Many people buy life insurance to provide financial security to their family. If premature death occurs, the policy provides a cash sum to take care of the future financial needs of the family.
Insurance agents are drilled into thinking that they play a “noble” role in safeguarding the future of many families. This is half the truth.
Here is the other half: Many families are being grossly overcharged for the modest financial protection offered by the life insurance policy. After deducting the high expenses, their net savings do not earn a sufficient yield for them to live on during their retirement.
Let me quote a real example. Take the case of a male at age 30 saving $300 a month over 30 years. He is able to secure a sum assured of $100,000 under an endowment policy.
If premature death does not occur (and this represents probability of 95%), he is likely to receive a maturity sum of say $171,000, representing a yield of 3% per annum on his savings over 30 years. The insurance agent says that this looks like a good deal, considering that his family had enjoyed financial security for 30 years.
If the policyholder had invested the same sum of money in a low-cost investment fund that mirrors the investments of the life insurance company, he is likely to earn a net yield of about 5% per annum. At the end of 30 years, this will give an accumulated amount of $239,000.
This investment fund earns $68,000, or 40% more than the proceeds of the insurance policy. This is reflected as the “effect of deduction” in the benefit illustration given to the consumer at the point of sale of the life insurance policy. Most people are not aware about the existence of this figure, let alone understand what it means.
The effect of deduction of $68,000 represents a “reduction in yield” of 2% per annum, i.e. the difference between the net yield of 3% and the gross yield of 5%.
The insurance agent will probably explain that this is the cost of the valuable benefit provided by the policy, namely, the financial security provided to the family for 30 years.
What the agent did not say, which is probably dishonest, is that the policyholder could have bought the same financial security to the family through a decreasing term insurance policy for only one-tenth of the cost, or about $7,000. The low cost term insurance, which is what the agent does not offer to the policyholder, will allow the policyholder to earn $61,000 more over the 30 years.
The remainder of the “effect of deduction” goes to pay for the agent’s commission, the overriding commission to the agency managers, the advertising expenses, the sales incentive trips, the overhead expenses of the insurance company, and the profits for their shareholders.
If the policyholder buys a whole-life policy or a critical illness policy, the “effect of deduction” is higher than that for an endowment policy. Although the coverage is higher and wider, the total cost is still about ten times of the cost of a comparable term insurance plan.
The investment-linked policy is equally bad for the policyholder. I have seen benefit illustrations for these policies where the reduction in yield is 4% or more. If a reduction in yield of 2% amounts to $68,000, a reduction in yield of 4% will more than double the cost. This is taking too much from the unsuspecting consumer. It amounts to daylight robbery.
Here is my advice:
1. Do not buy any high-cost life insurance policy. High-cost life insurance plans are those where the policy combines life insurance protection with savings. Low-cost life insurance policies – term insurance policies – cover protection only.
Examples of high-cost life insurance policies include whole life, endowment, critical illness, education and investment-linked policies, where many months of your premium are used to pay the insurance agent’s commission.
2. If a policy is recommended to you, you should ask about the “effect of deduction” and the “reduction in yield”. If the insurance agent is not able to show these figures, you should stop the discussion as the agent is incompetent or dishonest. Ask the agent to disclose the total amount of commission payable over the first three years of the policy. Remember, the commission comes entirely from your premiums.
3. Find out about the cost of decreasing term insurance to provide the same coverage. Do not ask the same agent, as he or she is likely to quote you a large premium. Call the hotline of another insurance company. If they do not provide a decreasing term policy, you can buy a level term policy for a higher premium.
4. The coverage of $100,000 is probably inadequate for your family. You need to be covered for about five years of your earnings. Most people need $200,000 or $300,000. If you buy decreasing term insurance, you can afford to have higher coverage as the cost is low.
My history in NTUC Income
Some people will point out that during my tenure as chief executive of NTUC Income, I had offered the same life insurance policies that are now being discouraged in this article.
Here is the truth. The policies that were sold during my time have a cost to the policyholder that is less than half of similar products in the market. This is achieved by reducing the agent’s commission and the administrative, marketing and other expenses. These policies give a return on maturity which is 15% to 30% higher than similar products in the market.
This statement applies to the old policies introduced during my tenure. I do not wish to comment on the new policies introduced by NTUC Income after I have left. The consumer should ask about the “effect of deduction” and the “reduction in yield” on these new policies and make their judgement.
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- Is compulsory Longevity Insurance necessary?
