I see a number of insurance topics and I just wanted to share my experience about buying investment linked insurance, which I feel is a very poor financial decision.

My mum bought a investment linked life policy about 20 years ago. The agent told her she would get back 60K++ upon maturity. We still have the paper document on that. My mum is illterate, so she trusted the agent who was her friend and bought it. Luckily, all was well we didn't need to make any claims. Fast forward to now, she received a letter stating the policy would mature in two more years, but she would only get back 18K.

I can understand if the amount is 50K even 40K but at 18K, it is 70% difference. I wrote in to the bank asking them why the amount differed so much. Their explanations was due to poor investment made in 1997, that's why it was so low. I don't buy that, I gonna write to Bank Negara and maybe sue them for false selling (anyone can help?).

Anyway, personally I do buy insurance but without investment. I pay a fixed sum yearly which covers everything in case of hospitalization to death. My premium is only 15% compared to an investment linked policy. My insurance agent always try to psycho me to buy investment linked polices, saying one must always invest. No thanks, I will use the 85% of not paying the premium and invest on my own. The insurance companies can't invest better, and the only reason they want to sell you investment is besides comission, they get 5% of the investment performance. Look at my mum's case, they got all their comission all these years, and the losing end is people like my mum.

If you have any investment linked insurance, check your maturity value. You can probably do a lot better financially than to leave it to the "experts". For those who will ask anway, the insurance policy is from Hong Leong Assuarance.

1. I do not understand why the company would tell you in 2 yrs time, the maturity cash value is 18k. They gave the figure based on what.

2. Investment link means linked to fund, unit trust. I'm sure you understand that, so now, how can a company say how well or how bad the fund would perform in next 2 yrs. For all you know, it could increased 50%!! Then the maturity cash value is certainly more than 18k. Now the other way around if the economy takes a worse turn, it could drop further, then the cash value is worse than 18k.

try get an expert to read the buying terms and condition first.. i dont think you can do anything(usually)

Look at Lehmen Brother case in Singapore, the government is blocking the refund to investor.
It's a different case in Hong Kong for mis-selling, investor got their refund back.

BTW, TS.
If you think you are not compatible with your insurance agent, time to move on.
When you advance to the next level, it's best to change your team of advisor.

now is bad time, investment link sure not good lah, wait till good time, then you will say investment link better geh.

5 more years lah if you can wait, then good lor ...

its true investment link has more tips and tricks than traditional insurance but eventually when the industry settles, there will only be 2 kind of insurances left, Term and Link ...

hei ts, did u read what is the nature of the product ur mom bought 20 years ago?? wondering is there such product 20 years ago...

do u mind to tell the amount ur mom invest 20 years time ago?? if ur mom invest 10k 20 years ago and now paying back 18k i understand la... but if all the while ur mom got add on money to the acc then it is kinda impossible...

besides that, since u mention it is a link investment, i wondering did ur mom take some money out during the 20 years period??
did ur mom forget to pay the premium for the insurance for sometime??
during the whole 20 years, did ur mom claim insurance be4?

lastly, i wondering is it the investment product + the insurance = 60k.... some agent juz wan to reduce the confussion level and just skip alot while introducing all these products....

the factors above might influence the sum u get back... suggest u to ask the agent back....

I don't think u can get investment-linked policy 20 years back !!!
I think it is endownment with cash payout every 3 /5 years.....

which insurance firm? mind to tell?

yea agreed

ILP was introduce in Malaysia bout 10 years back . . . but if its a traditional plan
its imposible to have negetive returns like what you said

i believe what you bought is a whole life insurance plan instead of endowment (savings) plan
that explain why the cash value is so little after 20 years

I am sorry to hear this, but as an insurance agent, I have to tell you that those figure they told you on what you going to get in 20 years is estimated amount and subject to economy and the investment method they have made.

As you know, there is no 100% assurance on investment. Say you invested in mutual funds and they tell you that you will get return of 20% in 3 years, is it true? It can be true and it can be more or less isnt it? How they know it will be 20% in 3 years? It is just estimated amount based on historical performance only.

Another saying is that if you invest yourself in shares, can you assure that there will be return?

Of course you can sue the insurance agent, but you will never succeed cause investment is investment, not savings.

Hope you can distinguish the difference.

i dont even trust the insurance with the investment link... it's worthless... some of the agent is really misleading. few yrs ago, my father was being approached by a bank agent for the insruance product.. she promised him that he will get 5 times more back from what he paid 100/mth 30 yrs later

after that my father home and discussed it with brother. and both of them went again for the further discussion on the matters. his q really strict and go to the points. the agent ended up cant really argued with brother. the actual return is only 20% of what she promised of my father.

somemore she not really know what actually the insurance is. even my brother (analyst) know more detail than her. u see them as irresponsible agent just walk away with the commission without telling customers about the risk associated with the products sold.

come on lah. u should telling the fact of the product do come with the risk not only for the return... it's just my sense and experience wanted to share with u guys.

