View Full Version : Universal life plan , premium legacy from AIA
I have been thinking for months whether to buy universal life plan to leave some money for my 2 sons when I am not around. Beside property, Universal life plan is another gift to leave for my 2 sons. .
I finally decide to buy a universal life plan from AIA. Due to my so call good health after the medical screening. I am given 6.5% discount.
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now.
rdgs
Vic
this insurance can pass on to your sons?
this insurance can pass on to your sons?
Only Money can pass to my son through a will when I am not around. Not policy. Prudential insurance may hv this type of policy where U can pass it to your children. Need to find out more from prudential.
Interesting.....
Can you share a bit of what this is all about?
Thanks
Better check with Mr. Tan Kin Lian first before making a decision. He is an insurance expert and will evaluate your insurance plan objectively at a small fee.
www.fisca.sg
Most likely he will ask you to invest in STI ETF instead. The annual yield of STI ETF (inclusive of dividends) is more than 9%. ;)
I have been thinking for months whether to buy universal life plan to leave some money for my 2 sons when I am not around. Beside property, Universal life plan is another gift to leave for my 2 sons. .
I finally decide to buy a universal life plan from AIA. Due to my so call good health after the medical screening. I am given 6.5% discount.
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now.
rdgs
Vic
most people will recommend term insurance:o
Be a bit more hard working. Buy term the rest quarterly buy STI ETF . N re invest the dividen
buttercarp
05-03-13, 19:30
most people will recommend term insurance:o
I agree.
I prefer term insurance.
Cos when the kids are financially independent, I will terminate it.
Legacy planning, I can't enjoy the legacy I planned and why should I continue to insure myself when my kids have their own money.
I would rather use the money to enjoy my retirement.
Worse of all, if the kids become unfilial, with legacy planning, you know what they are going to wish for :scared-3: .
Better check with Mr. Tan Kin Lian first before making a decision. He is an insurance expert and will evaluate your insurance plan objectively at a small fee.
www.fisca.sg (http://www.fisca.sg)
Most likely he will ask you to invest in STI ETF instead. The annual yield of STI ETF (inclusive of dividends) is more than 9%. ;)
That is why I only buy US$1,000,000.I want to spread my investment risk.
rdgs,
Vic
I agree.
I prefer term insurance.
Cos when the kids are financially independent, I will terminate it.
Legacy planning, I can't enjoy the legacy I planned and why should I continue to insure myself when my kids have their own money.
I would rather use the money to enjoy my retirement.
Worse of all, if the kids become unfilial, with legacy planning, you know what they are going to wish for :scared-3: .
I hv 2 beautiful sons. When I see their faces. It motivate me to leave something for their future without letting them know 1st.
I will hv my own retirement plan for my wife & I. I am looking in retirement life plan from tokio marine insurance. But the premium is too expensive.
Pay 300k/yr for 5 yrs = Total S$1.5m.
Only At age 60, I will get guarantee S$100k/yr cheque . If my wife & I can leave till age 99, I will be collecting a TL of S$3.9m (age 60 to 99=39 yrs). If my wife & I are no longer around at age 100, my 2 sons will get another >S$3.2m death benefits. Look very attractive retirement plan but premium too high , S$1.5m.
rdgs,
Vic
buttercarp
05-03-13, 20:00
I hv 2 beautiful sons. When I see their faces. It motivate me to leave something for their future without letting them know 1st.
I will hv my own retirement plan for my wife & I. I am looking in retirement life plan from tokio marine insurance. But the premium is too expensive.
Pay 300k/yr for 5 yrs = Total S$1.5m.
Only At age 60, I will get guarantee S$100k/yr cheque . If my wife & I can leave till age 99, I will be collecting a TL of S$3.9m (age 60 to 99=39 yrs). If my wife & I are no longer around at age 100, my 2 sons will get another >S$3.2m death benefits. Look very attractive retirement plan but premium too high , S$1.5m.
rdgs,
Vic
Children are beautiful when young.
All children are innocent and deserve the best from their parents.
The problem may arise when they grow up and get married.
Wow, the tokio marine is really expensive!
How can we be sure that it will be around to honour its promise in the next few decades?
It is a good policy if you can afford comfortably its premium and live to a ripe of age.
don't let them know you prepared the stuff for them. in case they become too reliant.
What if US$ keep depreciating given their debt and printing of US$ when you sons get them?
I hv 2 beautiful sons. When I see their faces. It motivate me to leave something for their future without letting them know 1st.
I will hv my own retirement plan for my wife & I. I am looking in retirement life plan from tokio marine insurance. But the premium is too expensive.
Pay 300k/yr for 5 yrs = Total S$1.5m.
Only At age 60, I will get guarantee S$100k/yr cheque . If my wife & I can leave till age 99, I will be collecting a TL of S$3.9m (age 60 to 99=39 yrs). If my wife & I are no longer around at age 100, my 2 sons will get another >S$3.2m death benefits. Look very attractive retirement plan but premium too high , S$1.5m.
rdgs,
Vic
What if US$ keep depreciating given their debt and printing of US$ when you sons get them?
I am borrowing USD dollar @1.06% to pay for my premium. I dont convert my SGD cash into USD. Not worth it.
Borrowing cost is below US$2.8k/yr for USD$1m whole life protection with return until death. My friend paid S$6000/yr for SGD$1m term insurance protection with NO return from Prudential until age 99. So which plan is better . Universal life plan or term insurance from Prudential.
if U buy universal life plan, U must be able to borrow US dollar. If not, better dont buy.
rdgs,
Vic
I am borrowing USD dollar @1.06% to pay for my premium. I dont convert my SGD cash into USD. Not worth it.
Borrowing cost is below US$2.8k/yr for USD$1m whole life protection with return until death. My friend paid S$6000/yr for SGD$1m term insurance protection with NO return from Prudential until age 99. So which plan is better . Universal life plan or term insurance from Prudential.
if U buy universal life plan, U must be able to borrow US dollar. If not, better dont buy.
rdgs,
Vic
Same age term insurance protection premium is different man/woman
=============================================
SGD$1m term insurance protection premium is SGD$6k for a woman.
SGD$1m term insurance proetction premium is est SDG$10k for a man.
So for Universal life plan USD$1m whole life protection with return & with borrowing. I pay only US$2.8k or SGD$3450
If I will to buy a term inusrance SGD$1m, I need to pay est SGD$10k/yr
with no return. Protection till age 99 only. If I live till age 100. Policy lapse. My children get nothing.
So which plan is better ? Universal life plan protection (age >150) with return (SGD$3.45k/yr premium) Vs term insurance SGD$1m protection (till age 99) with NO return (SGD$10k/yr premium)
I did a study for month. This is what I found out. I maybe wrong in my above assumption calculation.
rdgs,
Vic
What is the return? 4%pa guaranteed?
Term insurance premium depends on age bracket right? Just like medishield premium and get higher as one grow older. Term insurance usually cover 30 major illness on top of usual death and tpd. Your universal policy same coverage too?
......
So which plan is better ? Universal life plan protection (age >150) with return (SGD$3.45k/yr premium) Vs term insurance SGD$1m protection (till age 99) with NO return (SGD$10k/yr premium)
.....
how come you don't include in your calculation the initial premium for universal life?
assuming average age is 80, u pay us$2.8k x30years + 261k = 345k
% return is 1mil/345k = 2.9x
if term insurance, 6k x 30 years = 180k
% return is 5.5x
what do you mean by age > 150?
how come you don't include in your calculation the initial premium for universal life?
assuming average age is 80, u pay us$2.8k x30years + 261k = 345k
% return is 1mil/345k = 2.9x
if term insurance, 6k x 30 years = 180k
% return is 5.5x
what do you mean by age > 150?
He borrowed the initial lump sum premium and do not have to pay annual premium anymore.
He borrowed the initial lump sum premium and do not have to pay annual premium anymore.
thanks,
then if he died at 80,
returns would be 1mil - 261k = 739k
interest paid = 2.8 x 30 = 84k
his returns would be 8.8x
that would seem to be a good bet.
however if average interest rates for 30 years is 3% for example,
interest for 30 years is 235k
returns would be 739/235 = 3.1x
if at anytime, he has to cough up cash, then maximum return would be that
1mil/261k = 3.8x.
returns on universal too dependent on interest rates.
personally,i would prefer term insurance, shorter term (not until 99), so cheaper premium. returns higher.