Zhummmeng,
Just ignore that burger who try to talk logic in an illogical way. He mentioned that 600 out of 310,000 is just so little. Of course we know the intricacies of opting in and opting out. I am sure if he tries to organize a poll to indicate how many would like to opt into the new bonus cut by NTUC Income, he probably will not even get 10 votes. So just let him be. There are always funny people like him around. I pity him and those who have to see him everyday.
Whatever had happened and the outcomes point to the need to have people of real integrity to run businesses for the general population.
Unlike the United States, there is scant chance of popular legal recourse here; business decisions are the privilege of the directors, and do not expect too much. The slightly more than 50% target signatures achieved in the intended protest speaks much. Singaporeans are also practical people; after a while, they do not waste much time too.
Thank you Mr Tan Kin Lian. Please take a good rest too.
Zhummeng & “RealPolicyHolder”,
The truth cant be ignored, as bluff cant be concealed.
We, NTUC Income policyholders will fight for what is right, and segregate away from what is wrong.
You cant IGNORE, hide, shield or run away from the truth….
Never….
Because the_truth will prevail!
Whole life insurance is for EVERYONE! ( :
Have you ever wondered what would happen if my hypothetical case study man has met an NTUc agent? Well, the below transcript would have been.
Agent: Mr. Prospect, we have a 5 star limited premium wholelife that would take care of all your critical illnesses(CI).
Prospect.: but i don’t have CI
Agent: You will get, you know…every body will get… sooner or later
Prospect: How do you know/
Agent: You see here , it says 1 in 3 will get cancer
Prospect: but I am in the 2.
Agent: you can be the 1.because next time it is 1 in 2, ..and then 1 in 1…you cannot escape
Prospect: sure or not…… so ‘choon’
Agent: aiya, you don’t believe, eh? what is your budget?
Prospect: $100 may be can.
Agent: hmm, let me see….. how old are you?… ok, i rekommend this popular plan vivolife for 10 years. ..you want quickly pay off, right? and then insured for whole life until you have grand children, right?
Prospect: ya, right.
Agent: ok, here it is……for $100 you are covered for $25K…….but, but, you got triple coverage if you kena acccident and die…your wife gets $75K plus bonus and now with new bonus structure….hmmm it is better. also you get retrenched , no need to worry about the premeium for 6 months…good or not? ..you see one and
only one in Singapore and batam……and if you don’t like to give to your grand children you can convert to annuity at age 60 years old…..this $32K. see…
Prospect: ok, lah, I take this plan…ya , lah so many good things.
So the prospect signed the proposal forms …….What happens next…….to be continued in next episode.
The truth is you would not even get 10 votes if you go around soliciting votes in favour of that lousy scheme.
I am still waiting for point to point rebutal if you find the recommendations that I provide on June 2nd, 2008 11.02 pm as inaccurate.
Let us articulate as intelligent adults and not deviate from the point of contention.
I rest my case, with whole life insurance is for EVERYONE! ( :
A joke about whole life insurance.
‘A common joke among insurance agents is: “We deserve high distribution costs as a reward for the difficult job of selling policies with high distribution costs.”‘
Source: Ask Dr Money
The truth is an agent of ntuc income. He kept emphasising that he is a policyholder of ntuc income.
You talk about buying vivolife. If I put $300 a month on this policy for 14 months and I get retrench so I don’t have to pay premiums for the next 6 months. If I still can’t get a job after 6 months and I can’t afford to continue the payment what will happen to my policy.
(1) “Second fallacy, is that, term insurance advocators seems confused of why they get insurance. They mixed protection and returns.”
Fact: Whole life mixes protection and returns. Term separates them.
(2) “First of all, we have to understand that not everyone have the DISCIPLINE to save.”
Fact: If you have no discipline to save, you will cancel your whole life. We all know how pathetic the returns is when you surrender. Bottom-line is people with no discipline will be financially poor, no matter what instrument they use.
(3) “In contrast, with Vivolife, BWBUI advocators need not pay premiums up to 6 months”
Fact: You can only claim once. So technically, it is a peanuts amount. Better to focus on becoming the best in your job and industry. Truth is amongst those retrenched, there are those who are unlucky and some who are poor performers. Better yourself to reduce the chance. 6 months reserve is there to help you when you are in that unlucky group.
(4) “You get medical insurance plan, not because you want to save money now, but because you WANT TO GET THE BEST MEDICAL INSURANCE COVERAGE, when in need.”
Opinion: In view of the case study, I have justified why he should Medisave instead of cash, because he is poor.
I do not understand why the_truth misinterpreted me and attempted to slander and discredit me. I am not against people buying whole life. I quote my earlier posting.