This post has been edited by wkf: May 3 2009, 12:22 AM

I will just reply in one thread

The bank is Hong Leong.

The agent has already long left the industry.

I'm not sure the exact plan my mum took, it's some kind of whole life policy, ALP, or something where the returns are reinvested into. I think she put in 24K total. No she never took out the money or do a claim before. When my mum bought it, I was but a mere boy.

The paper slip has a chart showing values, projected maturity return 68K. I attached it here.

You said it "Investment is investment", and I say "Insurance is insurance". The two shoud not mix together or sold, especially to old illiterate folks. Sueing the agent is incorrect because it is the bank/company who approves the selling method. In Singapore, there is quite an uproar at Hong Lim Park over the Lehman bonds as it is the retirement funds of many, especially Hong Kong investors are compensated but not Singaporeans.

Even if I pay normal protection insurance premium and put the remainder in FD, 20 years will end with with more. True, my investment may not confirm may make money, but I won't make 70% loss as I will have a stop. Frankly, I still don't understand how they can be so far of the projectection. It just proves the point again that the investment "experts" doesn't fare better than average investor. And at least, I don't have 5% comission taken out from my gains.

My opinion is mutual funds is actually another poor investment form for the lazy but that is another topic.


Attached thumbnail(s)

Guess you need to get the idea right.

Investment-linked insurance product (ILP) = insurance + mutual funds.

All your premium paid will be converted to fund units then only deduct for any insurance cost. This is why ILP charged management fees + other charges for managing the funds.

And guess you need to know why most insurance companies sell ILP instead of traditional plan? This is to protect them self from being sue should they not achieve their "promised" amount stated on the quotation since it is "investment" in nature.

That is why traditional plan is more valuable.

Sorry but from your attachment, I can't really analyze what kind of insurance plan is it.
Definitely not Investment Linked.
Looks like endowment, but so far there's no cases where maturity value is less than what you paid.
Maybe Hong Leong assurance agent can explain it.

This post has been edited by bbjslee: May 3 2009, 04:35 PM

investment link product more benefit than traditional isnurance in terms of cash value

I got investment link insurance for 20 years.
I don't know:
- what investment it is investing in.
- what is the latest market price
- how much of the annual premium goes to insurance and how much goes to investment.
- how many percentage they deduct for management fees

Which insurance company will send me annual statement about the above?
How much paid for insurance, how much added to investment account, how much dividend is paid?

Maybe I should just buy a traditional plan (much cheaper maybe 80% cheaper??) and put that 80% into ASW or Sukuk which are GUARANTEED investment.

I think my ides are quite right. My own policy (not my mum) is pay and forget. My yearly premium is 80% lower than if I took a ILP. It give me the additional cash to invest on my own, and be responsible.

Mutal funds, unit trust, whatever..they are the same. You are putting your money in the hands on people whom you haven't even seen their faces. And you trust them to handle it properly for you?! No thanks, I will manage my own finances. People who don't want to be financially responsible end up losing it.

The thing that sickens me is that the sellers do not explain things clearly (like my mum case or Lehman bonds). It can be considered fraudulent selling but unfortunately here, there's not enough consumer protection.

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Added on May 3, 2009, 11:10 pmThe agent has already bye bye to the industry long time ago. It looks like endowment plan, but there are some strange rules about it which has a shroud of mystery, like how the guaranteed CBR is calculated and what is guaranteed really means. End of the day my mum paid too much for such policy coverage and received back too little.

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Added on May 3, 2009, 11:13 pmYes, you should rethink your insurance strategy. The only issue is ASW and Sukuk are very quickly subscribed, but you get the idea. Invest your own money yourself!

This post has been edited by imtrobin: May 3 2009, 11:13 PM

I like to give my point of view in mutual fund.


They are the best if you intend to work till retirement age and don't bother increasing your financial intelligence.

Most people go into stock market and earn money, yet later they lose it back again to the market. The reason is because they lack the plan.
Mutual fund can provide that plan for you.
The only problem is, it only works well in an up-market.

I would recommend a few options
1. Scan the whole policy and post here for us to see. (Very tedious)
2. Find your own insurance agent(s) ask them for opinion.

For all you know there was a simple misunderstanding somewhere.

Misunderstanding or not, my illiterate mum was sold on the idea of getting back $68k upon maturity, and now it is 18K. I can understand if it's 50K but 18K is more than 70% down. The agent is long gone, so there's no point chasing that path. I hope people rethink their insurance and financial planning for retirement.

Yes, I suspect ILP is a bit suspect as well.

One financial planner told me that it's good when you're young, but must cash out by the time you're in yr forties cos that's when the HIGHER premiums will be deducted frm yr units - best to opt for term then.

ILP is cheap when you're young. But later it is phenomenally expensive.

