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"Is this ILP good for my mother?"

Saturday, September 16, 2017

Reader:
My mum's insurance agent sent this. Would you consider this ILP? It's also being marketed at an event at the sports hub...







AK:
Generally, I would say to anyone not touch ILPs even with a 5 feet pole. 

However, ILPs are especially unsuitable for older people as the cost of life insurance jumps after age 55 and from age 60, it becomes very costly. 

This is because mortality risk increases as we age.

In an ILP, the cost of insurance is deducted from the policy value by selling units. 

As we age, the cost of insurance goes up and in our golden years, it goes up more rapidly.

So, imagine units in the ILP being sold down more rapidly to pay for the cost of life insurance as we age.

Unless the unit price of the ILP goes up more rapidly and significantly than the increase in deduction, when the value of the ILP becomes zero, the insurance coverage is terminated.






In my opinion, this particular insurance agent who is trying to sell the reader's mother an ILP does not have her interest at heart.

It is no secret that ILPs are probably the most lucrative products available to insurance agents.

So, I am not surprised that less scrupulous agents would try to sell them to any Tom, Dick or Harry or, in this case, Mary.

Related posts:
1. 20 years and $29K.
2. Reader regrets ILP.

6 comments:

Laurence said...

AK's all-encompassing, eternal adage applies as always:

"Nobody cares more about our money than we do. Don't ask barbers if we need a haircut."

Laurence said...

Prospective customers for insurance policies can expect your friendly insurance agents to call you for a chat after this news below. Surely some charitable clients need to be found to fund the $100m right?


What Happens When Insurance Agents Are Paid Huge Sum Of Money To Join Another Company?

AK71 said...

Hi Laurence,

For sure, the agents who left GEL to join AIA because of the incentives will be pressured. They will have to meet new sales quota or have their incentives clawed back. There is no free lunch in this world especially when the lunch costs millions of dollars.

Laurence said...

Found a useful article that highlights the world of deceit out there:

4 Half-Truths Insurance Agents Say To Convince You About ILPs

Laurence said...

Everyone keeps harping on disruptive innovations such as Uber/Grab, AirBnB, Trivago, Redmart, etc, etc that are sending traditional businesses such as Comfortdelgro to the same graveyard as the Titanic.

But what we really need the most now which I've not heard people clamoring for, is a disruptive innovation that will send our highly paid insurance agents into permanent retirement.

Laurence said...

Am I the only one who thinks that some policies sold by insurance companies nowadays are bordering on ridiculous, maybe even downright absurd?
I can't see why anyone would feel a need to buy any policy similar to the one below, not to mention bestowing a big bonus to the agent in the process:

Great Eastern's 3-year 2.05% endowment plan selling well: company official

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