Yes i also prefer cheap term insurance coverage till 70yo on top of regular whole life policy.
For those between 31-40,1mil term insurance till 70yo should cost around $2400 a year. However the premium surge up after 50yo
He borrowed the initial lump sum premium and do not have to pay annual premium anymore.
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now (US$2.7k or SGD$3.45k).
Universal life plan Vs Term insurance
============== ==========
Sum insured US$1,000,000 SGD$1,000,000
Premium US$2.7 or S$3.45k /yr est S$10k/yr
Protection age inifinity Max age 99 (age100 lapse)
Return There is a return No return at all
Trust Free if >US$2m U need to pay yrly if U want
I hv been quite curious for past 2 yrs why the rich & smart people are borrowing money to buy Universal life plan ( USD5 to 10 million). Why must be in USD ? Why not SGD as US dollars maybe depreciate in long run?. I need to come out one lump sum single premium for universal life plan is a huge amt. Why not just buy a term insurance which is cheaper where U pay yearly.
I start to realise when I ask around & compare with my friends who bought term insurance. I find that by borrowing to finance my Universal life plan. I am actually paying less than a term insurance + many advantage for protetction as shown above.
So if U will to buy univeral life plan. U must be able to borrow USD which is very low now to finanace the universal life plan. This is how the rich & smart people did it. I just follow what they do.
rdgs,
Vic
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now (US$2.7k or SGD$3.45k).
Universal life plan Vs Term insurance
-------------=---------------------------------------
Sum insured US$1,000,000 Vs SGD$1,000,000
Premium US$2.7 or S$3.45k /yr VS est S$10k/yr
Protection age inifinity Vs Max age 99 (age100 lapse)
Return There is a return Vs No return at all
Trust Free if >US$2m Vs U need to pay
I hv been quite curious for past 2 yrs why the rich & smart people are borrowing money to buy Universal life plan ( USD5 to 10 million). Why must be in USD ? Why not SGD as US dollars maybe depreciate in long run?. I need to come out one lump sum single premium for universal life plan is a huge amt. Why not just buy a term insurance which is cheaper where U pay yearly.
I start to realise when I ask around & compare with my friends who bought term insurance. I find that by borrowing to finance my Universal life plan. I am actually paying less than a term insurance + many advantage for protetction as shown above.
So if U will to buy univeral life plan. U must be able to borrow USD which is very low now to finanace the universal life plan. This is how the rich & smart people did it. I just follow what they do.
rdgs,
Vic
my principle of insurance is to make sure i dun burden my kids in future. leaving them something is a by-product (not the main goal). so i would prefer term, then invest the rest.
STI ETF got 9% pa? over how many yrs? never knew ETF got dividends... must really do some homework
I quoted a paragraph from Tan Kin Lian's Blog:
Universal life for high net worth people
There is a similar trap for universal life that is being sold to high net worth people. They are asked to put in $1 million to be invested to get coverage of $5 million. The did not realize that their lump sum investment is locked into the low yielding policy for many years and can only withdraw it prematurely at a big penalty. An example can be found in my book on life insurance (case #16)
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now (US$2.7k or SGD$3.45k).
Universal life plan Vs Term insurance
-------------=---------------------------------------
Sum insured US$1,000,000 Vs SGD$1,000,000
Premium US$2.7 or S$3.45k /yr VS est S$10k/yr
Protection age inifinity Vs Max age 99 (age100 lapse)
Return There is a return Vs No return at all
Trust Free if >US$2m Vs U need to pay
I hv been quite curious for past 2 yrs why the rich & smart people are borrowing money to buy Universal life plan ( USD5 to 10 million). Why must be in USD ? Why not SGD as US dollars maybe depreciate in long run?. I need to come out one lump sum single premium for universal life plan is a huge amt. Why not just buy a term insurance which is cheaper where U pay yearly.
I start to realise when I ask around & compare with my friends who bought term insurance. I find that by borrowing to finance my Universal life plan. I am actually paying less than a term insurance + many advantage for protetction as shown above.
So if U will to buy univeral life plan. U must be able to borrow USD which is very low now to finanace the universal life plan. This is how the rich & smart people did it. I just follow what they do.
rdgs,
Vic
Different intentions when we buy insurance.
Those who bought universal is assuming they are not going to die early.
I bought term insurance is to boost my coverage with lowest premium as possible just in case if i die or something bad happen early
Different stroke for different folks
How does STI ETF works?
It's a fund that tracks the STI. But has lower management fees compared to those named funds sold by the fund houses.
I doubt if its dividend is 9% as even the top dividend paying stocks in the STI do not pay much above 6%. The dividend is more likely to be around 3+%. These are the dividends from the component stocks.
STI ETF is essentially tracking the performance of ST Index which is made up of 30 component (mainly blue chips) stocks. Since the inception of this "stock" (you can buy it via your stock broker or online) on 11 Apr 2002, the annualised yield has been 9% (inclusive of dividends) or 5.79% (excludes dividends). So it is a much better investment than buying a universal or life insurance.
It is advisable to just buy term insurance till 65 o 70 years old. No need to cover till year 99 or 100.
my principle of insurance is to make sure i dun burden my kids in future. leaving them something is a by-product (not the main goal). so i would prefer term, then invest the rest.
STI ETF got 9% pa? over how many yrs? never knew ETF got dividends... must really do some homework
It's a fund that tracks the STI. But has lower management fees compared to those named funds sold by the fund houses.
I doubt if its dividend is 9% as even the top dividend paying stocks in the STI do not pay much above 6%. The dividend is more likely to be around 3+%.
Dividend about 2+%. 9% includes cap gain
How does STI ETF works?
STI ETF got 9% pa? over how many yrs? never knew ETF got dividends... must really do some homework
sti etf is a basket of blue chips.. singtel, dbs etc
http://www.bloomberg.com/quote/STTF:SP
the yield is < 3%
Don't be confused on dividend yield vs. annualised yield. Dividend yield may be 3% but the price of STI ETF has also gone up in line with the stock market performance. So as a whole, your annualised yield is around 9% since inception.
It's a fund that tracks the STI. But has lower management fees compared to those named funds sold by the fund houses.
I doubt if its dividend is 9% as even the top dividend paying stocks in the STI do not pay much above 6%. The dividend is more likely to be around 3+%.
I think it's enough to cover till 70. By then the beautiful boys should have grown up and become independent. No need to provide for them. If you are still needing to support them by that age.....:banghead: :banghead: :banghead:
Just hope that they don't go and marry beautiful girls who will fool around and spend your money.
Here is another quote from Tan Kin Lian's blog:
Universal life is a life insurance product. It is likely to have high charges taken away from your savings to pay commisison to the agent. You should ask the agent about the charges. A universal life policy is likely to have charges similar to an investment-lined plan.
You can read about the charges on investment-linked plan (ILP) from this FAQ
http://www.tankinlian.com/faq/ilp.html
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now (US$2.7k or SGD$3.45k).
Universal life plan Vs Term insurance
-------------=---------------------------------------
Sum insured US$1,000,000 Vs SGD$1,000,000
Premium US$2.7 or S$3.45k /yr VS est S$10k/yr
Protection age inifinity Vs Max age 99 (age100 lapse)
Return There is a return Vs No return at all
Trust Free if >US$2m Vs U need to pay
I hv been quite curious for past 2 yrs why the rich & smart people are borrowing money to buy Universal life plan ( USD5 to 10 million). Why must be in USD ? Why not SGD as US dollars maybe depreciate in long run?. I need to come out one lump sum single premium for universal life plan is a huge amt. Why not just buy a term insurance which is cheaper where U pay yearly.
I start to realise when I ask around & compare with my friends who bought term insurance. I find that by borrowing to finance my Universal life plan. I am actually paying less than a term insurance + many advantage for protetction as shown above.