I too have Life ILP. I will periodically take out the Accumulated cash to invest in equity directly. But will maintain the Life coverage. When the cover becomes unattainable, I will just discard it and switch to basic term. That is my plan.

Xuzen

You are right when you said that one should not mix insurance and investment.Insurance is for protection and investment is for wealth generation. I buy my insurance with premiums only, no endowment, no investment, no returns, no nothing to be paid back ever. Why i think that insurance should not be mixed with investment is as follows.

1. When you pay for the ILP's you can never choose the time/amount you want to invest, you lose flexibility.
2. ILP have very poor annual report which they never show you all the expenses incurred and FULL accounts.
3. The fees charged are higher than mutual funds so you do lose out and ILP's are not regulated by BNM.
4. By paying for ILP's you are putting all your eggs in one basket, in which you lose the option for diversification and switching/cashing out, unless you cancel your insurance.
5. Basically by buying ILP, you put your financial future at the hands of others.

Your opinion of mutual fund is inaccurate, in fact mutual funds play a big role in your investment strategy if you know how to utilize them properly.

1. Mutual fund provides diversification, not only for Malaysian stocks but diversification for foreign stocks/commodities/foreign bonds.
2. Mutual funds let you have access to commercial bonds, which is regularly sold as RM 1 million allotments, other wise you cannot afford to invest.
3. Those who buy and hold, or dollar cost average (basically lazy) is irresponsible of their investment, which they deserve whatever they get. Basically if you work at it, investment in mutual funds is a lot of work. You need to work on when the right time to buy and sell fund like shares, or switch to different categories when needed.
4. Not all funds are expensive (but malaysian funds is one of the world's most expensive), so you do not have to invest solely in Malaysian based funds. If you do not fancy mutual funds with high cost, then perhaps a cheaper ETF is the better candidate, which is basically an open fund. Anyway there are a lot of oversea funds you can buy.

I hold a diversified assets, which includes direct malaysian stock, some malaysian bond funds. For non malaysian based funds i own asian ex japan funds, commodities funds, us, europe funds and China A and H class funds.

This post has been edited by gark: May 8 2009, 03:57 PM

Yup,
i agreed with you on Mutual Fund..

All agents always ask people to keep invest invest invest and by the time you retire...you should have a handsome returns..which i say Bullshit..


i got a colleague who invest thru this agent(about 10 years) and deligently invest every 3 month thru EPF and yet in the end when he retire last month..

His investment almost equal to return now if he were to sold back all his mutual fund last month

Crazy,isn't it? might as well let it rot in EPF which give much better miserable return.

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Added on May 8, 2009, 4:11 pmThank you for the elightment.




This post has been edited by MakNok: May 8 2009, 04:11 PM

You should scale back your risk as you near retirement, means sell of your earnings gradually and invest into bond based funds. If you just buy and hold then, you are not selling when it's high which you miss out all the opportunities to monetize your funds during the boom 2005-2007. If during the good times your friends did liquidize some of his funds, then he might be doing very well indeed. Like i say if anyone tells you that you can get very good returns with low risks don't ever believe them.

Well,
i can safely say in my case....all my colleague who invest in mutual fund are blind lead the blind and i am the only who do switching reGuarly from 2004 until i liquidted my fund at feb 2008

Seriously, investment link is a bad idea. (read about their annual charges and premium allocation and you will understand why)

I recommend Amanah Saham Wawasan 2020 or other Amanah Saham if you want other company to invest the money for you.

Well, I can help you to invest your money into the market if you trust me

i interested to knew which insurance company is that ???????????????????????

[quote=MakNok,May 8 2009, 04:09 PM]

All agents always ask people to keep invest invest invest and by the time you retire...you should have a handsome returns..which i say Bullshit..
i got a colleague who invest thru this agent(about 10 years) and deligently invest every 3 month thru EPF and yet in the end when he retire last month..

Hi there,

Pls dun look at high returns in ILP plans, ILP is designed in a way that you get the most coverage with the lowest premium (0 to 45 yrs), cos the cost of insurance will shoot up exponentially in the latter years so basically you get nothing or 10 to 20% of what you've put in at the end of the day.

For investment, go for UT.

For protection, get ILP or Whole Life or TermLife.

For savings, go for insurance endownment policies. That's it.

Ronnie

I said twice already, Hong Leong Assurance,

Excellent! A live example I was scratching my head tonite for expressing my points!

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Added on May 9, 2009, 12:16 amYes. Even if i dont, like the majority, i hope everyone learn the lessons explained here by TS.

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Added on May 9, 2009, 12:19 amPardon me, but, what say you?
Isnt everything good in up-market?!

This post has been edited by rockcrawler: May 9 2009, 12:27 AM

not sure why someone brought me here from my blog

http://www.malpf.com/2009/05/personal-fina...n-1picture.html

but I have stated my view here, ILP has its good and bad and if you don't understand how it works, you may find yourself in deep shit like this TS example, and I have also proposed a solution, keep the fund in there and wait 3-5 years, the mom will get back better return.

