POSTED IN ONLINE CITIZEN
http://theonlinecitizen.com/2008/05/the-truth-about-life-insurance/#comment-7789
Dear Catherine Choong
You can read these FAQs to understand why I recommend buy term and invest the difference.
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/
Life insurance is important for a family,but it can be low cost insurance, covering death, accidents and critical illness. I invite readers to read my FAQ to make an informed choice.
http://www.tankinlian.com/faq/choice.html
The remaining savings, invested in a low cost fund, is likely to give an accumulated value that will be more than the face value of the policy at the end of 30 years. The policyholder does not need to die or suffer a critical illness to get this face value. The invested fund is likely to produce this sum.
http://www.tankinlian.com/faq/savings.html
A higher accumulated value in an investment fund (compared to a lower cash value in a life insurance policy) will give more money for the policyholder to spend during his or her retirement years. This is an important function of financial planning that is not well served by a life insurance policy, due to its high cost structure.
Although the return from an investment fund is subject to volatility, it is not a serious matter for a long term investor. This point is covered in my FAQ. A life insurance policy with a high terminal bonus, also provides uncertain cash value, and is less transparent.
The life insurance policy gives a poor return due to the "effect of deduction". This is the huge sum that is taken away from the policyholder to pay the marketing expenses and other charges.
My general analysis is on the life insurance products commonly sold in the market. I believe that the "effect of deduction", in the case of NTUC Income, are lower than the market. It is for you, as the adviser, to tell the policyholder about this lower effect of deduction and demonstrate the value of the Vivolife product.
Someone showed me a benefit illustration for Vivolife. I was surprised that the cash value at the end of 20 years still showed a poor yield. I hope that this is an aberration, and that the yield for most other Vivolife products are better. Perhaps you can show some examples, illustrating the total premiums paid for 20 years, the cash value and the "effect of deduction" for the 20 years.
I have other point about an inflexible life insurance policy that forces the policyholder to continue paying the premiums and imposing a big penalty on early termination. This is not fair to the general public.
During the time that I headed NTUC Income, I declared high annual bonus and provided higher cash value (compared to the market), so that the policyholders who cannot continue the policy does not suffer a large penalty.
I believe that a flexible savings plan invested in a low cost fund is better for the policyholders in this modern time. Many of them are now investing in low cost unit trusts and mutual funds available from other platforms.
I hope that the life insurance industry and advisers can rise to the challenge to give good value products to the large number of people who entrust their future to us.
Tan Kin Lian
Friday, May 16, 2008
Get a quote on your motor insurance
Dear Mr Tan,
1. In 2006 I bought my car insurance from company X and the premium is $4XX
And now i need to renew and the amount is $6XX, which is around $200 more. The
car is now older by two more years and the value is lower by maybe 30%, but the premium increased by 30%. I have 100% clean record for the passed 20 years. Should I still stay royal to this company?
I wonder why such a great increased just two years . Since my car value drop more than 25 to 30% why the premium increased?
REPLY
You should contact other insurance companies and ask for a quote. Read this FAQ
http://www.tankinlian.com/faq/motord.html
The premium on your car depends on the claim experience, and not on the value of the car. Last year, the claims increased significantly and most insurance companies made big losses. They have to increase the premium rate by more than 20% to catch up with the claims.
1. In 2006 I bought my car insurance from company X and the premium is $4XX
And now i need to renew and the amount is $6XX, which is around $200 more. The
car is now older by two more years and the value is lower by maybe 30%, but the premium increased by 30%. I have 100% clean record for the passed 20 years. Should I still stay royal to this company?
I wonder why such a great increased just two years . Since my car value drop more than 25 to 30% why the premium increased?
REPLY
You should contact other insurance companies and ask for a quote. Read this FAQ
http://www.tankinlian.com/faq/motord.html
The premium on your car depends on the claim experience, and not on the value of the car. Last year, the claims increased significantly and most insurance companies made big losses. They have to increase the premium rate by more than 20% to catch up with the claims.
Nominating a beneficiary
Dear Mr Tan
I am single and have no relatives. I went to an insurance company to change my beneficiary but was informed that I cannot nominate someone not related to me. Instead, I was asked to change my beneficiary to my estate and have to write a will. This brings about the following questions:
1. For people with no relatives, is it still necessary to have an insurance policy?
2. Does it mean I have no choice but to engage the services of a lawyer to draw up a will?
3. What is the cost involved to engage a lawyer to do a will.
REPLY
You can leave your policy money to your estate. If you do not have a will, it will be distributed according to the intestate law.