So if U will to buy univeral life plan. U must be able to borrow USD which is very low now to finanace the universal life plan. This is how the rich & smart people did it. I just follow what they do.
rdgs,
Vic
Dividend about 2+%. 9% includes cap gain
yes, i just checked. 2.45%.
every half year, they declare $0.04. so full year = 0.08/3200 (for example)
not fantastic. from inception not relevant anymore since we not vested. so hv to wait until STI drop back to 2,000 before entering.
It is advisable to just buy term insurance till 65 o 70 years old. No need to cover till year 99 or 100.
i beg to differ. if term ins covers critical illness, it shld stretch beyond 70 given that higher life span expected (but burdened with sickness).
Don't be confused on dividend yield vs. annualised yield. Dividend yield may be 3% but the price of STI ETF has also gone up in line with the stock market performance. So as a whole, your annualised yield is around 9% since inception.
good post;)
buttercarp
06-03-13, 08:34
My friend paid S$6000/yr for SGD$1m term insurance protection with NO return from Prudential until age 99.
rdgs,
Vic
Hi vic, I guess your friend is in his 30's?
Wow, $6K per year till 99 years old.
Sure get the 1 mil if he continues to pay the premium cos how many of us will live till 99 years old?
However, he must be very sure that he can afford the premium after his retirement, or at least get his children to pay his premium after he retires, or the insurance will lapse and he will not get anything back.
He can chose to terminate the payment at anytime with no returns.
But if that's the case, then he would probably opt for a shoter tenure and pay less premium.
i beg to differ. if term ins covers critical illness, it shld stretch beyond 70 given that higher life span expected (but burdened with sickness).
Imo, one should have both whole life policy and term insurance.
The whole purpose of term insurance is to boost the coverage with lower premium on top of whole life policy.
Premium surge up even more after 60yo for term insurance which make it losing it's original purpose. It is actually advisable to terminate term insurance between 50-60. Whole life policy continues to cover u after that.
Imo, one should have both whole life policy and term insurance.
The whole purpose of term insurance is to boost the coverage with lower premium on top of whole life policy.
Premium surge up even more after 60yo for term insurance which make it losing it's original purpose. It is actually advisable to terminate term insurance between 50-60. Whole life policy continues to cover u after that.
Whole life policy with critical illness rider/waiver is best taken out when young.
Limited pay policies are available if you are worried about servicing the premiums after retirement.
The premiums surge for group term insurance (eg AA/SAFRA group term plans). As far as I am aware, for those you purchased individually, the premium is level throughout the term (it is priced at the age when you enter).
If people think like you, then they will lose out in the long run. Investment is a long term commitment and one should invest regularly. Otherwise you can tan gu gu...:doh:
yes, i just checked. 2.45%.
every half year, they declare $0.04. so full year = 0.08/3200 (for example)
not fantastic. from inception not relevant anymore since we not vested. so hv to wait until STI drop back to 2,000 before entering.
Whole life policy with critical illness rider/waiver is best taken out when young.
Limited pay policies are available if you are worried about servicing the premiums after retirement.
The premiums surge for group term insurance (eg AA/SAFRA group term plans). As far as I am aware, for those you purchased individually, the premium is level throughout the term (it is priced at the age when you enter).
You are right.
I choose group term because the premium is lower and i intend to terminate once i hit 60yo.
Maybe can consider to have 3. Whole life, group term and term as a whole package.
If people think like you, then they will lose out in the long run. Investment is a long term commitment and one should invest regularly. Otherwise you can tan gu gu...:doh:
People have to get over their fear of equities.
The falls in 2008 are still fresh in their minds. However, 2008 was a great period for buying in, even if already vested.
You are right.
I choose group term because the premium is lower and i intend to terminate once i hit 60yo.
Maybe can consider to have 3. Whole life, group term and term as a whole package.
Yes insurance needs to be reviewed regularly and before reaching 40 years old it must be reviewed seriously before the premiums for whole life escalate.
As mentioned, for those younger people, getting a limited pay whole life policy with critical illness should be considered. This type of policy should also be considerd to buy for your kid to cover critical illness (pay for 20 years and cover for the rest of their life).
(I am not an insurance agent - just an end user).
some of the criticism against universal life/whole life is that when interest rates fall, the policy holders have to top up.
1) since projected returns of the universal life/whole life are based on the current low rates.
2) rates can only go up.
so, won't the returns of the policy be more than the projected returns ?
Buy term insurance is ok but NEVER buy a life insurance or an endowment plan.
I have many very bad experiences with such life insurances and endowment plan from several major life insurance companies (AIA, Income, Aviva and Prudential) in Singapore. They can show you very attractive returns on illustration paper, but when come to actual claim you can expect your bonuses cut by at least half. They can give you all kinds of reasons for the bonus cut. NEVER trust insurance companies again.
The rule of thumb is: buy term insurance only and invest the rest in STI ETF.
Yes insurance needs to be reviewed regularly and before reaching 40 years old it must be reviewed seriously before the premiums for whole life escalate.
As mentioned, for those younger people, getting a limited pay whole life policy with critical illness should be considered. This type of policy should also be considerd to buy for your kid to cover critical illness (pay for 20 years and cover for the rest of their life).
(I am not an insurance agent - just an end user).
I am borrowing USD dollar @1.06% to pay for my premium. I dont convert my SGD cash into USD. Not worth it.
Borrowing cost is below US$2.8k/yr for USD$1m whole life protection with return until death. My friend paid S$6000/yr for SGD$1m term insurance protection with NO return from Prudential until age 99. So which plan is better . Universal life plan or term insurance from Prudential.
if U buy universal life plan, U must be able to borrow US dollar. If not, better dont buy.
rdgs,
Vic
I have the same Prudential plan as your friend and in fact I'm considering switching over to your plan from AIA. Still undecided :beats-me-man:
Might consider buying the Aviva Army Group Insurance plan as well as it seems cheap (too cheap in my banker's opinion).
Buy term insurance is ok but NEVER buy a life insurance or an endowment plan.
I have many very bad experiences with such life insurances and endowment plan from several major life insurance companies (AIA, Income, Aviva and Prudential) in Singapore. They can show you very attractive returns on illustration paper, but when come to actual claim you can expect your bonuses cut by at least half. They can give you all kinds of reasons for the bonus cut. NEVER trust insurance companies again.
The rule of thumb is: buy term insurance only and invest the rest in STI ETF.
I dont agree with you on the life insurance part.Recently i surrendered one life policy after 18 years of coverage.The cheque is more than the premium i paid so far.On top of that,i enjoyed the life protection when my dependent are still young.I withdrew cos they are financially independent now.I guess buy life policy when you are young and married and have children.Main thing is protection.
I also had an endowment plan mature recently and another one next year. Although the bonuses are not what was projected but over the years have enjoyed the protection and the annualised returns still beat inflation.
I quoted a paragraph from Tan Kin Lian's Blog:
Universal life for high net worth people
There is a similar trap for universal life that is being sold to high net worth people. They are asked to put in $1 million to be invested to get coverage of $5 million. The did not realize that their lump sum investment is locked into the low yielding policy for many years and can only withdraw it prematurely at a big penalty. An example can be found in my book on life insurance (case #16)
UL plan main purpose - PROTECTION with cheap Financing cost.
============================================
This is not a smart way to put one lump sum US$1m to buy a US$5m univeral life plan with a depreciating US dollars. He must borrow US$1m ( Single premium) let say @ 1.5%. He pays his yearly premium @ US$15k (SG$18.6k). Better than to buy term insurance SGD$6m (6 x 1.2 x-rate) with Yearly premium maybe est Sg$60k same age.
======================================
My UL plan insured sum is US$1,000,000. My lump sum premium is US$261k. I borrow @1.06%. So I pay only US$2.7k or SG$3.5k/yr.
Let say base on the ave long term USD borrowing cost let say @ ave 3% (now 1.06%). Base on 261k single premium, I will pay ave 261kX0.03= US$7.8k or SG$9.7k yearly premium.
After 17 years later, my cash value est US$390k. If I decide to terminate my policy 17 years later due to inability to continue. I will get back US$390k base on projected value.