“Of course, if he earns $6,000 a month with $3,000 monthly savings, I think he may choose to buy a whole life”
Likewise, the_truth should respect the rights of others to buy Term. In fact the more the_truth promotes whole life, the more repulsive people feel towards whole life. Thus, I do look forward to further promotions of whole life.
After failing repeatedly to prove beyond reasonable doubt the effectiveness of term insurance as a a “one-size-fit -all” solution, term advocators came out with a nice name, “What Truth”.
Impressive. ( :
Just to reiterate, I am not an agent of NTUC Income.
I am just innocent individuals like Zhummeng and Blackbox.
Do not challenge our credibility.
We are noble, kind individuals who share the same spirit of proposing quality information to public yet advocate different views. ( :
Btw, let me rephrase the above question for you.
If I buy term insurance, and then, I get retrenched, only to realise that instead of SAVING money, I have squandered it all away.
Then how? ( :
Zhummmeng,
May I correct you? Maybe don’t say NTUC agent? I have encountered that conversation at MRTs with AIA, Prudential, GE, IFAs etc. Some are even worse, speculate and say GST will be 10% in the future.
Better to make it more generic to be fair. This would put you on a higher moral standing when putting across your points, don’t mind my honesty.
Anyway, the fact is nothing is free in this world. I am not familiar with this Vivo plan, but if you are trained in business/accountancy, you would know that everything is priced in a product. Nothing is free.
If you hear this ‘free whatever’ from a salesman (generic, any industry), you have to correct him with this understanding.
Hi the_truth,
From an insurance perspective,
(a) What is the incidence rate of retrenchment on a yearly basis?
(b) What is the financial impact/severity of being retrenched?
(c) What is the expected time needed at the 90th percentile to find a job?
(d) During the retrenchment period, is it expected you will change your lifestyle to cut expenses as low as possible?
For me, I do not have an answer. Thus, I aspire to be the best in my job and industry. I think being strong in your expertise is the best insurance against retrenchment. Also, savings of 6 months is a practical solution.
My guess is that
(a) 1 in a 1000
(b) Around $6,000
(c) 3 months
(d) Yes. I will cut all frills as much as possible and apply for jobs, search jobsdb, call my friends, any desperate move.
This is not a debate of term vs wholelife, just a personal opinion.
(1) “Second fallacy, is that, term insurance advocators seems confused of why they get insurance. They mixed protection and returns.”
Blackbox Idea: Whole life mixes protection and returns. Term separates them.
The_truth Facts: When I say mixed protection and returns, I mean term advocators mixed the objective of having a protection plan, and mixed with the objective of having an investment plan.
Term insurance advocators often use “returns” as a benchmark, “idealistic” yardstick to claim that whole life insurance is no good.
Term insurance advocators, then compare whole life insurance with an investment plan, and say, “See…I told you. The returns from whole life insurance is no good.”
This only happen because term insurance advocators is confuse on the reason why they get whole life insurance.
As I have reiterated earlier, we get insurance not because it give good returns.
We get insurance to ensure that we want to ensure that we are well PROTECTED against death, disability, dread diseases in any WORST CASE SCENARIOS.
The emphasis here is PROTECTION in any GIVEN CIRCUMSTANCES.
Term insurance can only be use to ENHANCE a person’s coverage and not use as a base, or as a “one-size-fit -all” solution.
(2) “First of all, we have to understand that not everyone have the DISCIPLINE to save.”
Blackbox Idea: If you have no discipline to save, you will cancel your whole life. We all know how pathetic the returns is when you surrender. Bottom-line is people with no discipline will be financially poor, no matter what instrument they use.
The_truth Fact: That is why they have to get a whole life insurance policy.
Term insurance, if he do not have a habit of savings, means he has no contigency fund. Which also means come unemployment, he will simply lapse his term insurance policy.
The first benefit of whole life insurance is that, whole life insurance forces them to save, if they dont have the habit of savings.
The second benefit, if he indeed do not have a habit of savings, come unemployment, assuming he have a Vivolife policy, he needs not pay premium for 6 months.
If his policy have been inforce for some time, and he happened not to pay the premium, the policy can still be inforce due to the cash buffer integrated in the whole life policy.
Isnt that wonderful? ( :
(3) “In contrast, with Vivolife, BWBUI advocators need not pay premiums up to 6 months”
Blackbox Idea: You can only claim once. So technically, it is a peanuts amount. Better to focus on becoming the best in your job and industry. Truth is amongst those retrenched, there are those who are unlucky and some who are poor performers. Better yourself to reduce the chance. 6 months reserve is there to help you when you are in that unlucky group.
The_truth Facts: Yes.
This unemployment waiver feature just as a contingency, back up plan.
