Continue existing policies

Dear Mr. Tan

I would like to thank you for your generousity in time and advice for everyone. Your blog has been an eye-opener for me.

I would like to seek your advice on my family's insurance needs. Finance has been tight for us. We have 3 regular premium ILPs that were bought 7 years ago. We are thinking of stopping the ILPs and buying a Term insurance.

My agent has suggested that we buy a life insurance policy. Do you think that this is a good idea?

REPLY

For the three ILP policies, can you find out the following:

1. What percentage of the monthly premium is invested from now onwards (i.e. after the policy has passed 7 years).
2. What are the deductions from the monthly premium to cover the policy expenses and mortality charges?
3. What is the annual charge on the investment fund?
4. What is the spread on investing each premium into the fund?

Quite likely, you have passed the period of high upfront charges. If this is the case, it is better to keep the ILP policies as an investment for the future.

I do not recommend a new ILP policy, as it incurs high upfront charges. But, if you have already incurred it in past years, it is better to continue with the policy.

I suggest that you buy a decreasing Term insurance to cover 5 years of your earnings, reducing over a period of 20 years. Do not buy the whole life policy.

You can read the FAQs here:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/ilp.html