I take my US$390k (projected value) & pay US$261k which I borrowed from bank. I left with US$(390k-261k)=US$129k. Because I borrowed for 16 years, I need to calculate the total amt I borrowed (ave 3% interest rate) . So US$7.8k X 16 years = US$125k. Nett I still can get a small return of US$4k (US$129k-125k) for FREE PROTECTION during this 16 year.
For term insurance, if you terminate after 16 yrs, U GOT NOTHING. At the same time, U need to calculate the premium you paid for the 16 yrs X 10k/yr = Sg$160k for protection. For my age, my term insurance est 10k/yr premium.
I hope my calculation assumption is right.
rdgs,
Vic
Your loan to pay the premium is secured against the cash value of your other policies? Or secured against other assets? Or is it unsecured loan?
Of course, your cheque amount is more than your premium. The question is by how much. Did you calculate your rate of return? Very often the annualized return from insurance is less than 2%.
You see, a lot of people are still totally ignorant on the low return of life insurance. They still think it is a forced saving that will generate a return for their retirement. This is a fallacy. As they always say, caveat emptor. Don't blame others for your own mistake.
If you want pure protection, just buy a term insurance.
I dont agree with you on the life insurance part.Recently i surrendered one life policy after 18 years of coverage.The cheque is more than the premium i paid so far.On top of that,i enjoyed the life protection when my dependent are still young.I withdrew cos they are financially independent now.I guess buy life policy when you are young and married and have children.Main thing is protection.
As I explained before, the projected value is always at the high side to lure unsophisticated investors. Based on my own experience, you will never get the projected value as indicated and I can assure you that your rate of return will always be much lower.
Have you calculated how long do you need to reach break even against your premium payment? What are all the charges to the policy? How much is guaranteed and non guaranteed? What are the penalties for early withdrawal? Again, for peace of mind you should consult an unbiased insurance expert to review the plan for you objectively.
UL plan main purpose - PROTECTION with cheap Financing cost.
============================================
This is not a smart way to put one lump sum US$1m to buy a US$5m univeral life plan with a depreciating US dollars. He must borrow US$1m ( Single premium) let say @ 1.5%. He pays his yearly premium @ US$15k (SG$18.6k). Better than to buy term insurance SGD$6m (6 x 1.2 x-rate) with Yearly premium maybe est Sg$60k same age.
======================================
My UL plan insured sum is US$1,000,000. My lump sum premium is US$261k. I borrow @1.06%. So I pay only US$2.7k or SG$3.5k/yr.
Let say base on the ave long term USD borrowing cost let say @ ave 3% (now 1.06%). Base on 261k single premium, I will pay ave 261kX0.03= US$7.8k or SG$9.7k yearly premium.
After 17 years later, my cash value est US$390k. If I decide to terminate my policy 17 years later due to inability to continue. I will get back US$390k base on projected value.
I take my US$390k (projected value) & pay US$261k which I borrowed from bank. I left with US$(390k-261k)=US$129k. Because I borrowed for 16 years, I need to calculate the total amt I borrowed (ave 3% interest rate) . So US$7.8k X 16 years = US$125k. Nett I still can get a small return of US$4k (US$129k-125k) for FREE PROTECTION during this 16 year.
For term insurance, if you terminate after 16 yrs, U GOT NOTHING. At the same time, U need to calculate the premium you paid for the 16 yrs X 10k/yr = Sg$160k for protection. For my age, my term insurance est 10k/yr premium.
I hope my calculation assumption is right.
rdgs,
Vic
As I explained before, the projected value is always at the high side to lure unsophisticated investors. Based on my own experience, you will never get the projected value as indicated and I can assure you that your rate of return will always be much lower.
Have you calculated how long do you need to reach break even against your premium payment? What are all the charges to the policy? How much is guaranteed and non guaranteed? What are the penalties for early withdrawal? Again, for peace of mind you should consult an unbiased insurance expert to review the plan for you objectively.
I know the projected value is always at the high side. My breakeven without borrowing is 9 yrs. If my borrowing at ave 3% long term, my breakeven is 17 years later. My main purpose is for PROTECTION with cheap borrowing cost . Dont care about projected value. Because I married late, I need to at least 20 yrs protection b4 my sons are in working life.
My term insurance quotation protection premium est Sg$10k/yr for SG$1,000,000. But universal life plan US$1,000,000 with cheap borrowing @1.06% now is US$2.7k or SG$3.45k.
After I buy , the next day cash value is 80% of 261k. I will ensure that the plan will not lapse within 20 yrs.
rdgs,
Vic
I hv 2 beautiful sons. When I see their faces. It motivate me to leave something for their future without letting them know 1st.
I will hv my own retirement plan for my wife & I. I am looking in retirement life plan from tokio marine insurance. But the premium is too expensive.
Pay 300k/yr for 5 yrs = Total S$1.5m.
Only At age 60, I will get guarantee S$100k/yr cheque . If my wife & I can leave till age 99, I will be collecting a TL of S$3.9m (age 60 to 99=39 yrs). If my wife & I are no longer around at age 100, my 2 sons will get another >S$3.2m death benefits. Look very attractive retirement plan but premium too high , S$1.5m.
rdgs,
Vic
If u invest the 1.5M today in prop and equity with leverage will u do better? coz insurance return are so far very low.. 2-3% a yr... hardly beat inflation.
If u invest the 1.5M today in prop and equity with leverage will u do better? coz insurance return are so far very low.. 2-3% a yr... hardly beat inflation.
Stock is too volatile. I will only buy when there is extreme fear again. Property will all the CMs + increase in property tax + huge supply coming in. Next 10 yrs may not see any huge upside. My niece bought Aquarius by the park in 1999 (Q overnight to buy). It took her 12 years to BREAKEVEN. End of the day, she is not making money on her investment. The rental is not good during that time.
As I said, UL plan is more for protection in case I really GONE b4 they reach working life. I also want to spread my risk. I am already holding > S$3m bond with leveraging. It Pay me S$200k/yr Net. But will slowly de-leverage by 2014.
I am borrowing US$261k against my investment portfolio.
rdgs,
Vic
It seems that breakeven without borrowing of 9 years is reasonable. And also if the guaranteed cash value is immediately 80% by the next day after purchase is true, then I think it is a good policy. If you treat it like a term insurance and prepare to lose the money for protection, then I guess it is no harm to invest into it.
But it does sound too good to be true to me. Why don't you check with Tan Kin Lian to confirm if your calculation is correct?
I know the projected value is always at the high side. My breakeven without borrowing is 9 yrs. If my borrowing at ave 3% long term, my breakeven is 17 years later. My main purpose is for PROTECTION with cheap borrowing cost . Dont care about projected value. Because I married late, I need to at least 20 yrs protection b4 my sons are in working life.
My term insurance quotation protection premium est Sg$10k/yr for SG$1,000,000. But universal life plan US$1,000,000 with cheap borrowing @1.06% now is US$2.7k or SG$3.45k.
After I buy , the next day cash value is 80% of 261k. I will ensure that the plan will not lapse within 20 yrs.
rdgs,
Vic
It seems a reasonable course of action given your circumstances. Don't you have to pay back the principal as well as the interest on the loan?
Will you be able to take another loan on the cash value of the policy in the future should you need to do so? For example if your children need urgent funds for their education or down payment for a property.
.....
As I said, UL plan is more for protection in case I really GONE b4 they reach working life. I also want to spread my risk. I am already holding > S$3m bond with leveraging. It Pay me S$200k/yr Net. But will slowly de-leverage by 2014.