You dont expect to be retrenched all the time, and if should that uneventful thing happen again….
Dont worry…You still got the buffer.
Whole life insurance have cash value to ensure sustainability of the policy, giving you the peace of mind, that in ANY GIVEN CIRCUMSTANCES, you will be covered on Death, Disability and Dread Diseases.
Isnt that GREAT?
(4) “You get medical insurance plan, not because you want to save money now, but because you WANT TO GET THE BEST MEDICAL INSURANCE COVERAGE, when in need.”
Blackbox Idea: In view of the case study, I have justified why he should Medisave instead of cash, because he is poor.
The_truth Facts: The very fact he is poor, is the very reason why he needs the coverage so much.
Hospital bill is spiralling upwards and not downwards. Everyone needs the best medical plan, giving the BEST COVERAGE when in need.
When he is critically sick, bedridden, he will never has the choice to think which type of ward, service, bills+++
The emphasis is on the recovery, with the best medical facilities at his disposal.
In addition,the hospital cash benefit which comes with the plan, will come in handy for him.
He will get cash everyday, while he is in hospital. Even when he is in hospital, his fixed expenses continue.
The hospital cash benefit can help him pay for the fixed expenses, relieving him from the need to think too hard about finances, instead just focus on his recovery.
Isnt that noble? ( :
Blackbox Idea: “Of course, if he earns $6,000 a month with $3,000 monthly savings, I think he may choose to buy a whole life”
The_truth Facts: Everyone needs whole life insurance.
Be it you are young or old, rich or poor, Indian, Malay, Chinese, Eurasian….
All of us, needs whole life insurance.
All of us, needs COVERAGE against Death, Disability and Dread Diseases in ANY GIVEN CIRCUMSTANCES.
Blackbox Idea:I do not understand why the_truth misinterpreted me and attempted to slander and discredit me. I am not against people buying whole life. I quote my earlier posting.
The_truth Facts: I never intend to slander or discredit you personally.
I just offer opinions, opposed to yours.
I am sincerely sorry if what I have written, have offended you in any way.
You are the only term insurance advocators here who share your views in an intelligent and respectable manner.
Whole Life Insurance is for EVERYONE! ( :
The_truth lied on 31st May:-
Out of 310,000 policyholder affected, about 600 is challenging the bonus restructuring exercise which tantamount to only a small minority of 0.193%.
I am part of the silent majority, who supports NTUC Income management directions to act in the best interest of us, policyholders of NTUC Income.
The truth can be found in the link below:-
http://forum.channelnewsasia.com/viewtopic.php?t=152631&highlight=ntuc
More than 76% are against the withdrawal of the collective protest. Needless to say, they are all 100% against the annual bonus cut. If we include those who still insist on going ahead with the protest themselves, the percentage is even higher. Also, those who agree to the decision by Tan KL to withdraw the collective protest may still be disagreeable to the annual bonus cut. So the percentage is definitely higher than 76% which by itself is already the majority.
The Truth hurts isn’t it? So the-truth should stop huffing and puffing smoke around to fool others and self proclaiming himself to be the voice for the majority of NTUC Income policyholders. I pity those who are physically around you.
Hi Blackbox,
I muchly agree with your statement of the need to aspire to be the best in your job and industry.
I share the same sentiment as you, that being strong in your expertise is the best insurance against retrenchment.
I believe be it, you are a term insurance advocator or whole life insurance advocators, this should be the primary aim for all of us.
Whole life insurance is for everyone ( :
The_truth lied on 31st May:-
Out of 310,000 policyholder affected, about 600 is challenging the bonus restructuring exercise which tantamount to only a small minority of 0.193%.
I am part of the silent majority, who supports NTUC Income management directions to act in the best interest of us, policyholders of NTUC Income.
The truth can be found in the link below:-
http://forum.channelnewsasia.com/viewtopic.php?t=152631&highlight=ntuc
More than 76% are against the withdrawal of the collective protest. Therefore, they are all 100% against the annual bonus cut. If we include those who still insist on going ahead with the protest themselves, the percentage is even higher. Also, those who agree to the decision by Tan KL to withdraw the collective protest may still be disagreeable to the annual bonus cut. So the percentage is definitely higher than 76% which by itself is already the majority.
The Truth hurts isn’t it? So the-truth should stop huffing and puffing smoke around to fool others and,self proclaiming himself to be the voice for the majority of NTUC Income policyholders. I really pity those who are physically around you.
Yeah, The-truth really hurts this time round. :)
continue from 4th June, 12.01am.
let’s give the former prospect a name, let’s now call him policyholder Mr.Thruthfool.
