Should I terminate an expensive ILP bought from a friend?

I received an email from a reader on an ILP she bought and I am going to share an edited version here.

Please remember that life insurance is essential but the cost of insurance should be kept low.

Hi AK,

I have recently started to read your blog and I really appreciate how you post unbiased financial advice for your readers. As such, I am really hoping you can help me with this dilemma that I have.

I have graduated last year and bought an ILP from my friend. I am investing $xxx every month into this plan for about x months now. This is a 30 year plan, and recently I'm having second thoughts about whether to continue this plan or not. 

...

I was wondering if I should discontinue the plan (because the costs are exorbitant) and invest the money myself in the OCBC BCIP, or should I just lower my contribution to $xxx a month since that is the minimum amount. Because if I cancel the plan now, I would have lost the (money) that I put in already. Please advise! Thank you in advance!

Warmest regards,

AK's reply:

Hi,

......

I wouldn't touch ILPs with a 5 feet pole myself.

Since you have come to the realisation on your own that the cost of having an ILP is exhorbitant, you might want to cut your losses instead of throwing more money into the plan. Just a thought. Not advice.

Do a comparison to see how much money you would save if you were to buy term life instead to enjoy the equivalent amount of coverage. You could invest the savings using a program like OCBC BCIP which you have identified.

I am not giving any advice. Just sharing my thoughts. :)

Best wishes,
AK


I think that this is quite a fortunate case as the reader realised quite early on how expensive the ILP actually is and is thinking of taking steps to remedy the situation quickly now. Others could be less fortunate.

Before signing on the dotted line of any proposal, it is important to read every word, sentence and paragraph carefully. Do the necessary due diligence. Then, make a well informed decision. 

If we don't understand something, make sure to clarify. If we are still confused, do not accept the proposal. Walk away.

Cultivate this habit and it will guard us against unnecessary expenses and angst in all aspects of life, not just with life insurance proposals or shopping in Sim Lim Square for the latest iPhone.

Related posts:
1. Term Life Insurance: Why buy term?
2. How much term life insurance should fresh grads have?
3. Free ILPs or Term Life Policies?
(Warning: This is highly controversial!)

Should I put money in a foreign currency fixed deposit?

Long, long time ago, I was attracted to the high interest rates of a foreign currency fixed deposit. 

Upon maturity, the interest received was not even able to cover the exchange rate loss. 

Ouch.

不好玩





No more such adventures for me. 

Once bitten, twice shy.

Even now, why do banks give higher interest rates for foreign currency fixed deposits in A$ but a lower interest rate for US$? 

Why? Why?





Clue:

Unlike a fixed deposit in S$, there is no bao jiak with fixed deposits in a foreign currency. 






Well, for us living in Singapore anyway.

Note: 
Just the view of a local frog in a local well on an island called Singapore.

Related posts:
1. Why fixed deposits?
2. Special chests for emergencies.

References:
1. Australian dollar drops to 5.5-year low after ECB move.
2. POSB 1.88% FD for 12 months.