Menu Content/Inhalt
IFA On Duty - Home arrow Ask Me arrow Question on the needs for a single person
Question on the needs for a single person PDF Print E-mail
Written by Wilfred Ling   
Wednesday, 01 September 2010

Hi Wilfred,

I'm a 29-year-old single, living with my parents and a younger brother. One of my single friends in her late 30s asked me, why did I buy whole-life policy. I was stumped for a while.

As singles do not have a dependent and I do not foresee myself getting married, do we actually need a whole-life policy, ILP or term policy? I have 2 whole-life policy and 2 ILP.

One of the ILP has a death benefit of $260,000, and my premiums is $1,500 per year. From the BI, after 30 years of paying the premiums, I noticed the effect of deductions is doubled of the non-guaranteed surrender value @ 9% and 5-6 times more than the non-guaranteed surrender value @ 5%. Total premium pay-out at end 30th year is more than the non-guaranteed surrender value @ 5%. My financial advisor said to protect myself in case of death and explained the insurance cost is lower than the 1st ILP I bought. In addition, he said there is more flexibility in ILP.

If it is for protection as what my advisor mentioned, does the premium justify the value that I am getting? Is it normal for effect of deductions to be this high in ILP?

It seems like whole-life policy & ILP are the norm for everyone to take.

Hope to seek your advice and at the same time, perhaps create awareness for other singles when coming to make a decision on financial matters. Because we are our own dependents.

Thank you and look forward to hear from you.

Answer: Since you said yourself you have no dependent and still staying with parents, I infer you also do not have significant debts like mortgage. So why are you protecting for “death” if there is no need to? Thus, there is no need to have any insurance covering death.

For singles, the most important insurance is medical insurance, followed by disability income and critical illness. You yourself said that singles are their own dependents. This is correct. Therefore, in the event when you become disabled or mentally incapacitated, you have no one to look after you. This is unlike a married person who can rely on spouse. Thus, estate planning such as the necessity to draw up a Lasting Power of Attorney is the highest priority for such a case.

Whole life and ILP appear to be the “norm” because the agent needs to earn a living and the only way to earn a significant living is to sell products that generate a decent commission for them. For $1500 annual premium ILP, the commission is roughly $1500 (paid over a few years) in total. It is better that you pay $1500 separately to get objective advice than to commit into a life time of obligation. It does not take a genius to work out the math to determine which is numerically more expensive.

By the way, when you enter into a long-term contract such as a regular premium insurance, your debt ratios increased to your detriment. See Economic reality of your net worth (balance sheet) and Why is an ILP considered inferior/ a time bomb?

Wilfred

Comments
RSS
The Watchman  - Mis-selling   |220.255.7.159 |2010-09-02 00:38:11
It is very obvious the agent SOLD the products for commission and invented some imaginary needs to justify the sale of these high commission products.
Should recommend the termination and get the refund from the insurer on ground of mis-selling by the agent or else report to MAS.
amylauschke  - Not so easy lah   |Registered |2010-09-02 07:18:12
if the policies were sold years ago, how to report as misselling now? It is better to just cut loss, and move on with proper financial planning and estate planning.
The Watchman   |220.255.7.188 |2010-09-02 23:15:39
You can report for mis-selling provided you have the fact find forms. The evidence is in there, self incriminating,to prove that you are mis-sold.
ALL PRODUCT PUSHING OR OPTION 3 PRODUCT ADVICE WILL LEAVE A LOT OF SELF INCRIMINATING EVIDENCES IF YOU KNOW HOW TO DETECT THEM.
Remember insurance is sold and NOT bought, therefore it is very likely that the agent was the one who initiated the meeting, therefore the agents was duty bound to provide advice.
If it can be proven that it was the agent who advised the client to choose product advice option and never told of the consequences then the agent will a suspect of conflict of self interest.
This is one of the many ways to check if the agent is telling the truth or the fact find form is true or fake.
MAS will use this step to check for mis-selling.Of course, to pin the agent down as guilty you require more evidences...one is what is written on the fact find forms. Anyway , lies will not stand up to scrutiny, it will be exposed.
Only registered users can write comments!

3.26 Copyright (C) 2008 Compojoom.com / Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."
 
< Prev   Next >