would affect you quite negatively once you're older than 65 years old where the COI could be more expensive than your premiums paid and eat into your investments.

While an ILP is sold as a Whole Of Life cover, it is an inefficient way of doing so. If you're planning to cancel it once you hit the investment goal, it could be a cost efficient way to do it while having downside protection. Even possibly cheaper than buying a term policy.

However, if you require your coverage to be whole of life, getting a traditional WL plan would make more sense.

Your COI is level, you get both the sum assured plus any bonuses which adjusts for inflation (ignoring those with multiplier effects), plus have a guaranteed and not variable increasing cash value unlike investments which can have negative returns in some years.

Your last choice and cheapest choice would be to get a Term policy till a specific age, usually till Retirement. The idea here is that once you're not generating any income, you do not need to protect any income.

But I do suggest you take a look at getting some of your cover as Whole Life and some Term. Especially if you're tagging Early Critical Illness cover (cheaper in a WL plan than Term).

Again, insurance is to protect your income in unforseen circumstances, death, disability, illness. And to guarantee certain events in your life come true without fail, such as paying for your children's education in the future and Retirement.

If you'd like to seek a second opinion, and get an unbiased comparison for the majority of insurers in Singapore, I'll be glad to assist.

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Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 6. Master
Updated on 07 Jun 2019

Walk away. At your age, term plans will be the cheapest for coverage.

There are a lot of fees involved when it comes to an ILP policy. The bid offer spread is one, monthly fees and management fees are the other common ones. Never mix investment with protection in the same product, and get involved with them separately. Agents like to recommend ILPs cos commissions tend to be higher as compared with a term plan.

And frankly, unit trusts are crap for investment returns. Learn how to invest on your own instead. There's a lot of sharing on this in the Seedly questions section; you may wanna browse through.

Do reach out if you need further help. Cheers

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Kenneth Lou
Kenneth Lou

on 14 Oct 2018

Yeah i think term plans fit best for now at this age.
Lim Chun Long Jimmy
Lim Chun Long Jimmy
Level 5. Genius
Answered on 14 Oct 2018

Since you will not be earning any income for the next few years, it is better that you choose term plan(s) instead of investment-linked plan(s) to minimise costs and maximise coverage.

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Rave Ong Ci De
Rave Ong Ci De
Level 5. Genius
Answered on 14 Oct 2018

Have u signed the contract? Is it within the 14 days free look period? If it is, call in without delay to cancel the policy.

I remember seeing a few months back that u can get the agent to buyover the plan if u wanna surrender. From what u described, I personally feel that the agent is not doing things in ur best interest, as this plan, which requires regular contribution is not suitable for students. In terms of premiums, as a few others have said, term plan is the best value for money for protection.

Do all the nice method and keep things amicable as possible. If it is not possible to be nice, then turn nasty. Which leads to the next point.

Do u still have his name card with his representative no.? U can lodge a complaint that he did not serve in ur best interests and recommended a policy that is not suitable for u. (Note: I dont recommend this, but if that fellow turn nasty, then u shld not stand the ceremony. This is also to protect urself and knowing, exercising ur right as a consumer.)

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Nicholas Chan
Nicholas Chan
Level 5. Genius
Updated on 07 Jun 2019

Given you circumstances, term plans would be cheaper & more suitable for you.

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BC Woo
BC Woo

Updated on 14 Oct 2018

... and stay away from this agent who recommended u to switch to ILP
Brandan Chen
Brandan Chen, Financial Planner at Manulife Singapore
Level 6. Master
Answered on 15 Oct 2018

Do consider the following pointers:

1) You are currently not earning any income. And Life Insurance is mainly for income protection. Hence, consider getting yourself a Integrated Shield Plan (if you have not done so) so that your treatment for CI, Serious accidents would be covered

2) If you still want some form of coverage, consider looking at renewable Term insurance as per what Xiaohui suggested. With that, you can lock in the coverage amount and switch to a whole life plan or Term Insurance in the future when your budget increases.

Unless your agent is proficient in allocating ILP funds and can potentially grow your investments for you (which most agents are not) it is not likely that you can stop paying for this after 10 years while maintaining the coverage.

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Soon Xiaohui
Soon Xiaohui
Level 5. Genius
Answered on 14 Oct 2018

Hello there, as budget is a major concern for you, a term plan is strongly recommended for you.

As you did not mentioned detail on the coverage, you may look at 5/10 renewable term (for short term or temp coverage) or term till specific age.

You may use comparefirst.sg to do a quick comparison. Or do approach me if you need some assistance/advise on this.

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