QUOTE(honwhy05 @ Mar 31 2009, 09:50 PM)
2) Another popular product promoting by insurance companies is children education. Generally it works this way. You pay certain amount of RM, your child will get protected and in return you get XYZ after number of years.
My personal opinion is this product is absolutely diverted from the original objective that is children education. Here is why
a) You pay premium for the insurance policy, so that you can have a lump sum when your child needs the money in let say 15 years time. The amount you paid will be compensated with a 4% max return(refer below)
b) If you invest the same amount of money in other investment (Certain risks), you can get more that 4% return in average...(Diclaimer here)
PLEASE TAKE NOTE THAT INSURANCE IS PURELY MEANT for protection. As the industry grows, insurance companies came out with variety of products that bundle saving, retirement, education to allow agents to earn commission and survive. As far as we as a consumer is concerns, you buy insurance for protection, i repeat protection. If you objective is to saving, or retirement or children education, kindly look at other investment tools like unit trust, shares, gold, etf etc. which can give you many times return that your insurance policy...
I agree with some of the points posted by honwhy05. But I don't think the same about life insurance for children's education purpose.
Why is life insurance (endowment plan) for education purpose very important?
There is a newly born baby. If his parents die when he is only one years old, the banks will not help the baby to do saving for him. The unit trust agent will not help the baby to do fund switching to maximize his return. But, insurance companies will help him to save money provided that his parents attach a rider called payor benefit to the life insurance. In other words, the baby doesn't have to pay premium (insurance companies pay it) and the saving process will continue until the plan matures in the future. I can't think of a financial product that provides this benefit except insurance.
Unit trust is a very good investment provided that we are quite familiar with it. I don't think unit trust can be used as an education fund for our children. Unit trust involves risk. So, we can't guarantee that we can sell it at a good price by the time we want to use the money for our children's education. We can't guarantee that the recession happening now is not going to happen again in the future.
If the parents will not die or become disabled for sure for any reason, I think insurance is not important at all. They are able to earn income to take care of their child forever until he becomes independent. Unfortunately, we don't know what will happen to us tomorrow or later. If they die in a road accident and they buy life insurance for their child, I think it will be the last and the most precious gift they can give to their child before they leave the world.
Full-time insurance agents depend heavily on commission. I don't think it is wrong to sell life insurance and other types of insurance to consumers as long as the consumers know and understand what they buy and the agents have done all their duties responsibly.
Mar 7 2009, 01:22 AM
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