I am borrowing US$261k against my investment portfolio.
rdgs,
Vic
hi, do they lodge a lien against your investment portfolio? so you cannot do anything to your portfolio.
and if you de-leverage, do you intend to keep the bonds (and top up cash) or sell the bonds off?
if you sell the bonds off, do you need to pay back the premium of 261k?
many thanks Vic for starting this thread. wanted to start one last time though yours is so much better cos got actual figures and examples.
actually we discussed some of this in the last page of this thread here...
http://forums.condosingapore.com/showthread.php?p=329911#post329911
i was actually very interested in this previously, but then decided on other priorities. in fact if you look carefully, with this legacy planning policy, you are actually buying an asset, your life, just like buying a property. And the beauty is that you can leverage on this purchase, just like buying a property. However the bigger the leverage, the higher the risk; it all depends on the market direction.
this was explained by the bank insurance (bancassurance) officer then:
on the first level, eg to protect 1 mil, rather than buy 1 mil protection, use 250k to buy 1 mil protection, then free up 750k to invest.
on the next level, can even loan from the bank that 250k and pay interest! to the tune of 1.2% (1% fixed and 0.2% floating) and the bank invests in bonds (eg us) that returns 4.2% average. this type of leveraging on your own life (treating your life like another property) can get loan wan. apparently breakeven on year 7 to 8 depending on the market.
so this main factors are here the bonds returns as well as the foreign exchange rate. and still free up the cash for other investments.
another fact: for the quantum paid for this legacy planning, there is no need for medical health checks, ie, it is independent of your health condition cos you have already paid a high premium to make it worth their while. good for those with preexisting medical and with money to spare, and want to leave a legacy.
as you have mentioned, choice of bank is important - though i am not too sure how much the bank guarantees this, cos this insurance is underwritten by another reinsurance company that is usually an independent subsidiary of the bank.
also, you are buying into bonds denominated in us dollars for better yield. taking loan on this single premium allows further leverage, but is also a double-edged sword.
the main advantage here is the "No need for Medical Health Check"... meaning anyone with preexisting medical conditions including HIV (? must check on this, seems possible in US) can also buy, so long as got the money.
many years ago, someone recommended TEPs (Traded Endowment Policy). No gearing one break even, and the geared one lost money; both lost opportunity costs. In addition, all the terminal bonuses promised by the insurance company just vapourised - simply removed cos of the global recession.
Vic is an astute investor and this policy for his children only forms a part of his portfolio. for anyone else going into this as a major component of his portfolio, it does not really make sense, unless for legacy planning (lots of money, etc) or pre-existing illness excluded by traditional insurance.
Of course, your cheque amount is more than your premium. The question is by how much. Did you calculate your rate of return? Very often the annualized return from insurance is less than 2%.
You see, a lot of people are still totally ignorant on the low return of life insurance. They still think it is a forced saving that will generate a return for their retirement. This is a fallacy. As they always say, caveat emptor. Don't blame others for your own mistake.
If you want pure protection, just buy a term insurance.My priority is on one lump sum protection during then when my children are young,in case i am not around.If for return, i rather go for blue chips in equity and also capital gain.Every one has diffrent priority under diffrent circumstances.
Hi vic, I guess your friend is in his 30's?
Wow, $6K per year till 99 years old.
Sure get the 1 mil if he continues to pay the premium cos how many of us will live till 99 years old?
However, he must be very sure that he can afford the premium after his retirement, or at least get his children to pay his premium after he retires, or the insurance will lapse and he will not get anything back.
He can chose to terminate the payment at anytime with no returns.
But if that's the case, then he would probably opt for a shoter tenure and pay less premium.
She is in the early 40s. Woman term insurance is much cheaper (>30% ?) than man. Her husband pass away early due to nose cancer 6 yrs ago. She has no problem paying the premium as her husband left at least 3 property for her.
Sorry, the premium must pay till age 99. Protection is infinity age. She will make sure the children pay for the term insurance premium of 6k/yr once they reach working life. She just told me that up her term insurance protection from S$1m to S$2m.
I hv told her universal life plan USD is a better choice than term insurance with the same coverage. Only if she can borrow in USD cheaply from bank to finance universal life plan.
rdgs,
Vic
rdgs,
Vic
Rate on initial premium for 1st 7 yrs = 4%
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now.
rdgs
Vic
Urs a special case, u actually earn a spread, plus a free cover. Nice one. Only applicable to those who can secure long term financing. U sure there is no special top up clause ?
Actually a simple 2mil 20y term life is cheap enough for many ppl when they are in mid 30s, typical age when ppl have kids.
[quote=lifeline]many thanks Vic for starting this thread. wanted to start one last time though yours is so much better cos got actual figures and examples.
actually we discussed some of this in the last page of this thread here...
http://forums.condosingapore.com/showthread.php?p=329911#post329911
i was actually very interested in this previously, but then decided on other priorities. in fact if you look carefully, with this legacy planning policy, you are actually buying an asset, your life, just like buying a property. And the beauty is that you can leverage on this purchase, just like buying a property. However the bigger the leverage, the higher the risk; it all depends on the market direction.
this was explained by the bank insurance (bancassurance) officer then:
so this main factors are here the bonds returns as well as the foreign exchange rate. and still free up the cash for other investments.
the main advantage here is the "No need for Medical Health Check"... meaning anyone with preexisting medical conditions including HIV (? must check on this, seems possible in US) can also buy, so long as got the money.
many years ago, someone recommended TEPs (Traded Endowment Policy). No gearing one break even, and the geared one lost money; both lost opportunity costs. In addition, all the terminal bonuses promised by the insurance company just vapourised - simply removed cos of the global recession.
Vic is an astute investor and this policy for his children only forms a part of his portfolio. for anyone else going into this as a major component of his portfolio, it does not really make sense, unless for legacy planning (lots of money, etc) or pre-existing illness excluded by traditional insurance.[/quote
I need to go for a full medical checkup b4 I can buy universal life plan. I was given a Preferred status for the premium class. A 6.5% discount due to my good health. I buy UL is mainly for PROTECTION. The projected cash value return will be just a bonus to me if I decide to stretch my policy until age 80-90 yr old.
You must be able to finance your plan to buy universal life policy. The borrowing cost has to cheap. No point convert your SGD cash & convert into USD to pay one lump sum single premium.
rdgs,
Vic
I hv 2 beautiful sons. When I see their faces. It motivate me to leave something for their future without letting them know 1st.
I will hv my own retirement plan for my wife & I. I am looking in retirement life plan from tokio marine insurance. But the premium is too expensive.
Pay 300k/yr for 5 yrs = Total S$1.5m.
Only At age 60, I will get guarantee S$100k/yr cheque . If my wife & I can leave till age 99, I will be collecting a TL of S$3.9m (age 60 to 99=39 yrs). If my wife & I are no longer around at age 100, my 2 sons will get another >S$3.2m death benefits. Look very attractive retirement plan but premium too high , S$1.5m.
rdgs,
Vic
for this did u consider the inflation cost? every 20/yr divide 1/2.
assume u live till 99. u collect 3.9m
so only on ur 100th anniversary ur 2 son get 3.2M? or u must live till 100 for that to happen?
so assume u collected 3.9M + 3.2M = 7.1M after 40yrs.. assume every 20yrs value is 1/2.
1st 20yrs 7.1M /2 /2 = 1.775M today value 40yrs later...
not sure if the way I look at it is right. but base on Singapore mortality rate. its ard 80 on avg. there is a 20yr gap till 100 b4 ur 2 song get the $$. Or its base on mortality the death benefit get paid out?
UL plan main purpose - PROTECTION with cheap Financing cost.
============================================
This is not a smart way to put one lump sum US$1m to buy a US$5m univeral life plan with a depreciating US dollars. He must borrow US$1m ( Single premium) let say @ 1.5%. He pays his yearly premium @ US$15k (SG$18.6k). Better than to buy term insurance SGD$6m (6 x 1.2 x-rate) with Yearly premium maybe est Sg$60k same age.
======================================
My UL plan insured sum is US$1,000,000. My lump sum premium is US$261k. I borrow @1.06%. So I pay only US$2.7k or SG$3.5k/yr.
Let say base on the ave long term USD borrowing cost let say @ ave 3% (now 1.06%). Base on 261k single premium, I will pay ave 261kX0.03= US$7.8k or SG$9.7k yearly premium.
After 17 years later, my cash value est US$390k. If I decide to terminate my policy 17 years later due to inability to continue. I will get back US$390k base on projected value.
I take my US$390k (projected value) & pay US$261k which I borrowed from bank. I left with US$(390k-261k)=US$129k. Because I borrowed for 16 years, I need to calculate the total amt I borrowed (ave 3% interest rate) . So US$7.8k X 16 years = US$125k. Nett I still can get a small return of US$4k (US$129k-125k) for FREE PROTECTION during this 16 year.