If cann't live with this kind of arrangment, don't use insurance to save money. keep ur money in FD if you cann't substain any market influence.

like other said, whatever ur mom got may not even be an ILP but an endowment. if that is true, please PM me all your mom personal details, especially if she has a copy of the illustration. If someone was promised an endowment return and didn't get it, I consider that as a big offense.

... and may do my best to fight for justice for ur mom's case ...

This post has been edited by mtsen: May 9 2009, 12:59 AM

No, some business do well in a up market and even better in a down market.

Bartender business theory.
When times is good, business is as usual.
Times is bad, the bar business is better, because many people want to drown their sorrow.


My first deal a 42k low cost flat, rental RM380 last year June.
Currently rental went up to RM450.
Too bad I cannot make this deal.

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Added on May 9, 2009, 9:10 amWhen one retire just at / after the crash of the stock market, all his retirement fund gone bye bye.

Many soon to be retirees in Singapore lost money in the Lehmen (lemon), one of them being interview on the TV.
One of them claim losing S$500k, after that the voice start to change.
Almost cried.

So you may want to tell your friend how lucky he is to get it back.
Some are even luckier, retire with US$1mil and few years ahead of schedule.

This post has been edited by jasonhanjk: May 9 2009, 09:10 AM

Which is why i wish that i wanna to point out that invest in mutual fund got risk as well.
it will work against you if think you can dump it in and just forget about it..

By retirement....hopefully when you wish to sell..happen to be UP market...if not another round of Bull which maybe might be minimum 5 to 8 years times.

I pity those who are CON by their fund manager that diversify their money into Unit trust will be much better than fixed deposit.
and promising it is a great fund for retirement....
provide when at that time is not a BEAR year....

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Added on May 9, 2009, 9:10 am
When one retire just at / after the crash of the stock market, all his retirement fund gone bye bye.

Many soon to be retirees in Singapore lost money in the Lehmen (lemon), one of them being interview on the TV.
One of them claim losing S$500k, after that the voice start to change.
Almost cried.

So you may want to tell your friend how lucky he is to get it back.
Some are even luckier, retire with US$1mil and few years ahead of schedule.

[/quote]

This post has been edited by MakNok: May 9 2009, 10:27 PM

I agree that ILP is misleading the policyholder. Just look at their sales kit and you will see the lies.
Usually when selling an investment link policy, the agents will show you a table from Year 1 until Year x (max maybe until Year 100). It will show premiums paid, sum insured, investment value or whatever.
Now... scan from Year 1 until Year 100. Look at the investment value. IT KEEPS INCREASING EVERY YEAR!!!! This is definitely a lie. We can't have economic boom every year for 100 years! There will be economic slowdown. IN THE LAST 12 YEARS, WE'VE ALREADY HAD 3 SLOWDOWNS (1997, 2001, 2008).
So please, if you're a good agent, then convince your agency to develop a 100 year table with between 10 to 20 years of economic slowdowns. Then show us the dips and rise in the investment value over the 100 years!

This post has been edited by simplesmile: May 10 2009, 08:21 AM

couldn't agreed with you more!!!
Agent should be honest....well...they have historical data which they can help investor as well.

Thanks. PM you details

[quote=MakNok,May 9 2009, 10:26 PM]

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Added on May 9, 2009, 9:10 am
When one retire just at / after the crash of the stock market, all his retirement fund gone bye bye.



[/quote]

[/quote]

MakNok,

It is STUPID for a person to be 100% invested in stock market. It is as simple as that.

Any normal and common financial planning will say

A) Have 3 to 6 months of emergency fund in bank / FD

B) Keep the money that you need within 5 years in fixed income aka bond.

Now, if a person follow rule (A) and (B), a person will NEVER lose everything with a stock market crashes. And, even if the stock market crashes, the person has 5 years to recover from that.

My favorite saying is INVESTMENT means that you can go to sleep and do nothing for 5 years and you will be fine. So, by definition, your investment needs to be able to survive a stock market crashes.

Dreamer

Most people don't really understand what investing really means.
Even financial planner today don't know either.

Investing is a plan.
No matter you live or die, stock market go up or down, housing price go up or down.
The plan must work in all scenario.

Scenario A is for a safe and secure plan.
Scenario B is for a plan to comfortable.
Finally, there is the plan for being rich.

To be rich, all 3 plans are needed.
Plan to be rich, plan to be comfortable and a plan for safe and secure.


I agree it's stupid to put all your money in the stock market, it's as good as jumping off the building without a parachute.
Bad financial planner do recommend that but it's the investor must take full rensposibility.

This post has been edited by jasonhanjk: May 11 2009, 08:35 AM

No offense. I brought you here from your bloy to pry for your reply. I like your blog and hope to get your opinion & attention on this issue. Thank you for your time.

