Real life lessons in matters regarding insurance.

This might sound familiar to some of us but I am more interested in sharing this with readers who have yet to buy insurance products or who are thinking of buying insurance products soon. Be careful.





Reader says...

Thank you so much for reading my email. More thank yous for the advice. 

I have a cousin who sold a whole life insurance to my dad (when he was 40+) for sum assured of $60,000 with CI rider. 

The monthly premium is $208 and my dad will have to pay the premiums until he turns 88 yrs old. 

Back then, I was only 20 and still studying. When my parents mentioned to this cousin (already resigned from AIA years ago), how they are going to pay as they most likely won't be working in their 70s and 80s, the cousin replied, "Your children can help to pay." Unknowingly or rather without consent, my sisters and I were in debt. 

Before purchasing the AIA whole life insurance, the cousin knew my dad had another whole life insurance with NTUC for sum assured of $25,000. 

The thing that pains me was that my cousin was starting out as an insurance agent, sales target became the motive.

Don't ask why. You just buy.

If I had the knowledge then, I would have questioned my cousin for not recommending a term insurance instead. 

For example, term insurance for sum assured of $50,000 or $100,000 until he is 70 or 75. Then the NTUC whole life ($25,000) will cover until 99 years of age. 

Of course, her commission will not be as much. Then again, what is the primary role of a financial planner?

Now my dad is 61 yrs old, I'm trying to convince my dad to cancel this AIA whole life insurance (yearly expense of $2500) and purchase a term insurance of $50,000 for the coverage period of 10 or 15 years.

Another case was my husband's brother who became a Manulife insurance agent and sold him an ILP. He has since resigned. 

In order to meet his sales target, he paid the premiums on behalf on my husband who was still in university that time. 

Now, when we reviewed this ILP policy, a total of $8000 premiums paid but the surrender value was only $5000. I told him that out of nowhere, you have lost $3000 within 5 years. 







Could have been better to put it in a bank let inflation erode or go for a holiday, which has at least some form of "payback". 

Although we felt very heart pain, at least it is a good lesson for both of us. If don't know, don't any how buy =p

Sorry for the ranting. These two cases are the best lessons learnt. 

I wish to have a good week and great health to write more posts. :) hehe 

Taken on a trip to Hong Kong:
The giant Buddha in Ngong Ping.

AK says...

I am quite happy to read your emails which put a smile on my face. :)

I am sorry but not surprised to hear of your dad and husbands' experience. 

My parents also had similar experience and the policies were all sold to them by relatives and friends. -.-"

With regards to your dad's case, unless he still has dependents, he doesn't even have to buy a term life policy till age 70 or 75. 






I don't know if you read my blog post on how I advised my dad to terminate his whole life policy because he no longer has dependents. 

We, his children, are all grown up and making our own money.

So, your dad could consider terminating his whole life policies and his cash flow will improve. 

Of course, he will probably be receiving a lump sum payment as well which he could use for a holiday or something else he has been thinking of doing. 

He should enjoy his golden years and not worry about paying for an insurance policy that has outlived its purpose. :)








The truth is nobody cares more about our money than we do.

Related posts:
1. Should I terminate an expensive ILP from a friend?
2. A true story about life insurance and grapes.
3. Consider terminating whole life insurance policies.
4. AK responds to Sumiko Tan's expensive lesson.
5. MediShield Life, free medical insurance and hospitalisation?

Saizen REIT: TKs.

When I was a soldier in the Singapore Armed Forces, I learned a Hokkien phrase with the abbreviation "TK". It was one of those inane things that I picked up during those two and a half years that somehow got stuck in my mind. If you don't know what the abbreviation is, here is a hint: It has to do with size and a part of the male anatomy. OK, no more.

Anyway, today, I replied to an email from a reader about TKs. However, these are TKs of a very different nature. These are the TKs of the Japanese business world.

Hi AK,

I am currently trying to understand more about Saizen Reit, a stock that you happen to own. Hence, I would like to ask if you could share with me the structure of the REIT. I was reading their annual report and I could not understand the jargon.

Can you kindly explain about what is the relationship between Saizen and the TK operators because I do not understand who actually owns the properties. Thanks in advance for your help. 

I am a noobie trying to learn more about this Reit and I got confused by its structure.

Warm Regards,

KF

Hi KF,

The TK structure is one way foreigners can invest in Japanese real estate. It is a typical Japanese real estate investment structure, in fact. The TK or Tokumei kumiai is a legally binding contract.

So, when we buy into Saizen REIT, we are buying into a foreign investor that has a stake in these TKs. Saizen REIT has contributed money to the TKs and has the right to share in the profits but Saizen REIT is not allowed to run the TKs. This is why there are TK operators who are actually the local operational managers in Japan.

In case you are wondering, Saizen REIT is entitled to 97% of the profits generated by the TKs.

The investors own the assets in the TK, not the TK operators. Saizen REIT has invested money and they own the assets.

Best wishes,
AK

OK, I think I am going to have some rice and "tau kee" stewed in soya sauce for lunch.

See the TK? ;p



Related posts:
1. Deeply undervalued but is it a BUY for you?
2. Saizen REIT: Still a good investment for income?