Education Plan

Dear Mr. Tan,
I recently bought an education policy for my son. The agent said that it is the best way to save for his future education. What are the advantages of this policy, compared to your recommendation to save in an investment fund?

REPLY
The advantages of the education policy are:
a) It forces you to make regular savings over the term of the policy
b) In the event of premature death of the parent, the guaranteed sum assured plus bonus is payable (which is higher than the total savings)

The advantages of the investment fund are:
a) The maturity payout is likely to be 10% to 20% higher than the education policy
b) It gives greater flexibility
c) You can insure against premature death through a low cost decreasing term insurance.

In today's environment (comparing the cost and benefits of both options), it is better to save through a low cost investment fund, and buy term insurance to cover premature death.

If you buy an education policy, compare the return from various insurance companies and choose one that gives a higher return, due to lower expenses.