I agree with OP, investmet should be investment, insurance should be insurance.

I'm not too sure about the process, but I think you take insurance, you are doing so collectively, so if one guy die you'll be paying for him from your share. Also there will always be some people who will try to take advantage of the system by trying to claim for everything. Collective insurance is a good thing, but if you start thinking of it as an investment then donno what would happen, just pray not too many people die or get accident.

I started by getting some insurance, although they claim to pay premium, I didn't really care about that. Since I just started work and poor, I just want some cover if I get accident and get cacat, at least I'll get a bit of money. After that I just invest in normal investment and save up, so now if I get accident my normal investments can cover me, and don't have to worry about insurance companies citing technicalities in order not to play compensation.

For me this is logic, I came across a few agents pushing hard their insurance cum investments policy to me, when I explain why I don't want they smile and agree.

[quote=dreamer101,May 10 2009, 11:29 PM]

[/quote]

MakNok,

It is STUPID for a person to be 100% invested in stock market. It is as simple as that.

Any normal and common financial planning will say

A) Have 3 to 6 months of emergency fund in bank / FD

B) Keep the money that you need within 5 years in fixed income aka bond.

Now, if a person follow rule (A) and (B), a person will NEVER lose everything with a stock market crashes. And, even if the stock market crashes, the person has 5 years to recover from that.

My favorite saying is INVESTMENT means that you can go to sleep and do nothing for 5 years and you will be fine. So, by definition, your investment needs to be able to survive a stock market crashes.

Dreamer

[/quote]

How to invest in bonds? Aren't they for high net worth ppl?

any latest respond from the particular insurance company?

[quote=constant,May 12 2009, 01:18 PM]
MakNok,

It is STUPID for a person to be 100% invested in stock market. It is as simple as that.

Any normal and common financial planning will say

A) Have 3 to 6 months of emergency fund in bank / FD

B) Keep the money that you need within 5 years in fixed income aka bond.

Now, if a person follow rule (A) and (B), a person will NEVER lose everything with a stock market crashes. And, even if the stock market crashes, the person has 5 years to recover from that.

My favorite saying is INVESTMENT means that you can go to sleep and do nothing for 5 years and you will be fine. So, by definition, your investment needs to be able to survive a stock market crashes.

Dreamer

[/quote]

How to invest in bonds? Aren't they for high net worth ppl?

[/quote]

constant,

http://finance.yahoo.com/q?s=BSV&.yficrumb=auuw5dfuvav

http://www.marketwatch.com/story/lazy-port...mpetition-again


I do not buy individual bond and stock except one stock. I buy stock index fund and bond index fund. For someone in Malaysia to do this, they need to open US Stock brokerage A/C to buy ETF. You need a few K in USD to do this.

Dreamer

They sent me a letter, which is basically citing poor investment in the 1997 crisis, and a whole bunch of information which doesn't explain anything. I reread the insurance terms in more detail, frankly there is this Compound Bonus Revision, which is the investment, and it is subject to deductation fees and expense which are unstated. Bascially what I'm reading is they can deduct any amount based on what they like as expenses.

I'm gonna to write a complain letter to bank negara sometime end of the month when I find more free time, and maybe find a lawyer to take the case up. Any recommendations?

Hi guys, I read one article saying the insurance company can increase ILP yearly premium as they want in a few years time. in accordance to the insurance charges schedule.

Is this true?..

I just bought an ILP a year ago and came across the article yesterday. I am afraid that my premium will increase in a few years time.

Sorry newbie here, but when it says maturity, does it mean you withdraw the lump sum of cash and the policy is no longer valid?

umm....this seem worrying to me le....
i brought 1 insurance recently...think is life insurance...purpose same as the mortgage insurance...but this one got cash value...if compare to the mortgage insurance....
the agent said will at least get 5% interest....
if house loan finished..let say 20 years......at least can take back the $$ put in for about 20 years...mayb will loose some $$ only if compare to mortgage insurance....
dono how true is it....

August, i think u bought a life insurance to protect your loan instead if MRTA. It is true as life insurance have cash value and it is accumulated and also has compounding interest. Just that the premium will uch more higher than MRTA which is only a lump-sum amount.

For me, i don't think that ILP s a good product. I agree with TS that insurance is insurance & investment is investment. The former is for protection while the latter is for wealth accumulation. Moreover, from what i learnt, not the whole amount of ILP premium is invested. THe insurance company will deduct the admin fees and few charges and the leftover only will be invested and there was an agent from "G3" told me that usually the amount invested is just a small portion. And worse is that the amount invested will decrease fom time to time as the fees charged will increase when one is getting older. This was what that he told me and i don't know how true it is.