If you wish to write a will, you can use the will writing service provided by NTUC Income. You can get more details from Big Trumpet, www.bigtrumpet.com.sg
I am single and have no relatives. I went to an insurance company to change my beneficiary but was informed that I cannot nominate someone not related to me. Instead, I was asked to change my beneficiary to my estate and have to write a will. This brings about the following questions:
1. For people with no relatives, is it still necessary to have an insurance policy?
2. Does it mean I have no choice but to engage the services of a lawyer to draw up a will?
3. What is the cost involved to engage a lawyer to do a will.
REPLY
You can leave your policy money to your estate. If you do not have a will, it will be distributed according to the intestate law.
If you wish to write a will, you can use the will writing service provided by NTUC Income. You can get more details from Big Trumpet, www.bigtrumpet.com.sg
Collective Protest - Update 16 May
I received 54 signatures today, giving the cumulative total of 270 signatures. I am heartened that the forms contained more signatures. One policyholder collected 7 signatures on the same form, from several families.
Someone sent an e-mail to me yesterday, volunteering to collect signatures at MRT stations over the next two weekends. I advised him that this is not necessary. He should not collect signatures from strangers. I do not want to be accused of creating public disorder.
He was quite worried that I may fail to collect 1,000 signatures, as Singaporeans tend to be self centered. I asked him not to worry.
I have asked many policyholders, including those who submitted the signatures earlier, to get more signatures from their friends and colleagues. If we work together, we can achieve this target. You can also scan the signature form and send to me at kinlian@gmail.com.
Someone sent an e-mail to me yesterday, volunteering to collect signatures at MRT stations over the next two weekends. I advised him that this is not necessary. He should not collect signatures from strangers. I do not want to be accused of creating public disorder.
He was quite worried that I may fail to collect 1,000 signatures, as Singaporeans tend to be self centered. I asked him not to worry.
I have asked many policyholders, including those who submitted the signatures earlier, to get more signatures from their friends and colleagues. If we work together, we can achieve this target. You can also scan the signature form and send to me at kinlian@gmail.com.
ERP Charges
I try to avoid driving to work. I prefer to take the MRT. Sometimes I have to drive, due to the need to visit a few places.
There are some many gantries on many roads. Each time, I pass a gantry, there is a sum deducted from my cash card. I do not know what is the ERP charge. I only need how much cash remains on my cash card.
I suggest that the Land Transport Authority should display the charges on the gantry, next to the sign "ERP in Operation". At least the motorist will know what is the fee.
I understand that separate charges apply to different types of vehicles. Perhaps LTA only needs to display the charges for motor cars and motor cycles, as they are the most frequent road users. The charges for other types of vehicles can be set at a certain ratio to the charge for motor cars.
As the charges vary by time of day, it is only fair that the actual charges should be displayed. I hope that officials of the LTA are reading this blog.
There are some many gantries on many roads. Each time, I pass a gantry, there is a sum deducted from my cash card. I do not know what is the ERP charge. I only need how much cash remains on my cash card.
I suggest that the Land Transport Authority should display the charges on the gantry, next to the sign "ERP in Operation". At least the motorist will know what is the fee.
I understand that separate charges apply to different types of vehicles. Perhaps LTA only needs to display the charges for motor cars and motor cycles, as they are the most frequent road users. The charges for other types of vehicles can be set at a certain ratio to the charge for motor cars.
As the charges vary by time of day, it is only fair that the actual charges should be displayed. I hope that officials of the LTA are reading this blog.
I cancelled my credit card
Some banks and service providers seem to feel that it is their commercial right to impose hefty charges for late payment or other administrative oversight.
A few months ago, I received a letter from a credit card company informing me that the charge for late payment and for insufficient funds is in the order of $30 to $50. This is in addition to their interest of 2% per month. I was so angry that I called the hotline to cancel the credit card. The customer service officer was surprised at my action. He did not seem to understand why I reacted in that manner.
A few months ago, I received a letter from a credit card company informing me that the charge for late payment and for insufficient funds is in the order of $30 to $50. This is in addition to their interest of 2% per month. I was so angry that I called the hotline to cancel the credit card. The customer service officer was surprised at my action. He did not seem to understand why I reacted in that manner.
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