The result of that transaction is both are happy. The agent is happy because he has earned 40% of annual premium $1200. Not bad,eh. for filling some forms and and for product “counseling” ( lawyer got to slot for it). Mr. Truthfool is happy because that is the first and only insurance policy he has ever owned, and $25,000, wow!!! that is a lot of money if he were to die, his family will get so much money and if he were to contract a critical illness he will get another 125% of the sum assured, and if he were to kena “langar” or fall into an on coming mrt train he will get 3 times plus legal compensation from smrt. Wow !!!, that is real piece of mind!!!! Never had it so good.
While Mr. truthfool is fantasizing , mr. agent is laughing all the way to the bank..
Time passes quickly and mr. truthfool has already faithfully paid for 10 months and another 14 more months he will see the cash value, he thought to himself. There is some saving and money which he can live life to the fullest and with the freedom thrown into it to enjoy what money can buy. Isn’t that is what the ad touts. I can’t wait for that day……..
to be continued….in next episode
“RealPolicyHolder” tried to create numbers here by posting his assumptions as 2 names,
1) the questionable, “RealPolicyHolder”,
2) Pegasus
Impressive. ( :
Statistics created by Tan Kin Lian himself, using his own blog itself cannot be used, as an evidence to say that majority do not support NTUC Income Bonus restructuring.
Tan Kin Lian’s blog is not independent.
I, myself, can create an online poll and produce a result favorable to me, and proclaimed, oh yes…See, result speaks.
The truth will never be hurt. The truth will prevail!
“RealPolicyholder”, lets not deviate from the topic again, okay?
“The Truth About Whole Life Insurance”.
Whole Life Insurance is For Everyone! ( :
zhummeng,
Dont beat around the bush.
We, policyholders of NTUC Income, wants you to be transparent, direct, ethical like most of the agents in the industry.
You are downright unethical, denying the needs of Singaporeans from proper coverage and blabbering in an uneducated manner.
If you find the points, I introduced incorrect, do forward your points.
Whole Life Insurance is for EVERYONE! ( :
The truth, come clean. If you are courageous enough admit that you are an agent of NTUC INCOME. You are trying to protect your rice bowl that is why you are harping so much on whole life protection and vivolife.
You have been advocating on viovlife and even highting on the benefit of 6 months premium holiday upon retrenchment. In my earlier posting, I put up the following case and ask you what will happen to my policy and you choose to ignore.
” If I put $300 a month on this policy for 14 months and I get retrench so I don’t have to pay premiums for the next 6 months. If I still can’t get a job after 6 months and I can’t afford to continue the payment what will happen to my policy.”
If you are just a policyholder then you should express your views objectively. Why do you keep saying
“We, NTUC Income policyholders will fight for what is right, and segregate away from what is wrong.
You cant IGNORE, hide, shield or run away from the truth….”
May I ask you who you are representing?
You also said that “Whole Life Insurance is For Everyone! ( :”
If you are just an ordinary policyholder what make you so sure that whole life is for everybody. Are you an expert in insurance?
You keep challenging Zhummeng and blackbox and I know both of them had been staunch supporters of Kin Lian’s protest over the the restructured bonus and they also supported Kin Lian’s suggestion to buy term and rest the rest.
Relax lah. If you are really telling the truth, no need to get so worked up. Remember to huff and puff. Breathe in, hold your breath, count 123, then breathe out. Repeat until your heart rate slows. Okay, feeling better now.
I posted not twice but over 5 times because when I posted under my real nick of RealPolicyHolder, my message did not appear. After having to rewrite 3 times, I suspect that my message has been blocked by the moderator. So I tried various options, including changing my nick, then my message appeared. So I was convinced that messages under my REAL nick was blocked. However, the message appear now. Not sure what is happening. Maybe the moderator can shed more light on this puzzling episode. Certainly the intention is not to create numbers.
But the point now is you are casting a slur on Mr. Tan Kin Lian’s integrity. I have no doubt you will manipulate statistics, but how can you accuse Mr. Tan KL of doing such despicable things? Psychology shows that those who think what other people will do is highly likely such a person himself. Shame on you if you are like that. Anyway, like what What Truth has said, your character is dubious. You are probably posting as Singasoft in the Channelnewsasia forum as well, huffing and puffing smoke to ask people to continue to buy and that you are the majority. Like What Truth believes, you are with NTUC Income, but my take is that you are not the agent but probably one of the management, probably the funky one.
the Truth lies when he claims to speak as “We, the Policyholders”
I am a policyholder of Ntuc and absolutely disagree that the Truth has the right to speak on my behalf
For all the huffing and puffing – the total truth about WHole life insurance is that We, the Policyholders of Ntuc were NOT given the choice to opt out from the restructuring of bonus !!!! I am sure that if given a real choice the majority of the 300,000 odd policyholders will opt out.