Actually I dislike those insurance agents nowadays claimed that they are actually "financial planner". That's bullshit. I can accept if they claim themselves as insurance planner where they plan different quotation according to people's needs. But a true financial planner is to help people to ahchieve their financial goals, not just protection. Furthermore, i believe that there is no insurance company that is best in the market. I believe that each of them will have their own strength where maybe this will have a better medical card while the other will have a better life insurance policy. So, as a financial planner, one should have recommend their clients to get the products that suits him/her best. So, PLEASE don't claim yourself as financial planner if you are just merely an insurance agent.

This post has been edited by fbs: May 14 2009, 12:00 AM

Hi,

Nowadays, the insurance companies states very clearly in their contracts that the Cost of Insurance (COI) is not guaranteed meaning that insurance companies has the rights to increase their premiums prior 90 days written notice to their policy holders.

Try to read up your policy to find this clause and i've surveyed AIA, Prudential, Allianz all has this clause.

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Added on May 13, 2009, 10:29 pmHi August,

Do give a look at your policy, and you look if you can find these 2 clause:
1. Participating policy with reversionary bonus (eg whole life and endownment)
2. Non-participating policy (eg investment linked and term life)

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Added on May 13, 2009, 10:35 pmIn endownment policies, when its stated maturity in the policy, then what you say is true.

But for whole life policies with FULLY PAID UP OPTION, i'm referring to short term saving plans where you can opt to take the cash as annuities up to a certain age normally between 85 to 90.

But if agents who say its maturity without black n white, then becareful.

This post has been edited by chew_ronnie: May 13 2009, 10:35 PM

i've studied one of Allianz's new ILP, this is what i understand...

monthly premium consist of :
1. allocated portion (65% @ 1st year, 90% @ 2nd year, 100% @ 3rd year onwards)
2. unallocated portion (100% minus allocated portion, this is to cover insurance company's cost, as well as the bank's commission)

allocated portion will goes to:
- RM5.00 per month for service charge
- Cost of Insurance = risk factor / 1000 x sum assured / 12 months (risk factor differs from company to company, your agent SHOULD be able to tell you)
- the remaining balance will goes to unit purchase in selected funds

e.g. cost of insurance : 1.18 (risk factor for 30 yr old non-smoker) / 1000 x 100k (sum assured) / 12 months = RM9.84 per month.

make sure your agents are transparent enough to tell you where have your every single cent spent, to avoid disappointment like what have happened to the ts.

answering to post#50 above :
since risk factor will increase in according to age, hence cost of insurance will increase when from year to year.

however, cost of insurance increase =/= premium increase. i.e. your monthly premium will remain unchanged as long as your policy does not lapse (for allianz's case, up to 100 yr old). which means your money left (i.e. allocated portion - RM5 - COI) will decrease over times.

happy insuring

This post has been edited by brian3455: May 13 2009, 11:45 PM

Hi there,

I think what you are mentioning here is a Bankassurance product hence the allocation. Allianz's most popular ILP is the POWERLINK policy that has the following allocation:
1st and 2nd yr: 45% allocation for insurance premium
3rd and 4th yr: 80%
5th and 6th yr: 85%
7th yr and above: 100%

CHeck this out: https://www.allianz.com.my/cls/content.aspx?t=847&m=0#top

rgds,
Ronnie Fr Allianz

This post has been edited by chew_ronnie: May 14 2009, 12:00 AM

do you mean that 7th year and above the total amount we paid yearlyis for premium and not to invest?
Means only some portion of the premium during 1st to 6th year will be invested?

Hi fbs,

The allocation means, say 1st yr: 45% goes to insurance allocation meaning 55% is gone for admin fee and bla bla bla. This 45% shall be invested in Allianz's unit trust funds via buying units. N lets say one unit cost RM 1 for illustration purpose, and every RM100 you put in as premium, RM45 will be used to buy 45 units (@ RM1/unit). Then the insurance Allianz will purchase insurance protection (cost of insurance) in terms of units from the RM45, say based on your risk factor you mentioned say RM25 for life insurance, hence Allianz will deduct 25 units from your 45 units. The remaining 20 units is your balance cash values. This is repeated month by month.

So at the 7th year, when you pay RM100, you'll get 100 units assuming the unit price is still the same. At this point of time the cost of insurance shall be higher already because of the age increase, so say at RM 33 for the same sum assured. THis means Allianz will deduct 33 units from 100, so the remaining is 67 units in your investment account.

Every investment linked products works this way only the allocation rates and cost of insurance differs from companies.

Hope this will help you.

rgds

thanks for your reply...
now i understand d...

Thanks for the reply guys....

Any advice for current ILP holders?

Should I surrender my ILP, since I am afraid the premiums will be too much for me too bear in the future, and start looking for buy Term or whole insurance etc..

Start already don't surrender la... waste money only.

Check the duration of your policy, compare the current premium and the premium for term or life insurance with the same protection...

