Wow, so many pages already. My cheap 2 cents view (can't buy anything with 2 cents already..) is that if you're that young, you don't need to buy life insurance, unless you have dependants. The life insurance is for your wife or kids to survive, not yourself (you'll be dead already).

1) Also, not sure if this is mentioned, but about 70-80% of the first year's premiums go to the agency/agent. The 2nd year, 60%-70% and the 3rd, 50%-60% until the 5th or 6th year! So if your first year premium is RM1,000, your agent & his/her agency happily gets up to RM800 in their pocket. But nothing after the 5th to 6th year. That's when most agents "disappear"... never send you happy birthday cards anymore..... Or, they call you - to start a new policy or to increase your coverage! 99% of all agents don't tell you this commission structure that they get so fat on, but read your policy - it's in there. Now you know why agents so keen to call all their friends & relatives to buy.

2) They always tell you, the earlier you buy, the cheaper it is. This is very misleading. If you don't need it, don't buy it yet - you are just wasting your money and keeping the agents very rich. Keep the money in FD or gold etc first, or when the stock market is better, invest in unit trusts or directly into blue-chip stocks (some pay good dividends too). When you need life insurance, ie get married to a wife with no income, or have kids, THEN buy insurance. In the long run, it's much cheaper this way.

a) Agents try to convince you that the premium is "cheaper" when you buy earlier. Sure, you might pay RM1,000/year at 20 instead of RM1,500/year at 25. But you would have wasted RM5,000 from 20 to 25 for coverage that you don't need!

b) They also try to say that part of the RM5,000 will be invested and you will have returns. When they show you the impressive chart of returns, it's usually based on some fantastic estimated figure like annual 10-20% returns (which will be impossible this year, look at the stock market.). Also, the returns will have many fees deducted - administrative fee, policy fee, management fee. Check for these extra charges. Prudential lists these, not sure about others, they might not be listed, but they're there. It might add up to a whopping 4%-6% off your "returns".

c) And, the actual cost of coverage always increases with age. It's just mathematical - when you get older, you are more likely to die. They just "hide" it by keeping your premium the same. As mentioned, they invest a portion of your premium, and the returns are used to offset the higher cost of covering you. But if the returns are not enough, then expect that they will increase your premium as you get older. They might be some "guarantees" that the premiums will never increase - but of course, you don't get a free lunch. These premiums are higher to begin with. Much like your bank "capital-guaranteed" structured products.

I have nothing against life insurance though. It's a lifeline for dependents. But if you don't have dependents yet, you really don't need it. It's like buying baby powder 5 years before you even have a kid.

There is a very special situation where life insurance might come in handy even if you don't need it - as a tax saver. If you know your taxable income every year is RM75,999 after all the deductions you can take (books, sports equipment etc) - then just buy a RM6,000 policy. Wham! You are knocked down from the RM70,000 tax bracket (24%) to the RM50,000 one (19%). You pay 5% less tax on RM69,999, and essentially don't have to pay 24% on that RM6,000. Of course, if every year you make RM70,500, then no sense to buy insurance, just donate RM501 to charity and save 5% on tax. Cheem, right? Check with your accountant though, don't let these rotten people take your money and waste it on angkasawans or stupid projects.

Medical insurance is a different matter...

Any dissenting views?

This post has been edited by hspace: Jul 10 2008, 10:12 AM