Isnt APATHY a nice thing for some ? Purrr ..
What the_truth was saying sound good but i believe decision is in a person’s mind. There is no right or wrong from getting from wholelife or term but it’s is wrong if we are telling people that wholelife is bad, term is good.
What truth is sort of p***s off with what the_truth is been trying to share his view. I don’t know where he coming from but i’m sure he has insurance for himself. He believe so much in wholelife and wanted to share the goodness of it, i see there’s no wrong about it. you could also share why term insurance is good too!
PS.Remember well the words of the late Nobel Prize winning economist Milton Friedman:”There’s no such thing as a free lunch.”
Dear everyone,
Again I would like to remind everyone to stick to the issues. If the mutual personal attacks continue, comments on this thread will no longer be allowed and the thread closed for comments.
Thanks.
Hi the_truth,
(1) “This only happen because term insurance advocators is confuse on the reason why they get whole life insurance.”
Price is what you pay and value is what you get. Whole life has good value, as it covers one for life. The question is, are you getting good value at good price? The next question is whether you can get a similar value proposition (not product) for a lower price. The proposition of ‘Buy term invest the rest’ offers this.
I agree with you not everyone is suited. But viewed in isolation on a purely financial/economic basis, it is better. Therefore, I also disagree whole life is for everyone.
(2) “The first benefit of whole life insurance is that, whole life insurance forces them to save, if they dont have the habit of savings.”
It forces them to save, I agree. But the key issue is that they will most likely still surrender due to low savings + low discipline. One step forward, and two steps back. So in view of the inevitability that they will most likely surrender, might was well put in bank or invest. As the surrender value is much higher.
So whole life to a spendthrift is like a good strategy doomed to a bad outcome. The key here is the distinguishing of strategy vs outcome.
So going one round, it again boils down to the person. I stand by my view that people who are financially ill-disciplined will remain financially poor no matter what instruments (whole life or term/self-invest) they use.
In such a case, neither whole life nor term will save the man. In fact, putting money in bank with low interest may surprising turn out the best outcome, though bad strategy.
(3) No comments
(4) “Hospital bill is spiralling upwards and not downwards. Everyone needs the best medical plan, giving the BEST COVERAGE when in need.”
Given that Class B and C are highly subsidised, I don’t think anyone in the lower middle should over-tax themselves paying overly comprehensive health plans to go Class A (which is not subsidised) or private wards.
Medishield is well crafted, with strong emphasis ownership in the co-insurance/deductible component. Too many health plans contain alot of fluff (TCM treatment, pre-hospitalization, parent accomodation for child, get well benefit etc).
Of course, I would strongly urge the person to upgrade to the best private Shield when his finances allow, for his whole family. And get one with life-time cover, since people are growing older.
Again, think along value-price proposition.
Hi What_Truth,
I am not supportive or against TKL’s protest. From the days of TKL blog, I have stood out as a ‘Buy Term’ man.
My personal view is that the bonus restructure is a logical strategy but also one that is emotionally hard to accept. And it is one that hinges heavily on trust on management. Given that management is a variable component, the outcome is uncertain.
I do however think there will be a political price to pay if indeed the management does not deliver. This is because TKL openly mentioned that Mr Lim and Mr Yao are supportive of the move.
If I approach it from game theory, I would place my bet that NTUC Income can deliver. The stakes are too high for the two men, and consequently their affiliated political party. A heads-tail game that has skewed probability.
Caveat: I am just looking at it purely from a gambler’s perspective. I do not mean to suggest you continue your whole life policy.
So anyway, given that in general, the outcomes of life insurance is uncertain (depends on bonus issues, investment climate, quality of management etc), it i best to invest on your own.
But this takes great responsibility and ownership, though a rewarding one.
I realised that BlackBox offers GOOD POINTS for discussion, so I CHOOSE to respond to him, instead of others who post things that are irrelevant to the topic above, “The Truth About Whole Life Insurance”.
Blackbox,
(1) Price is what you pay and value is what you get. Whole life has good value, as it covers one for life. The question is, are you getting good value at good price? The next question is whether you can get a similar value proposition (not product) for a lower price. The proposition of ‘Buy term invest the rest’ offers this.
My RATIONALE: That is why I have been recommending that what Tan Kin Lian should propose is whole life insurance with the lowest effects of deductions instead of term insurance as a “one-size-fit -all” solution.
