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Sunday, April 20, 2008

Earn more than the rate of inflation

Hi Kin Lian,

Many people buy life insurance policies to save for their future needs. For most of them, these policies takes most of their long term savings. Why does the policies give a poor return, which is sometimes not enough to cover the rate of inflation? What can ordinary people do, to get a return that can beat inflation?

REPLY

You can read this FAQ to understand the true cost of life insurance. It is quite high, and represents a reduction of more than 4% from the actual yield. After taking this reduction, the net yield is not sufficient to cover the rate of inflation:

http://www.tankinlian.com/faq/true.html

To beat inflation, it is better to buy Term insurance and invest in a low cost investment fund. This is explained in these FAQs:

http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/low.html

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