If you're immersed in this section long enough you'll know that there's a huge debate regarding Insurance policy as a method for investment and savings whereby I for one doesn't agree. I buy insurance not for savings or investment. I buy because of protection, I never expect returns or money back.
Go ask a CFP and seek their opinion. Most that I come across would say Insurance is for protection and not investment/savings. Currently KMDC is giving out course of CFP and I know some friends currently attending Module 2 - Risk Management & Insurance Planning.

True....but ppl fail to see that in investment and savings (especially savings) the term liquidity is at utmost importance. Thus I also seldom advise on "flipping of properties" as a smart investment tools.

Why we term savings as savings is not because you do not need to use that money so you pack it up and saves. Savings is needed in case of emergency. Thus liquidity is not there in Insurance or it's not flexible enough to be termed as "savings". In hard times, we would rely on our savings to live. Thus save less or next to nothing and constantly withdraw from our savings. Insurance plan cannot provide that unless you already have sufficient "cash value" which take years to build. So in a way, one looses both his protection and "savings" because he cannot afford to pay for it; as combination of this "all for 1 package" usually is not cheap.

Regarding investment, there's a lot more vehicles that can generate more ROI than these insurance packages and at the same time offer more flexibility in cash out (liquidity). Maybe you're right in a lot of ppl are just too lazy to search. In a certain way, insurance agents are to be blamed; but I do come to my senses that it's their job whereby they rely on that income generator to live. They cannot be telling the clients the whole truth and risk loosing their clients and commissions to survive.


Anyway, back to the topic of over insured.
If a large portion of one earning goes to insurance and left nothing for "savings" than that's over insured.
Or when sometimes one felt burdened by paying their insurance than that's a very clear sign of over insured!
I've seen many ppl who are burdened by their insurance premium. Especially those that pay through credit cards. And It's because of paying via cards that I disagree that it's savings. Investment and protection yes....but never in my terms I would recognised insurance as "savings".

Did you read. I never say no insurance. Insurance is for protection which is for the cases whereby you mentioned above.
Savings is for emergency....when you hit recession, when you're layed off, when someone in your family needs money, when you need money, when you want to buy house, when you need to get married, when you plan for oversea trips etc...
(btw, I haven't even go long winded about the utmost importance of emergency fund)
Tell me what can insurance do in this condition.
Thus I disagree with treating insurance as savings, and especially despise when the word "force savings" is being used! End of story. You may do an own survey by asking CFP's opinion.
Thus I did mention there's a lot of hot debate on this definition.

Btw, while you quoted my statement:
"Why we term savings as savings is not because you do not need to use that money so you pack it up and saves. Savings is needed in case of emergency. Thus liquidity is not there in Insurance or it's not flexible enough to be termed as "savings". In hard times, we would rely on our savings to live. Thus save less or next to nothing and constantly withdraw from our savings. Insurance plan cannot provide that unless you already have sufficient "cash value" which take years to build. So in a way, one looses both his protection and "savings" because he cannot afford to pay for it; as combination of this "all for 1 package" usually is not cheap."
You never talk about the liquidity part and the chance of both losing his protection and "savings" portion which I mentioned.
So any insights on that?

And if possible, I guess you may correct me also in my last statement which was not in your quote:
"Anyway, back to the topic of over insured.
If a large portion of one earning goes to insurance and left nothing for "savings" than that's over insured.
Or when sometimes one felt burdened by paying their insurance than that's a very clear sign of over insured!
I've seen many ppl who are burdened by their insurance premium. Especially those that pay through credit cards. And It's because of paying via cards that I disagree that it's savings. Investment and protection yes....but never in my terms I would recognised insurance as "savings""
Since you talked about credit card debts and bad financial discipline. So if the guy doesn't have any discipline to save in banks and are card slaves, insurance "forced savings" would help him?!

This post has been edited by b00n: May 9 2008, 11:31 PM

Ask a real CFP which do not have any obligation to sell any product from whichever insurance/finance company and see what are their thoughts.
Every sales person nowadays in the field calls themselves financial planner. But would they introduce products that are not sold by their company? I do not blame them as it's their rice bowl. How many agent you came across advised on "emergency fund". How many agent you came across really sit down and help you calculate your monthly expenses vs your salary and say...."here, this is the max you can 'invest' if you want to".

g00glesYYl, what we're saying is that there's still a lot of investment method out there that gives better return in years as compared to Insurance. yes, insurance can gives profit as investment and it's like how we always compare with FD returns.
Now replace <FD> with <insurance> compare against other investment vehicle. Or if one is crazy enough, do try and compound FD returns for 30 years and see whether or not the return is really that bad.

EG:
If one puts 10,000 into FD and rack the return for the next 30 years without taking it out at constant 3.7% annual interest rate:
FV(3.7%/12,12*30,,-10000) = 30,291.81 = 202.92% = 16.91% per annum
Not a bad return at all!! (So why is everyone complaining that FD is not worth it?)

The point I want to make here is by looking at this calculation, the return is superb! But than again, how much money and how long do you need to reap that profit comes into question. Thus, for insurance and it's investment plans and also most of the investment vehicle out there, we need to factor in those components to see whether or not it's worth the purpose.

Wow, that's a first time an insurance agent not promoting ILP.
Can explain more on the risk involved for those that don't understand?

Ppl who knew my posting in regards to insurance would know that I don't prefer ILP because of the returns (other investment vehicle can produce better), and I don't like to mix protections and investment. However, the risk factor would need you to enlighten us.