…and I believe NTUC Income gives the best valued whole life insurance due to their cooperative policy.
I get the BEST valued Whole Life Insurance policy in Singapore, that covers me Death, Disability, Dread Diseases in ANY GIVEN CIRCUMSTANCES.
Isnt that GOOD? ( :
(2)It forces them to save, I agree. But the key issue is that they will most likely still surrender due to low savings + low discipline. One step forward, and two steps back. So in view of the inevitability that they will most likely surrender, might was well put in bank or invest. As the surrender value is much higher.
My RATIONALE: For the less discipline individuals, when they get a savings plan, they may stop and enjoy the money, because in their mind, these money I have saved, is meant to be used.
If they get an insurance plan, they will think differently.
This is a protection plan, that I must have.
They will look at their wife, their son, their daughter and do whatever it takes to sustain the policy.
This policy is geared for PROTECTION and not for spending.
Anyway, lets not talk about “surrender value” here, since the emphasis or true OBJECTIVE of whole life insurance is indeed PROTECTION against Death, Disability, Dread Diseases in ANY GIVEN CIRCUMSTANCES.
We are not talking about returns or how much money we can get back.
We are only concern on PROTECTION against Death, Disability, Dread Diseases in ANY GIVEN CIRCUMSTANCES.
(2)So whole life to a spendthrift is like a good strategy doomed to a bad outcome. The key here is the distinguishing of strategy vs outcome.
My RATIONALE:Whole Life Insurance is for everyone and it lead to a GOOD outcome.
You get the peace of mind, that you have PROTECTION against Death, Disability, Dread Diseases in ANY GIVEN CIRCUMSTANCES.
Your family will be well taken care of, should anything were to happen to you, of course, only if you have Wholw Life insurance.
(2)So going one round, it again boils down to the person. I stand by my view that people who are financially ill-disciplined will remain financially poor no matter what instruments (whole life or term/self-invest) they use.
My RATIONALE: I agree with you on this. ( :
(2)In such a case, neither whole life nor term will save the man. In fact, putting money in bank with low interest may surprising turn out the best outcome, though bad strategy.
My RATIONALE: No matter what his strategies are, he still need PROTECTION against Death, Disability, Dread Diseases in ANY GIVEN CIRCUMSTANCES.
……and WHOLE Life Insurance is absolutely THE WAY!! ( :
The_truth
Hi the_truth,
Whilst insurance should be seen as a protection more than savings, whole life plans are unique in that there is a built-up cash value. Comparisons that I know of are usually made against no-risk financial instruments like savings interest. So to totally ignore comparing the returns on whole life does not seem to be fair, more so when a savings component has been priced in the product.
On the other hand, Term which has absolutely no cash value can never be compared to a savings/investment product. Term + Investment together is the closest comparison to a whole life, beyond which I cannot think of any.
Can you show us an example of a good value whole life policy (in your opinion) with effect of deduction?
NTUC Income is a cooperative, and does not have to pay corporate tax (to my best understanding). I believe this is a reason why they can price products cheaper than its competitors. The question here is does the lowest price product necessarily mean good value for its price? I feel it is not a matter of comparison, take the best in class, and case close.
Price should be seen on an absolute and not relative manner. My view is that whole life at its current cost offers good value with not so good price, even for the cheapest product. Distinguishing between value and price here is important.
My question to you is this.
If you find a person has excellent money management skills, frugal, and earn a good income, has personally beaten/equal the market return for the past 10 years. He buys term and invest the rest. Do you think he should buy whole life?
My answer to this is, he shouldn’t. For he will be in a financially better position than if he buys whole life. He buys a term, builds up his reserve, and when the term expires his reserve is much larger than what the whole life could be built up to. Best of all, true freedom as he can claim from himself from not just 30 critical illness, but any major illness. This can also provide the protection.
Thus, with this one group of people proven, I don’t think it can be said that whole life is for everyone (everyone is too big a word).
continue from 5th June 12.17am
Mr. Thruthfool is holding his vivo insurance for more than a year now.One evening his phone rings and over the other side is a familair voice , the voice of his insurance agent.
Mr. Agent: How are you, mr. truthfool?
Mr. Truthfool: Fine, who is that?
Mr. A; I am your agent who sold you the vivo insurance.I happen to see your name and decide to call you and say hello.
Mr. truthfool: Oh Yes, i remember . What is up?
Mr. A.: Call you to find out if you are ready for your insurance review. By the way,
you must have recieved a fat bonus, eh? this year, did you? Did you also recieve a pay rise?
Mr. truthfool: is that the reason you call me? to ask me about this?
Mr. A: No ,no. I call to see if I can review your insurance.