For term insurance, if you terminate after 16 yrs, U GOT NOTHING. At the same time, U need to calculate the premium you paid for the 16 yrs X 10k/yr = Sg$160k for protection. For my age, my term insurance est 10k/yr premium.
I hope my calculation assumption is right.
rdgs,
Vic
What happen if one die within next few years? Group term is alot more worth it isnt it?
U can actually get a loan on the premium and just pay the interest. Under this instance, there will be no cash value. Universal is good if you want to leave a legacy behind. In other words, more money for your kids.
Term is good to protect the individual during his wealth accumulation stage. Once you reach a certain age, you technically should have saved a fair bit and should be sufficient for the kids for legacy.
One other advantage of universal is at a older age, universal is more worth while. Term will be expensive. Universal is also good to make up for the "insufficient amount" u hope to hand down.
Different stage, different weapon.
I know the projected value is always at the high side. My breakeven without borrowing is 9 yrs. If my borrowing at ave 3% long term, my breakeven is 17 years later. My main purpose is for PROTECTION with cheap borrowing cost . Dont care about projected value. Because I married late, I need to at least 20 yrs protection b4 my sons are in working life.
My term insurance quotation protection premium est Sg$10k/yr for SG$1,000,000. But universal life plan US$1,000,000 with cheap borrowing @1.06% now is US$2.7k or SG$3.45k.
After I buy , the next day cash value is 80% of 261k. I will ensure that the plan will not lapse within 20 yrs.
rdgs,
Vic
Realistically...
You will not be able to borrow 100% of the 261K premium, more like 80% of the cash surrender value at all times. The reason your financial instituition says u can, is because they are using up your collaterol value of your other investments. To me, I rather look at each investment as a stand alone rather than pool all the margins together. Assuming a 80% loan, there is a cash requirement of 52.2K being locked up, instead of actively being invested. I always ask myself what is the opportunity cost of this 20% being locked up forever.
There is also no rate of return. They claim there is a guaranteed 4% interest earned. This is 4% of accumulation value (surrender value), not the premium paid). There is also a policy fee that somehow always grows to approximately 3.9%, as the cost of insurance increases with age. Eventually, this annual policy fee will outgrow the 4%, and the cost of insurance will start to be funded from the surrender cash value.
In conclusion, ULI itself is a poor investment option. However, ULI provides substantial peace of mind in this highly leveraged world, and there will always be some cost associated with it.
UL plan main purpose - PROTECTION with cheap Financing cost.
======================================
My UL plan insured sum is US$1,000,000. My lump sum premium is US$261k. I borrow @1.06%. So I pay only US$2.7k or SG$3.5k/yr.
Let say base on the ave long term USD borrowing cost let say @ ave 3% (now 1.06%). Base on 261k single premium, I will pay ave 261kX0.03= US$7.8k or SG$9.7k yearly premium.
After 17 years later, my cash value est US$390k. If I decide to terminate my policy 17 years later due to inability to continue. I will get back US$390k base on projected value.
I take my US$390k (projected value) & pay US$261k which I borrowed from bank. I left with US$(390k-261k)=US$129k. Because I borrowed for 16 years, I need to calculate the total amt I borrowed (ave 3% interest rate) . So US$7.8k X 16 years = US$125k. Nett I still can get a small return of US$4k (US$129k-125k) for FREE PROTECTION during this 16 year.
Premium surge up even more after 60yo for term insurance which make it losing it's original purpose. It is actually advisable to terminate term insurance between 50-60. Whole life policy continues to cover u after that.
that's assuming you have quite a few significant life policies, so touchwood if you need any of them for illness coverage, you can cash out.
Limited pay policies are available if you are worried about servicing the premiums after retirement.
got to be very careful about limited pay policies. if they are hugely based on investment returns (not guaranteed), you will find that more often than not, it is not making good enuff money to cover what you need at the point where the "no need to pay" kicks in.
If people think like you, then they will lose out in the long run. Investment is a long term commitment and one should invest regularly. Otherwise you can tan gu gu...:doh:
that's true. i do dollar cost averaging too.
got to be very careful about limited pay policies. if they are hugely based on investment returns (not guaranteed), you will find that more often than not, it is not making good enuff money to cover what you need at the point where the "no need to pay" kicks in.
This is not the old type of policy sold by AIA where the returns allow you to stop paying after a certain number of years.
For this type of policy, it is designed to be limited pay for a set number of years (eg 20 years) from the outset. You are not required to continue paying if the non-guaranteed portion doesn't reach a certain amount.
I would recommend it for young people esp kids but not for mature citizens 40 years and above (because the annual premium is likely to be high). For kids it's still reasonable (reasonable to me, I am sure there will be forum-mers who will swear they will never buy a whole life policy under whatever circumstances).
Like Rosy, I think a mixture of policy types would be a good way to spread risk and that's why I do for my family.
that's true. i do dollar cost averaging too.
Imo, dollar averaging is a gimmick used by financial advisor to make their clients stay vested to enrich their pockets.
No offence intended.
Imo, dollar averaging is a gimmick used by financial advisor to make their clients stay vested to enrich their pockets.
No offence intended.
correct to a certain extent. problem is, no one knows when mkt is peaking, neither when bottom is bottom. so you can stay out, or you can put a small bet. i would prefer to place a small bet than to MTB altogether.
Insurance – One of the MUST important financial planning
-------------------------------------------------------------------------------
If u put bananas and $$ in front of monkeys, monkeys will choose bananas, because monkeys do not know that $$ can buy a lot of bananas. In reality, if you put $$ and health in front of people, people tend to choose $$ because their simple minds often become fixated on chasing instant gratification ( desire to experience pleasure w/o delay).Many people do not know that health can bring more happiness & wealth.
When you are young and healthy you probably won’t even consider your health as important .You never imagine that one day they could get diabetes or cholesterol problems as you neglect your health . Many health problems are also related to stress. Stress will worsen or increase the risk of conditions like obesity, heart disease, diabetes, depression, gastrointestinal problems etc.
So Life & health insurance are one of the most important financial products 100% you must buy as early as possible.
Term or whole life insurance
=====================
Whole Life insurance is to protect the life insured in the event of death. It is a small savings and high protection insurance. It will have a certain cash value.
Some say that for newborn, buying a whole life insurance policy is actually better than buying term insurance.Life insurance IRR (rate at which an investment breaks even in today's dollars ) decreases if you buy at a later age.
Term insurance is pure protection. There is no cash value. It can be used to cover for temporary needs (age 50, 60 or 75 or even till 99) . It is much cheaper than whole life insurance
Some may struggle to pay monthly premiums at a later stage of their working life due to their financial constraint. One should consider buy term insurance (much cheaper).
Health insurance (Govt medishield life)
=============================
Govt medishield life is compulsory .A basic health insurance plan to help with large hospital bills which is based on the costs of Class B2 & C wards .It is paid throught your CPF medisave acct.
Parent (age 87 & 89) Basic medishield life health plan
1. Yealy premium = $615 (Premium b4 subsidies $1.5k)
Our good govt top up $800/yr each to my parents medisave acct. So practically, they don’t have to top up CASH to pay for the medishield life premium of $615/yr.
Integrated plan scheme (IPS) . An Additional private insurance coverage (Rider - come out cash) component run by private insurers, typically to cover Class A/B1 wards in govt or private hospitals. The advantage of IPS private A Class hospital plan is that the waiting time is much reduced .
My family has a comprehensive IPS plan.
1)Me - Has made a claimed est $10k for minor surgery
2)Wife - Has made a claimed est $200
3)Sons - Has made a claimed of $5k due to minor accidents.
Children <18 are up to twice as likely to experience an event leading to a personal accident claim than adults. Singaporeans have a higher chance of getting hospitalised due to these following reasons:
1. Accident, poisoning and violence
2. Cancer
3. heart diseases
4. Intestinal infectious diseases
5. Pneumonia (It is serious upper respiratory infection ).
My older brother has pulmonary edema. His body will struggle to gain oxygen. This is due to the amount of increasing fluid in the lungs preventing oxygen moving into the blood stream. It will grow worse until the doctor removes the fluid. He has been in/out hospital > 10x per year. If he did not have the govt compulsory medishield plan. He would be probably bankrupt in his bank acct.