I have stated some point for ponder in another topic.
Since it's relevant, maybe you guys can think and discuss about it:

What is ur age at the moment? N how long is the duration of ur ILP? If you are young say less than 35, ILP is still the cheapest insurance policy you can go, even a term life policy cant match the premium. Also another issue is the cost of insurance meaning to say that if your insurance coverage is very high (cost of insurance is very high) then you may have to have a look in it.

rgds,

Read my comments and would appreciate if you could address my concern on the last paragraph in regards to losing out which I mentioned.

Yes I know your concern that investments shud not be mixed up together with insurance. I strongly agree with that because as an insurance agent, i also do not use ILP as an investment vehicle because of the BS return at the end of the day. What I want to address out is the for younger age, get an ILP because the ratio of premium to sum assured is very very low even if you compare directly with a term assurance. This is in point with your saying that we shud pay the least for insurance premium for a said sum assured, then the extra cash we have, we pump it into other investment vehicles.

Just a simple illustration here (based on Allianz illustration) based on a Male of age 30 Non-smoker:

Term Life with riders:-
Term Life : 200K
Critical Illness: 200K
P.Accident: 200K
Medical Card: R&B 400, Lifetime Limit RM1.5M
Waiver benefit
Cost: 5,175.23/annum

ILP with the same benefits:
Cost: RM 3,900

So the difference is roughly RM 1,200/annum and you can use this money to invest anywhere you like. This is the point I wanna point out.

rgds,

This post has been edited by chew_ronnie: May 16 2009, 11:34 AM

most important for me to have ...

1.medical card
2. life & pa insurance.

chew_ronnie,

There is a CATCH here which you need to bring up. All those number are ASSUMING that the I (investment ) portion of the ILP return X % per year. So, what is that X%?? The last 3 years, KLSE went up 30%. If you assume that X is 30%, it will DEFINITELY not happen. And, if the actual return is much much lower than X, I would bet that ILP will cost a lot more than term insurance.

So, what is X assumed in your ILP quotation??

Mark my words. We will see a lot of screaming and crying from people buying ILP in one or two years. They THINK that they got a bargain.

Dreamer

Dreamer,

Good for you to point this out as what you say is true to the fact that if someone pays yearly for ILP, then the phenomenon you say will happen if the X value is low. It is advisable to pay premium on a mthly basis as dollar cost averaging will work by buying more units at lower price.

Yes, 30% will not happen thru out, but I've seen some of the funds has achieved 20 odd% in the bull run. But this is still not the point here, just that paying premium in monthly basis shall get thru this issue.

X is assumed at 3% yearly. Which may may be higher or lower in real case scenario. So there may be some time that policy holders need to top up if the funds performs too low.

I believe, the whole insurance industry is moving towards ILP, and traditional plans shall be phased out very soon. So does this means that ppl SHUD NOT buy insurance when all traditional plans are removed?

Thanks for your sharing here.

chew_ronnie,

<<X is assumed at 3% yearly. >>

1) That number does not seem to be correct.

2) What happen when the return went negative for 2 years??

<<the whole insurance industry is moving towards ILP, and traditional plans shall be phased out very soon. >>

3) That simply mean this plan is GOOD aka MORE PROFITABLE for insurance company. Which means it is BAD for consumer.

4) A 2 years bear market will wake people up very quickly.

Dreamer

This post has been edited by dreamer101: May 16 2009, 10:50 PM

Really? If that happens, yes I won't buy insurance from that company. I'm sure there will be other who will spring up to offer traditional. When there is demand, there will be supply.

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Added on May 18, 2009, 3:10 pmWhat if the market has only ILPs? Means no insurance for you. I can bet with you that this day will come.

This post has been edited by chew_ronnie: May 18 2009, 03:10 PM

Sorry, I'm not into gambling or betting but investing. If that days comes, I will raise funds to start a insurance company for like minded people who are investment savy and want to have insurance security. BTW, I think I will win if I bet.

While insurance companies are pushing for ILP. I don't believe that it will completely overtake traditional plans. I believe all plans have thier pros and cons and serves various purpose for various people, be it traditional or ILP.

its unfortunate that even till this day we hear about people getting misleaded by agents in buying insurance products that doesnt serve thier purpose.

ILP are not horrible investment products but they're not great either. so its important to take note that your primary purpose for ILP is INSURANCE, the returns that comes with it are a BONUS. knowing its pros and cons and conditions that comes with it helps as well.

Some favorable ILP points
1. Affordability - premium to coverage ratio are low
2. Flexibility - riders can be added/removed as seem fit, funds as well
3. Cash Value are not tied up

Some downside
1. NON GUARANTEED - depending on market/funds cash value might even drop to 0
2. risky as age goes older
3. Time to time monitoring/adjusting is needed.

therefore ILP is not for every one unless you meet a certain criteria.
recommended criteria:
1. young (25-30)
2. need high coverage FAST
3. limited budget
4. want to cover a temporary risk (such as loans)
5. willing to stretch every ringgit

other tips in buying ILP includes
1. think twice when proposed projections are high (usually the funds invested are high risked)
2. make sure that the policy contains the funds you choose.
3. apply for a automatic conversion scheme where risk will decrease as age goes higher.
4. make sure the plan meets your purpose!

