Some FAQs on Insurance
Have been getting some recurring questions as well as repeated search queries reaching this site. I think it will be good if I can answer some of the more frequently asked questions about insurance.
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Willingly Fed to the Sharks
I was recently reminded of this incident that happened a few months ago. I met this person who was recommended an ILP by her agent. The agent went as far as to use skewed calculation and fuzzy Maths to show her that the ILP was much better than a term policy.
Feeling uncomfortable about the recommendation, she sought a second opinion and that was how I came about to give her some advice.
Victim of “Financial Consultants”
I came across someone asking for help with regards to his insurance portfolio.
I have helped many clients to sort out their portfolios after they have bought all kinds of financial products that were not only lousy, but did not suit them at all. I felt compelled to offer some help to this individual as he was really paying a lot from his monthly income and was still poorly insured.
“Double Charges” in a Regular-Premium ILP
There are charges involved in both investing and getting insurance coverage. Purchasing stocks incurs a brokerage fee, and investing in unit trusts involves annual management fees and sales charges. Bulk of the first few years of premiums of an insurance policy goes to “distribution costs” (mainly commissions to the agent). Typically, distribution costs are highest in the first year and steps down over the next few years of a policy.
Regular-premium investment-linked policies (ILP) are touted by many agents to be for both insurance and investments, but do you know that many such policies charge the policyholder distribution costs (on top of investment charges) on his investments, and investment charges (on top of insurance charges) on his insurance?