Buy term insurance for protection
One of the many blogs that I occasionally read is Tan Kin Lian’s blog. Many in Singapore probably knows that Tan is the current CEO of NTUC Income, one of the big insurance companies in Singapore.
I feel that he is not afraid to share his views on many topics, even if they are sometimes perceived to be counter to that of an insurance adviser (or commission-based IFA). Specifically, I am referring to his many posts that recommend term insurance for protection (instead of promoting the more expensive and commission-laden whole life insurance).
For example, in the post Buy low cost term insurance for your protection, he writes
Insurance advisers (agents) are trained to convince you on the value of life insurance in providing financial security to your family, in the event of premature or unexpected death, disability or critical illness.
They are right. It is important to take care of your family.
The advisers prefer to sell you a whole life or endowment plan, because you pay a high monthly premium. Their commission is based on the amount of the premium.
It is better for you to buy term insurance to cover these risks. Although you do not get a return on the premium, the cost is less than 15% of the normal premium. You can invest the remainder of your savings in a large, well diversifed, low charge fund (also available from NTUC Income) and get an attractive return.
In this post Should I get a return for my life insurance savings, he writes
Many insurance agents like their customer to buy an endowment or whole life policy, as the agent can earn a high rate of commission on the premium.
But, this makes the insurance too expensive and is not good for the customer.
It is better to buy a low cost term insurance (even if there is no return on the premium) and to invest the savings in a fund.
In a most recent post What to do when your term insurance expires, he comments on one of the most common misconception that whole life insurance peddlars are using to con people into buying whole life insurance instead of term insurance:
I met a retired insurance manager. He told me that he did not like term insurance because, at the end of the term, the policy lapses and he does not receive any more coverage.
I told him the following points:
* you can take a term insurance for 20 years
* at the end of 20 years, your total savings (from other sources) can be more than the insured sum
* there is no need for life insurance when you have accumulated sufficient savings.He was surprised. He did not know that you can buy a term insurance for 20 years. He thought that it was only available for 3 or 5 years.
The cost of term insurance is very low, about one-tenth of the cost of a whole life policy. If you buy a decreasing term insurance, you get a further 30% to 50% discount.
I really find the above very refreshing. Readers can contrast this to a certain litigious IFA on the Singapore funds forum who in my opinion, peddles whole life insurance and propagates misinformation regarding whole life and term insurance on that forum.
Stumble it!