Critical illness insurance
===================
It pay out a sum assured when discovered critical illness like Kidney failure, stroke, heart attack etc etc.
If the parents has abnormal copies of gene that will cause major illness at later stage of life. Better buy more critcal illness coverage as early as possible.
1. Bought HDB flat from the owner (age 43 partial blind ).He needed to downgrade to smaller unit. He told me that his parent has a abnormal copies of gene & it is pass down to him. Parents & sister die same illness early age. Only his elder brother showed no sigh of abnormality . A happy go luckily attitude (mentally prepare to die anytime) live together with his bachelor friend.
2. My neighbour block has a dwarf family. Grandparent & parent are all less than 1.3m tall. The children same height as the parent & are likely to be dwarf also.
3. Three generations of depression. Very sad case about her 11 years old son death (depression)
Depression in kids Singapore: A Singapore mum , Doreen Kho shares her story.
https://mothership.sg/2017/11/doreen-kho-the-face-shop-founder-11-year-old-son-died-depression/
4. My wife distant relatives , auntie has diagnosed breast cancer a year ago. Practically her auntie's parents, brother & sister died of cancer before age 60. Wife told her cousin to buy insurance which they ignored her advice.
5. My friend (lady) husband die of nose cancer at age 39 suddenly. A very sad case that they thought it wont happen to him. So he only did buy small amt. So my friend immediately bought Term insurance $1m. Premium $9k per yr as she got 2 young children.
Disability insurance
===============
An insurance policy that protects an employee from loss of income in the event that he or she is unable to work due to illness, injury, or accident for a long period of time.
Personal Accident insurance
======================
An annual policy which provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events.
Exercise & drinking water
================
Lastly, maintain good health is the best wealth. Exercise regularly. Drink more water everyday.
I love to exercise (Tennis & badminton ) because It releases happy chemicals (Dopamine) into my brain. I felt energetic & prepare me to fight the stress in my daily life.
Dopamine, a chemical that plays a role in happiness, is a neurotransmitter in the brain that’s necessary for feelings of pleasure and happiness.
I drink alot of water everyday. First thing I wake up in the morning is to drink a big glass of water. It is now a habit.
Insurance – One of the MUST important financial planning
-------------------------------------------------------------------------------
If u put bananas and $$ in front of monkeys, monkeys will choose bananas, because monkeys do not know that $$ can buy a lot of bananas. In reality, if you put $$ and health in front of people, people tend to choose $$ because their simple minds often become fixated on chasing instant gratification ( desire to experience pleasure w/o delay).Many people do not know that health can bring more happiness & wealth.
When you are young and healthy you probably won’t even consider your health as important .You never imagine that one day they could get diabetes or cholesterol problems as you neglect your health . Many health problems are also related to stress. Stress will worsen or increase the risk of conditions like obesity, heart disease, diabetes, depression, gastrointestinal problems etc.
So Life & health insurance are one of the most important financial products 100% you must buy as early as possible.
Term or whole life insurance
=====================
Whole Life insurance is to protect the life insured in the event of death. It is a small savings and high protection insurance. It will have a certain cash value.
Some say that for newborn, buying a whole life insurance policy is actually better than buying term insurance.Life insurance IRR (rate at which an investment breaks even in today's dollars ) decreases if you buy at a later age.
Term insurance is pure protection. There is no cash value. It can be used to cover for temporary needs (age 50, 60 or 75 or even till 99) . It is much cheaper than whole life insurance
Some may struggle to pay monthly premiums at a later stage of their working life due to their financial constraint. One should consider buy term insurance (much cheaper).
Health insurance (Govt medishield life)
=============================
Govt medishield life is compulsory .A basic health insurance plan to help with large hospital bills which is based on the costs of Class B2 & C wards .It is paid throught your CPF medisave acct.
Parent (age 87 & 89) Basic medishield life health plan
1. Yealy premium = $615 (Premium b4 subsidies $1.5k)
Our good govt top up $800/yr each to my parents medisave acct. So practically, they don’t have to top up CASH to pay for the medishield life premium of $615/yr.
Integrated plan scheme (IPS) . An Additional private insurance coverage (Rider - come out cash) component run by private insurers, typically to cover Class A/B1 wards in govt or private hospitals. The advantage of IPS private A Class hospital plan is that the waiting time is much reduced .
My family has a comprehensive IPS plan.
1)Me - Has made a claimed est $10k for minor surgery
2)Wife - Has made a claimed est $200
3)Sons - Has made a claimed of $5k due to minor accidents.
Children <18 are up to twice as likely to experience an event leading to a personal accident claim than adults. Singaporeans have a higher chance of getting hospitalised due to these following reasons:
1. Accident, poisoning and violence
2. Cancer
3. heart diseases
4. Intestinal infectious diseases
5. Pneumonia (It is serious upper respiratory infection ).
My older brother has pulmonary edema. His body will struggle to gain oxygen. This is due to the amount of increasing fluid in the lungs preventing oxygen moving into the blood stream. It will grow worse until the doctor removes the fluid. He has been in/out hospital > 10x per year. If he did not have the govt compulsory medishield plan. He would be probably bankrupt in his bank acct.
Critical illness insurance
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It pay out a sum assured when discovered critical illness like Kidney failure, stroke, heart attack etc etc.
If the parents has abnormal copies of gene that will cause major illness at later stage of life. Better buy more critcal illness coverage as early as possible.
1. Bought HDB flat from the owner (age 43 partial blind ).He needed to downgrade to smaller unit. He told me that his parent has a abnormal copies of gene & it is pass down to him. Parents & sister die same illness early age. Only his elder brother showed no sigh of abnormality . A happy go luckily attitude (mentally prepare to die anytime) live together with his bachelor friend.
2. My neighbour block has a dwarf family. Grandparent & parent are all less than 1.3m tall. The children same height as the parent & are likely to be dwarf also.
3. Three generations of depression. Very sad case about her 11 years old son death (depression)
Depression in kids Singapore: A Singapore mum , Doreen Kho shares her story.
https://mothership.sg/2017/11/doreen-kho-the-face-shop-founder-11-year-old-son-died-depression/
4. My wife distant relatives , auntie has diagnosed breast cancer a year ago. Practically her auntie's parents, brother & sister died of cancer before age 60. Wife told her cousin to buy insurance which they ignored her advice.
5. My friend (lady) husband die of nose cancer at age 39 suddenly. A very sad case that they thought it wont happen to him. So he only did buy small amt. So my friend immediately bought Term insurance $1m. Premium $9k per yr as she got 2 young children.
Disability insurance
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An insurance policy that protects an employee from loss of income in the event that he or she is unable to work due to illness, injury, or accident for a long period of time.
Personal Accident insurance
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An annual policy which provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events.
Exercise & drinking water
================
Lastly, maintain good health is the best wealth. Exercise regularly. Drink more water everyday.
I love to exercise (Tennis & badminton ) because It releases happy chemicals (Dopamine) into my brain. I felt energetic & prepare me to fight the stress in my daily life.
Dopamine, a chemical that plays a role in happiness, is a neurotransmitter in the brain that’s necessary for feelings of pleasure and happiness.
I drink alot of water everyday. First thing I wake up in the morning is to drink a big glass of water. It is now a habit.
My parent (healthy @Age87/89) likely to live beyond 90. I probably have their longevity genes. So my CPF fund (CPF life annity + SA+OA) is very important for my old age retirement. I do not want to depend on my children for my old age retirement needs.
Your parents are not your emergency fund
Your children are not your retirement fund
Build your own wealth.
Action is the measure of intelligence. Start planning now.
Yes i also prefer cheap term insurance coverage till 70yo on top of regular whole life policy.
For those between 31-40,1mil term insurance till 70yo should cost around $2400 a year. However the premium surge up after 50yo
One cheap term insurance for singaporean Male is the Aviva SAF term. $1M per mth is $42. which is the most competitive priced so far. Those at 30 I believe this is the lowest cost to acquire when healthy.
