Here are a few reasons why you should not get an ILP product:
1) High distribution cost & Effect of deduction. (I believe it is almost the same with wholelife plan)
- how high is high? Imagine you cash value (policy value) of your policy only will equal to your total premium paid usually after 10 years or more, that is the time when you actually BREAKEVEN!
For the real example shown below: After 15years, you will pay for $18000 of premium, and based on projected return of 9% /pa ( your policy value will be equal to $18160)
- Part of the reasons why the distribution cost is high is that, the commission for your advicer is pretty high if they sell ILP to you.
2) High Extra Costs for policy (example admin cost + sales charges + management fees which will easily take away 5-10% of your monthly premium allocated to purchase the unit trust before you even start buying and aim to earn like 10% returns!!)
- We were advice to purchase unit trust in monthly/ periodically basis so that we can buy both at high time and low time and therefore can even out. But considering everytime you buy in you will be charge 5% of sales charge and some amount of service fee + admin fee...how much you left each month to buy unit trust??
3) No value added by the financial advicer & the insurance company.
- The fund/s that you are buying throught ILP are those easily available on the market like fundsupermart or banks.
- These other option may have promotion and impose lower COST( extra charges & fees )which in the long run will be a big amount. Remember the Power of compound interest!!
- As for Insurance, you can easily get a term plan which is much cheaper ( refer to my previous post) and the remaining amount set aside can be used to buy unit trust by yourself.
- One or two consultation session for $3k-$4k or more commission?? (Basically the 4 yrs of your premiums goes to the Insurance agent & partially to the company, so you can calculate by yourself how much your "friend" earn from selling you the policy)
4) Why not buying something which you can breakeven almost immediately at the time you are buying??
- you buy unit trust from fund house like fundsupermart and pay only for the charges (not commission) and you will get the value of funds at what you pay for. (The more the middle man/selling agent, the more the "handling fee", so i do not believe that you can get the funds at a cheaper charger as compare to getting from the fundshouse directly)
5) It is so easy to apply for a fund account and you can have easy access and control to your funds/ unit trusts. Buying and selling are made so easy for you.
Guess how much your fund value after paying for about 1 year, 2 year, 3 year ? Do not know? It is roughly only 10% of what you pay for....believe it or not? Write to your insurance company and speak to your advicer today!!
Pain for Once and peace Forever!
Enjoy watching the stock prices going up and coming down .....
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