Mr. truthfool: What is there to review? I have a 25K vivo and you said it could cover me for wholelife against critical illness, total disability and death….and I am still alive!! ….!everything ok..
Mr. A: No, what i meant is to find out whether you wish to top up.
Mr. Truthfool: to up for what?
mr. A: to top another $25K so that you will have $50K
Mr. Truthfool: who don’t know?
Mr.A: you top up whenever you have money and that is how we review for people
Mr. truthfool: Oh, I see . But I have enough…..$25k is already a lot of money.I don’t think I want more.. I am not greedy
mr. A: but Mr. Truthfool, $25K is too little. You remember, I asked you to let me know when you have money so that i can help you to review and top up your insurance?
Mr. Truthfool: Yes but i just bought a computer for my daughter for her school work. I don’t have any more money. Maybe another time. Why hurry.? I will be still around.and alive. don’t worry..
Mr. A: ok, ok . what about your CPF? ( no fish prawns also good)
Mr. A: Only some in my special account, about $5000../
Mr. A: good, good. I can invest for you in our single premium endowment
and it got double indemnity if you die from accident. good right? Are you free?
Mr. truthfool : no, not sure. I call you, ok?
The call ends. .. and phew!!! sighs Mr. truthfool… what a nuisance.
to be continued in next episode
Another truth revealed in Tan KL Bolg that is very troubling:
Restructure of Bonus not applied fairly
Dear Mr. Tan,
I have three policies belonging taken by my family, which are subject to the bonus cut. I do not like the cut, as I am not guaranteed to get the special bonus at a future date.
My friend told me that he has bought a Vivolife policy that is not subject to the bonus cut. The bonus rate is higher than my policy, before the cut. Why does NTUC cut the bonus for some policies and give higher bonus for other policies. Is it because the higher bonus will help to sell the Vivolife? I find this to be very unfair. Should I lodge a complaint to MAS?
TBL
It is revealed in this latest posting that NTUC Income is practicing a double standard treatment of its old and new policyholders. Bonus cut for old and existing policyholders while giving higher bonus for its new policies. This puts the integrity of NTUC Income into question. Meanwhile, every month that we wait, Income is merrily deducting through GIRO our hard earned money. I say NTUC Income should suspend all deductions until this is sorted out.
Seem like Black box is pin pointing the_truth. Waiting for the_truth to provide us, the policyholder an answer toward blackbox’s question.
Hi L,
Btw, I am not against the_truth. I do not even care if he is an agent or not. I am just against the proposition that whole life is for everyone (keyword is everyone). I am an advocate of greater financial literacy, so more will buy term, and be empowered to reap the most from it.
But I also like to say that the_truth brought some interesting points to discussion.
I quote the_truth
“If they get an insurance plan, they will think differently. This is a protection plan, that I must have. They will look at their wife, their son, their daughter and do whatever it takes to sustain the policy.”
This could be a valid point for people who cannot save. There is a psychological aspect and emotional guilt to surrendering. This may be helpful to them. Not sure if there are reader who can attest to the viability of this?
zhummeng’s points are quite interesting too. He has experience with bad agents.
I am fortunate not to have that many dealings with agents. I had only one agent, from Prudential. We parted our professional dealings some two years ago when I decide to go solo. She did well to craft a 70% term, 30% whole life. Nonetheless, I surrendered the policy (as I am a term convert). We are still good friends. And she had recently shifted to become IFA.
I wonder if readers could share their relationship with their agents?
Oic, i more fortunate to have a very nice agent who could really plan for my benefit more than his money in his pocket. For my self i strongly belief an agent who sold policies to me to be just agent. Now he and me became good friends, he had done a very good rapport in this area and when i need assist he would really attend to it rain or shine. That’s a successful adviser should be and also we as the policyholder should do our part too. We should not look them as “Agent”(sales person from a company selling you his products) but as a professional in Insurance industry.
But i belief there are agents who work like salesman due to the high quota to hit for their comapny. From my information that NTUC Income’s professional advisers mostly give me the impression of stablity and honesty differ from those younger adviser from other company.
Thurs evening i was approached by a young lady from P company to help her in a survey. it talk about our priority in life,i done finish for her the survey, after that she invited me to her campagin and she does some sales talk with me. After that, she took paper and pen out and share with me some savings plan. In my mind i was wondering, why she’s showing me a saving plan but my priority that i done in the survey is on medical aspect?obviously she’s just wanted to sell me something that’s it!!! I don’t believe so much that roadshow could really understand my needs and weakness but should be a place where i can get to know my “professional Adviser” first before we talk further in the future.
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