cherroy, yklooi and I suggest that Xuzen's following calculation be pinned somewhere so that in the future people who want to ask about insurance endowment can refer:

OK lets do some maths:

You need to put in RM 295.00/mth for 6 years.

Thereafter you get back RM 700.00/year + 5.5% on the dividend = RM 738.50/p.a for the next 30 years.

Part 1 of the calculation (The accumulation phase)
Mode = Begin, since your payment is paid at the beginning of the period
PMT = -(RM 295.00)
Period, N = 12mths x 6years = 72 periods
Present Value ,PVi = 0 meaning you start accumulation from zero
Interest rate, since you are not getting anything during this accumulation period, you are losing money because inflation is working against you. Therefore, I = (Growth - Inflation)/(1+inflation). I am using the conventional 5% inflation for calculation purpose. Therefore effective I = (0-5)/1.05 = -4.7619% p.a. or divided by twelve = 0.3968% per month.

Using these values I presented above I key in the figures into a financial calculator, your get a Future Value (FVi) = RM 18,433.48

Part 2 of the calculation (The distribution phase)
I will use Begin Mode as well, since I assume you will get your annuity due (payment) at the beginning of the period.
PMT = RM 700.00 + 5.5% = RM 738.50/p.a
Period, N = 30 years
Let the Present Value (PVii) equal to the above calculated FVi i.e. = RM 18,433.48
Let Future Value (FVii) = 0, since after 30 years you will get nothing back.
Now keying these new sets of figure into the financial calculator to calculate the Internal Rate Return or Return on Investment (ROI) for the whole 36 years tenure. (from start of the program until the end of distribution phase)

And....

...

...

IRR or ROI(I) = 1.32% p.a.(annualised)

Taa Daa.....

Are you happy with this ROI?

Even FD is consistently hovering above 2%

Xuzen

This post has been edited by JohnL77: Nov 28 2013, 01:41 AM

errrr...i think there must be a clear cut between "saving plans" and "investment plans", i'm no expert, so the formula seems complicated to me...lol...but it is fair to use this formula on HLA Cash Promise? since they did says is only a "saving plans" NOT "investment plans"...the only comparison that i can think off (for saving plans) is comparing with Bank (which is the last part of the calculation ROI os 1.32% vs FD 2%)...just a thought

This post has been edited by lrm8888: Nov 28 2013, 10:26 AM

Aih.. he simplify the steps, I think need to be familiar with financial calculator (I'm not) to fully understand. I am a bit confused on the Future Value, I thought it was Present Value. I'll try asking him to explain it to me.

There is no "savings plan". These are all insurance endowment policies. These agents don't want to call it endowment because when people hear "insurance" they run away. My experience from being in an ex-HLA agent.

This post has been edited by JohnL77: Nov 28 2013, 08:06 PM

Hmm or we can call it saving cum insurance plan? Because it comes with TPD and Death protection...What i've learned is if the policy holder dies, they will refund the money that you've paid plus the death protection amount. Still quite big amount ler...

Please see the projection posted by lrm8888. 1st year they'll payout about 7.6 times the premium you paid. But it gets smaller with each year. This is why, people who buy this plan still buy normal life insurance.

"This is a 25 year participating endowment plan..." - http://www.hla.com.my/ourproducts/pds/CashPromise.pdf

This post has been edited by JohnL77: Nov 28 2013, 09:18 PM

The major drawback of this kind of "saving" is that if one is unable to fork out premium for saving plan (due to whatever reason, out of job, no income, no cash for it), it would result in premature surrender of the policy, whereby surrender value applied, which the surrender value can be way lesser what had been paid on the previous year.
For eg. paid 10K for 3 years, at 4th years, one out of job, no income, or no extra cash to pay the 10k, means premature surrender the plan, what you get back from the plan?
22~23K from the projection sheet posted.


The death protection is not that "great" unless the death happen at earlier year.
If died when on 3rd year, (after paid 30k), death benefit is about 76K.

After fork out 60K for 6 years, if died at 7th year, the total death benefit is 76~78K.
Whereby 60K if put in FD also result in about 70K.

If want have death protection, one can get an ordinary life insurance, whereby premium is way lesser than saving plan and get about the same death protection amount.
Lesser premium, means less commitment whereby one's cashflow situation can be better.

PS: I am not saying whatever saving plan has no use, just anyone that wish to sign up for saving plan must clearly understand what it is about.
It is a long term commitment. What can be expected from the plan, what is the coverage. What is the consequence of fail to pay the premium.
What is the IRR of the plan when mature etc.

This post has been edited by cherroy: Nov 28 2013, 10:18 PM

Yup. If you surrender the plan on 4th year, they will refund you less than 30k, it's like they take back the interest paid to you on previous 3 years because you did not fulfill the 6 years terms.
If died on 7th year, they will refund your 60K plus the 76k death benefit. 60K + 76K. This is what I heard...