UL plan main purpose - PROTECTION with cheap Financing cost.
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This is not a smart way to put one lump sum US$1m to buy a US$5m univeral life plan with a depreciating US dollars. He must borrow US$1m ( Single premium) let say @ 1.5%. He pays his yearly premium @ US$15k (SG$18.6k). Better than to buy term insurance SGD$6m (6 x 1.2 x-rate) with Yearly premium maybe est Sg$60k same age.
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My UL plan insured sum is US$1,000,000. My lump sum premium is US$261k. I borrow @1.06%. So I pay only US$2.7k or SG$3.5k/yr.
Let say base on the ave long term USD borrowing cost let say @ ave 3% (now 1.06%). Base on 261k single premium, I will pay ave 261kX0.03= US$7.8k or SG$9.7k yearly premium.
After 17 years later, my cash value est US$390k. If I decide to terminate my policy 17 years later due to inability to continue. I will get back US$390k base on projected value.
I take my US$390k (projected value) & pay US$261k which I borrowed from bank. I left with US$(390k-261k)=US$129k. Because I borrowed for 16 years, I need to calculate the total amt I borrowed (ave 3% interest rate) . So US$7.8k X 16 years = US$125k. Nett I still can get a small return of US$4k (US$129k-125k) for FREE PROTECTION during this 16 year.
For term insurance, if you terminate after 16 yrs, U GOT NOTHING. At the same time, U need to calculate the premium you paid for the 16 yrs X 10k/yr = Sg$160k for protection. For my age, my term insurance est 10k/yr premium.
I hope my calculation assumption is right.
rdgs,
Vic
what about the cost of the 261K USD i.e. inflation ?
https://www.ifa.sg/tips-selecting-universal-life/
To help you appreciate how large this commission is, consider the following products and their commissions:
Property: 1% or less in commission.
Unit trusts: 1-2% commission.
Corporate bonds: 1-2% commission.
Stocks: 0.20% or less.
ETFs: 0.20% or less.
Singapore Saving Bonds: 0%
If you are financing part of your premium from a bank, the banks earn thrice – one is for selling the Universal Life and another for selling you the loan. The third time it earns a commission from the leveraged portion of the premium which itself comes from the amount borrowed. Here is an illustration on how the bank earns three times and assuming you have US$500,000 in cash only.
First the bank lends you US$500,000. Hence, the bank earns one time selling you a loan product.
Next, the bank sells you a US$1,000,000 single premium Universal Life.
The first US$500,000 comes from you own cash. Hence, the bank earns the second time via commissions.
The next US$500,000 is borrowed money. Hence, the bank earns the third time.
She is in the early 40s. Woman term insurance is much cheaper (>30% ?) than man. Her husband pass away early due to nose cancer 6 yrs ago. She has no problem paying the premium as her husband left at least 3 property for her.
Sorry, the premium must pay till age 99. Protection is infinity age. She will make sure the children pay for the term insurance premium of 6k/yr once they reach working life. She just told me that up her term insurance protection from S$1m to S$2m.
I hv told her universal life plan USD is a better choice than term insurance with the same coverage. Only if she can borrow in USD cheaply from bank to finance universal life plan.
rdgs,
Vic
rdgs,
Vic
Hello Vic,
Could you please tell me what do you think about that Personal accident insurance (https://www.axa.com.sg/personal-accident) policy ?
I have been thinking for months whether to buy universal life plan to leave some money for my 2 sons when I am not around. Beside property, Universal life plan is another gift to leave for my 2 sons. .
I finally decide to buy a universal life plan from AIA. Due to my so call good health after the medical screening. I am given 6.5% discount.
Insured amt = US$1,000,000.
Initial premiun = US$261,000
Premium class = Preferred
Rate on initial premium for 1st 7 yrs = 4% guarantee .
I will be borrowing against my portfolio to pay for my US$261k premium.
Borrowing cost is est 1.06% now.
rdgs
Vic
My 1st policy whole life policy ($200+ per yr) I bought was from my good friend in the late 80s. At that time, the projected return was from 5.75% onward.
Twenty eight year later, I reviewed my policy with my long time good friend agent. A shocking return of 1.87% base on his formula calculation. I was expecting 3% to 5% .
He said that my policy was affected by the 1997 Asia financial. I did not probe further as my yearly premium was low. I sold & "deposit" into my CPF acct.
Before I bought the UL plan. I ask the lady agent what will be the worst case scenario for the UL to be way under underperform or worst case zero.
1) World war
2) Pandemic disease
3) big Major natural disaster
4) Financial system collapse
I eventually bought the UL plan as I can borrow against my portfolio to pay for my US$261k premium. Borrowing cost was low est 1.06%. It stay low till 2013. I eventually pay off the premium of US$261k as my bond investing was making good profit. Of course the bank was not happy that I did not reinvest the profit I make from BOND TRADING. I make them even more unhappy as I keep withdrawing out the profit I make yearly. Finally, the asked me to put more fund in instead of withdrawing out even though my total portfolio > US$2m mixture of Bond leveraging (borrowed >1m) & many FX option trading (support my banker. Just make only small profit doing for 3yrs +). I eventually move out from the bank as they are going to charge me US$10k+/yr instead of usual US$2k+/yr .
I terminated my AIA UL plan in early Apr 2020 at est US$10k lost. Immediately convert to my USD to SGD @1.45. I make on FX but lost on early termination. With the SGD cash I have. I reduced my mortgage loan as well as Top up my son CDA to 30k (children development acct) earning 2% (age 1-11 ) & 2.5% (from Age 12 to age 30). It is for ploy or U education if I need to use it. If the CDA money is not used. At age 30, it will auto transfer to their CPF OA.
My 1st policy whole life policy ($200+ per yr) I bought was from my good friend in the late 80s. At that time, the projected return was from 5.75% onward.
Twenty eight year later, I reviewed my policy with my long time good friend agent. A shocking return of 1.87% base on his formula calculation. I was expecting 3% to 5% .
He said that my policy was affected by the 1997 Asia financial. I did not probe further as my yearly premium was low. I sold & "deposit" into my CPF acct.
Before I bought the UL plan. I ask the lady agent what will be the worst case scenario for the UL to be way under underperform or worst case zero.
1) World war
2) Pandemic disease
3) big Major natural disaster
4) Financial system collapse
I eventually bought the UL plan as I can borrow against my portfolio to pay for my US$261k premium. Borrowing cost was low est 1.06%. It stay low till 2013. I eventually pay off the premium of US$261k as my bond investing was making good profit. Of course the bank was not happy that I did not reinvest the profit I make from BOND TRADING. I make them even more unhappy as I keep withdrawing out the profit I make yearly. Finally, the asked me to put more fund in instead of withdrawing out even though my total portfolio > US$2m mixture of Bond leveraging (borrowed >1m) & many FX option trading (support my banker. Just make only small profit doing for 3yrs +). I eventually move out from the bank as they are going to charge me US$10k+/yr instead of usual US$2k+/yr .
I terminated my AIA UL plan in early Apr 2020 at est US$10k lost. Immediately convert to my USD to SGD @1.45. I make on FX but lost on early termination. With the SGD cash I have. I reduced my mortgage loan as well as Top up my son CDA to 30k (children development acct) earning 2% (age 1-11 ) & 2.5% (from Age 12 to age 30). It is for ploy or U education if I need to use it. If the CDA money is not used. At age 30, it will auto transfer to their CPF OA.
My motto - Always has MORE emergency in this 21st unpredictable century
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So to assume that one's job security, prosperity , health and fortunate will last is a very foolish way to live. It is during good times that we should prepare ourselves for leaner times
Many bankers / insurance agents have been selling very very hard on UL.
Reasons :
One lump sum payment and they get an extremely high commission.
Bank lends you money for the premium, so they earn on your interest
UL is only good if the insured die early... so I don't buy...
The real value of money / purchasing power just keep depreciating
On top, it is up to the insurance companies to adjust the terms and even the rate of returns.
All these, does not give justifications for buying UL
If you use your premium to invest in a good property (if possible, at the right time), rental income will foot the monthly mortgage and it is better to pass on property with appreciated value.
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