Insurance & Costs of having and raising a child

(21-04-2013, 10:34 AM)Traumfanger Wrote: And another point my friend brought up, I find it hard to argue? He mentioned that ILP has at least a guarantee for the principal sum paid. While investment doesn't have that. Then I told him, investment in a company, a company rarely suddenly collapsed. You sell when your faith of the company is no longer there. And don't forget throughout the years, the dividend you collected are also money. And for ILP, the breakeven for average is about 10 years. For personal investment, if you are doing it well, you start earning from the first year!

Then he said, this person has no time to identify when the company fundamentals are shaken, and when to sell or buy. After work just want to do his own thing don't want to spend time in finance related stuff. Because he don't know anything about it... Which brings back to square one. If the person really can't be bothered till that kind. I think he should just have that "instant noodle"

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(21-04-2013, 09:58 AM)Temperament Wrote:

(21-04-2013, 01:06 AM)Muck Wrote:

(20-04-2013, 02:49 PM)Traumfanger Wrote: Actually.. For those who really can't be bothered to learn investing, is ILP the right choice? Any other alternatives for them?

I can't ans that question when my insurance-agent-to-be friend ask me that. It makes it seem like ILP is the alternative for that group of people.

I personally think such a person has two alternatives that will prob do better than ILPs in the long run:
- Buy an ETF linked to a broad market index; or
- Don't do anything.

Honestly though, if one really cannot be bothered, then the latter should be the best option. "If you don't know what you're doing, then don't do anything."

"If you don't know what you're doing, then don't do anything."

My brother-in-law, a "Jolly Good Fellow" who can get along with any one, can fall asleep anywhere, anytime, really don't know much about investing. So throughout his life journey, many "investment people" make him lose money. But until he meet one (its a lady) who made more than $100K for him. Not only that, when his insurance coverage for critical illness expired at age of 55 or 60 (i think), she asked him to buy another. Remember, he being a "Jolly Good Fellow" just agreed though it is really "expensive" for us. But luckily he is not like us (calculate & calculate); he is diagnosed with 4th stage colon cancer recently.
So with insurance, he doesn't have to cue like most of us to see doctor and chemotherapy treatment. His insurance pays everything and he got a "lum sum payment" from his insurance too. He is responding well to the chemotherapy treatment. Amen.

Like most of us who use "subsidised hospital facilities", the waiting times in the cue to see the doctor will allow the cancer to grow to kill us already.
And he really is "If you don't know what you're doing, then don't do anything."

Of course i think critical illness insurance is expensive too because i calculate & calculate too. How about you?

I think at the end of it.. If those investment "friends" helped him to earn money, eventually when the other insurance expired, he has a pool of cash he accumulated through the help of his "friends". That's some what, what BTIR is about.

Sorry, he really lose money except the lady (million dollar round table insurance agent) who helps him, at last. Thank God. i think it is a rare case.

(21-04-2013, 10:34 AM)Traumfanger Wrote: And another point my friend brought up, I find it hard to argue? He mentioned that ILP has at least a guarantee for the principal sum paid. While investment doesn't have that. Then I told him, investment in a company, a company rarely suddenly collapsed. You sell when your faith of the company is no longer there. And don't forget throughout the years, the dividend you collected are also money. And for ILP, the breakeven for average is about 10 years. For personal investment, if you are doing it well, you start earning from the first year!

Then he said, this person has no time to identify when the company fundamentals are shaken, and when to sell or buy. After work just want to do his own thing don't want to spend time in finance related stuff. Because he don't know anything about it... Which brings back to square one. If the person really can't be bothered till that kind. I think he should just have that "instant noodle"

Your friend is still either very green or very dishonest! There is no guarantee of principal sum in ILP at all! There is no "Guarantee" column in a ILP's Benefit Illustration! If you see any, please attach here, and I will apologize for calling your friend green or dishonest.


Quote from "http://www.moneysense.gov.sg/understanding-financial-products/investments/types-of-investments/investment-linked-insurance-policies.aspx"
"Unlike whole life or endowment participating policies, ILPs usually do not have guaranteed cash values. The value of the ILP depends on the price of the units in the sub-fund which in turn depends on the sub-fund’s performance."