I urge you to get a projection from your agent. As you can see from the projection posted by lrm8888, the Total Death Benefit is everything that you will get if you pass away. No 60k + 76k. 76k only.

(7)=(4B)+(10)+(11)+(13)

Get a projection and look at it yourself. If your agent tell you the wrong thing, you should complain to Bank Negara.

Total death benefit is the total amount one get from plan, if died.

Saving plan just give back guaranteed cash value, cash dividend, cash bonus/terminal bonus, death/CI (if with rider etc) payout.

I never heard of "premium refunding" in insurance. Those getting money from insurance either is cash dividend, terminal bonus, insurance payout due to death/accident/illness etc.

If insurance "refunding whole premium paid previously", then insurance company earn what?

I agree with JohnL77 and cherroy comments. look at the sheet that i posted, you should know how much they are paying you when you are dead. btw, why on earth you are looking at the death benefits, might as well just get a normal life insurance plan...like what JohnL77 and cherroy said, the endowment plan for normal life insurace is cheaper. Put the rest of your cash in bank for better saving rate (assuming you have no other investment/saving plans).

One less person cheated by unscrupulous insurance agents.

I think she trust her agent too much.

Hmm...maybe i heard wrongly, need to check with the leader. I keep hearing this is higher rate than FD, higher rate than FD nia...
I'm actually HLA agent, newly joined for few days nia. Just wanna make sure this plan is not cheating people if not, i'll just focus on selling life insurance and MLTA...

All the best rinoa.

riona, HLA is not cheating anyone, after few days of own research i notice that the interest pay by HLA is indeed higher than FD...just one problem the "principle amount" or some prefer to call it the endowment amount or initial amount or etc...

if you just compare FD interest and HLA interest, HLA interest is higher but HLA drag the repayment of "principle amount" longer and because of that the net effect will ended up putting in FD is better.

From my earlier calculation, interest pay by HLA (for 15 years) is RM46k and FD interest only pay RM33k but like i mentioned because HLA hold back the repayment of your "principle amount" a premature cancellation at 15 years will ended by loosing to puting your money in FD. After 15 years HLA only repay RM95k or RM76k (principle + interest) but put in FD you get RM93k. See the overall picture??. By the way, 15 years is a very long time and if FD rate goes higher by then, then definately HLA is going to lose.

your leader and HLA did not cheat. Just that they did not explain the overall picture. And i have to check and check and check (also mainly thanks to the people here) that i managed to understand the Cash Promise better. You as the agent holds the responsibility to explain that to your clients...

This post has been edited by lrm8888: Nov 29 2013, 09:04 PM

Yup, just accidentally withheld crucial information.

Hmm I will do more research before going really into it...Thanks a lot for the info!!!

HLA don't cheat people, all policies sold must be approved by BNM 1st.

HOWEVER, it is HOW agent sell by misinforming or purposely twist the facts or leaving out certain important information, or doing creative selling that confuses the general population.

Logically, how can an insurance company pay higher interest rates than a bank? And the interest rate is paid based on which sum? The premium paid or the sum assured?

The answers to these questions will reveal the truth.

Yes, I forgot already, but is the dividend guaranteed?

Can you really call it interest?

The way I see it, you pay a premium and you get a guaranteed income for life. I thought last time the plan was until you 99 years old? Now 25 years plan only?

It isn't known as interest in the industry but for layman sake, let call it interest.

Such policies are neither here or there policies. Not good enough to retire, not good enough to die, not good enough to be disabled yet premium is sky high.

However it appeals to those taken by sweet talking agents who haven't a clue what they are selling. Most agents are blind sheep mislead by greedy shepherd.

Whatever happened to honest agents promoting pure life protection policies?

Well, selling such mundane life policies results in no flashy big car, no MDRT, no frequent trips, no recognition / awards. What's there to motivate to sell such policies? Besides, prospect hear life insurance sure run faster than a speeding train.

Selling savings policies sounds better to the prospect (prospect are always greedy for easy money, interest better than FD). Besides the case size can be bigger. So easy money equals to big flashy car, frequent trips, more awards and recognition and so forth.

Who want to buat kerja bodoh?

In the end, consumers are the biggest losers in this game of greed. Second to lose are the sheep agents who cannot promote to a shepherd himself and cannot tahan anymore with the situation, ala looking for new sales every year.

Not all agency are like what I described but a vast majority are. So many friends who joined the insurance and so far only 2 survived to today. The rest all hangus.

+1

"It isn't known as interest" That's all I wanted to hear.

I disagree that all the customers are greedy. Some are just people who severely lack financial knowledge and listen to these hacks for advice. Could be young people who just starting a career or old people who just want to leave some money for their descendants.