No point to argue over this matter. Just leave it for the near future to see.

This insurance agent I know came to talk to me about an overseas investment fund. He told me like an investment expert he has done his research and analysis over the last 2 years, his conclusion is the fund gives good returns and is very safe. On further enquiry , he told me the fund invests in futures.

To my knowledge futures are very risky investment, and this guy doesnt even understand some of the basic stuff about investment. The reality is insurance agents are not investment experts even many of them called themselves financial planners. Before committing on these investment, always better to get a second opinion from an accountant or somebody knowledgeable as these financial planners will not -
Give you fair and unbiased advice since they are trying to sell and make commissions
Many of them dont even have proper knowledge to offer good advice

A good read on the matter against endowment policies, from ex NTUC CEO. Same issue in Singapore

http://tankinlian.blogspot.com/search/labe...s%20Bonus%20Cut

So by this definition, savings are investments?

saving is a type of investment. just with low return

I think it is quite hard to define investment.

According to economic theory, buying shares is not an investment. But to many of us, it is.

wodenus,

No. Savings are emergency fund. Which by definition, you need to touch and use when emergency. Hence, you MAY do something about savings in 5 years.

Dreamer

I see. So Fixed Deposits are investments then?

wodenus,

FD is not investment. An investment needs to keep up with the inflation. FD is used as saving instrument.

Dreamer

But you can go to sleep and do nothing for five years and you will be fine. And it will survive stock market crashes.

But if inflation happens badly in the 5 years, your 100k may drops its value to like 80k.

I don't know.. it wasn't my definition

wodenus,

You do not listen very well.

A) FD is saving instrument. You SPEND your saving instrument in case of financial emergency.

<<But you can go to sleep and do nothing for five years and you will be fine. And it will survive stock market crashes.>>

B) In 5 years, the FD value will be reduced by inflation. So, whether the stock market crashes or not, the FD REAL value will go down every year.

Dreamer

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Added on June 10, 2009, 5:18 pmc.o.o.l,

That is why FD is NOT investment. Whether inflation happens badly or not, the REAL value of FD will go down. FD rate is never high enough to cover inflation.

Dreamer

This post has been edited by dreamer101: Jun 10 2009, 05:18 PM

I'm trying to, you have to help me understand this.



I see. I currently have FDs at 5% p.a. What's the annual inflation rate?


This post has been edited by wodenus: Jun 10 2009, 05:43 PM

wodenus,

A) So, do you BELIEVE the actual inflation rate is 5% or less??

B) Now, if you keep track of your expenses every month like I do for the past 10+ years, do your expenses only increase 5% or less compare to last year?? That is your own inflation rate.

You know the number.

Dreamer

fd at 5%?! wow... even money market rate is below that.
it's not a plain vanilla fd we're talking here, right?
(i'm highly suspicious here.. hehe)

I don't know, which is why I'm asking you



Don't keep track of expenses much. Are you saying that if my personal inflation rate is less than 5%, then my FD becomes an investment?

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Added on June 11, 2009, 12:24 amIt is... it's a plain vanilla FD rate, 5 years at 5%. Two years ago it peaked at 5%, just before the world economy tanked

This post has been edited by wodenus: Jun 11 2009, 01:12 PM

wodenus,

<< Don't keep track of expenses much. Are you saying that if my personal inflation rate is less than 5%, then my FD becomes an investment?>>

1) That furfills one of the two conditions.

2) The second conditions is you do not intend to use it for the next 5 years. The second condition does not work if this FD is used as your emergency fund.

Dreamer

So if I don't intend to use it for the next 5 years, then it becomes an investment?

so, that's the catch.. 5 years! (i had the tendency of thinking as such.. e.g long tenure)

well.. if we factored in 'opportunity cost', the proposition may not be the same.. but if you look at it as though it's a cost effective way of mirroring a bond (with coupons) asset.

if i were you, i wouldn't read too much into the inflation rate.. for it's just an arbitrary figure.. why? well, it depends on the propensity of a person to spend. in an extreme environment, if a person have zero spending, inflation is just academic.
on the other extreme, if a person spends 100% of what he/she earns(and more).. this person will feel the effect.

when spending becomes an auxiliary to life.. then we are less affected by inflation. of course, besides delayed gratifications, other substitutions to spending requires creativity of our part..

so, if people tell you that chicken rice's price has inflated by 30%... you can say, i rare my chicken and serve my own rice and thus, i'm able to avoid that 30% hike.. there're myriads of ways, and this is just one silly example, that's all.

This post has been edited by lwb: Jun 11 2009, 11:56 AM