(21-04-2013, 01:56 PM)NTL Wrote:

(21-04-2013, 10:34 AM)Traumfanger Wrote: And another point my friend brought up, I find it hard to argue? He mentioned that ILP has at least a guarantee for the principal sum paid. While investment doesn't have that. Then I told him, investment in a company, a company rarely suddenly collapsed. You sell when your faith of the company is no longer there. And don't forget throughout the years, the dividend you collected are also money. And for ILP, the breakeven for average is about 10 years. For personal investment, if you are doing it well, you start earning from the first year!

Then he said, this person has no time to identify when the company fundamentals are shaken, and when to sell or buy. After work just want to do his own thing don't want to spend time in finance related stuff. Because he don't know anything about it... Which brings back to square one. If the person really can't be bothered till that kind. I think he should just have that "instant noodle"

Your friend is still either very green or very dishonest! There is no guarantee of principal sum in ILP at all! There is no "Guarantee" column in a ILP's Benefit Illustration! If you see any, please attach here, and I will apologize for calling your friend green or dishonest.


Quote from "http://www.moneysense.gov.sg/understanding-financial-products/investments/types-of-investments/investment-linked-insurance-policies.aspx"
"Unlike whole life or endowment participating policies, ILPs usually do not have guaranteed cash values. The value of the ILP depends on the price of the units in the sub-fund which in turn depends on the sub-fund’s performance."

Well done!
Nobody should come here and bluff us all.

Then what are they talking about here when they mentioned 100% protection for benefits? http://www.lia.org.sg/consumers/when_ins...pany_fails

(22-04-2013, 09:55 PM)Traumfanger Wrote: Then what are they talking about here when they mentioned 100% protection for benefits? http://www.lia.org.sg/consumers/when_ins...pany_fails

I think the article is talking about in the event the insurance company fail and not due to a fund failure. ILP stands for Investment Link Policy. Meaning your premium, part of it is used to pay for benefits (death/CI etc) while the other part is used to invest in funds. The investment portion in a fund can fail but the insurance co still surviving very well. In that case too bad the invested money is gone but your benefits payout can still remains.

I am not sure if the ILP investment portion can be used to purchase fund which guarantee the principle amount. If such a case exists, i can bet with you that the returns can never be better than a Life/endowment policies due to the higher charges.

(22-04-2013, 09:55 PM)Traumfanger Wrote: Then what are they talking about here when they mentioned 100% protection for benefits? http://www.lia.org.sg/consumers/when_ins...pany_fails

Maybe you should ask your friend, find out the answer and then tell all of us here. I will like to know too.

Sometimes discussion can get muddled. I was talking to him then about ILP. But apprantly he was talking about endowment. So I think I misunderstood him.

If that's the case, then an endowment policy is better than ILP? I know whole life is not really needed as we can get covered via term and prudent investing.

(23-04-2013, 07:09 AM)Traumfanger Wrote: Sometimes discussion can get muddled. I was talking to him then about ILP. But apprantly he was talking about endowment. So I think I misunderstood him.

If that's the case, then an endowment policy is better than ILP? I know whole life is not really needed as we can get covered via term and prudent investing.

An endowment policy is simply a whole life policy with even more of the money put into investments. It is an even worse idea than a whole life policy. And before you ask, an education plan is just another name for an endowment policy.

Crudely speaking, ILPs exist because the insurance industry needed to come up with something to fight the "buy term and invest the rest" tide. So they created ILPs where there was still a pretense of insurance coverage in order to legally sell them as insurance products, when in fact the selling point is that ILPs are primarily investment products.

It should be obvious from the pathetic insurance coverage (typically 125% of the premium invested) that very little of the customer's money is paying for insurance. Contrast this with term plans where $1 can often buy $10 or more of coverage. If we take the same 1-for-10 coverage basis for the ILP, then of $100 invested in the ILP, only $12.50 is paying for $125 of coverage. The remaining $87.50 is invested on your behalf by the insurer.

Of course, you don't get the full $87.50 value, as you are paying the agent commissions on the $100 you invested. When you buy a term policy for the same $125 coverage you only pay commissions on the $12.50 premium. So you pay 8x less in commissions when you buy term and invest the rest. Is it any surprise that insurance agents promote whole life policies, endowment plans and ILPs over "buy term and invest the rest"?

Commissions make the world go round especially sales team. Without these comm, how are they going to feed their family?

(23-04-2013, 06:36 PM)a74henry Wrote: Commissions make the world go round especially sales team. Without these comm, how are they going to feed their family?

Maybe it brings us back to the debate if commission-based structure is a better model compared to fee-based. Sounds like an incentive issue.