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Hi,
Wld very much appreciate yr advice on above:
1) I advise my relative (male, age below 40 yrs) to buy term insurance.
2) However, he was advised by agent to buy Vivo life (50K) + LUV term insurance (100K, mthly premium is $20
3) To buy LUV term insurance, he needs to join as NTUC member, mthly membership fee is $9.
4) Is the above combination a good deal?
Would like to hear your veiws.
Thank you.
Elly
Hi Elly,
Personally, I think it is a good deal.
Let me explain…
In insurance, there are 2 general schools of thought…
1. Buy term and invest the rest.
2. Buy traditional Whole life / Critical Illness (e.g Vivo)
The problem with traditional insurance is that the yield is low (~2%). I believe it is so for Vivolife. So if a person is thinking of traditional insurance for his retirement, he will be greatly disappointed! Inflation will probably be even higher than the yield. Also, the policy holder must have the financial means to pay all the premiums (limited years for Vivolife) to enjoy the benefits. It was told that for traditional insurance, only 1 % of the all policy holders was able to pay premium till age 65. It means 99% actually default and lose big time. Anyone cares to verify this?
The problem with buy term and invest is that not many people know how to invest properly.
In order to help your relative, you need to answer the following questions…
Do you think your relative has the financial means (job security, debt level) to pay all the premium for Vivolife?
Do your relatively has a positive proven result in investment (shares, etf, bonds, etc)?
If your relative has no good answer to the above questions, then what the insurance agents proposed make sense. It is like taking the middle path.
It means do not stretch your budget too thinly and if you have extra then invest.
This is just my opinion. I employ the middle path as well. I have traditional insurance (But only Critical Illness) and I do my own investment.
ReplyHi Hopeful,
Thank you very much for your opinion.
I am aware that we must have some kind of financial planning, but I am not well versed with the financial/insurance products.
I am trying to help this couple, with 2 very young kids, to take up some very basic financial planning before it’s too late.
I was young before. I almost wanted to surrender my life policy midway, when times were really bad. But somehow I managed to hang on. That’s why I don’t encourage them to commit too much into these insurance policies. Afterall, there are other every day things to take care of first: housing loan, renovation loan (ending soon), children’s education policy, childcare fees, food, etc.
All the points that you raised up are very valid. Btw, the Vivolife & LUV also include critical illness plan. I am quite relieved to here that this plan is middle path. Ya, I think this plan suits them fine for the time being.
I have also asked them to take up NTUC medishield and rider plus. Thank you for making me feel confident that I have helped them choose something right. I think investment will come at a later stage when they have accumulated some $$$.
Thank you once again!
Regards
Elly
Hi Elly,
I think the question to ask first is how much coverage your relative already has and how much more he needs (depending on how much his dependents depend on him)
Hopeful has raised some valid points which you can consider.
ReplyHi lioninvestor,
Thank you so much for your response.
Sad to say, this relative did not have any life coverage until now!
Now that he has a family, I think he needs to plan for his family incase something untowards happen to him someday.
I am learning alot from your write-ups every now and then. From what I have learnt, I try to improve myself and also help others in whatever litle way that I can.
Thank you once again.
Regards
Elly
Hi Elly,
You are welcome. Better late than never.
One rough way of calculating is to find out how much expenses his dependents need, and multiply it by the number of years required.
Note that this is very rough and your relative could get better advice if he does a proper insurance planning.
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