Haphazard projections

Dear Mr. Tan

I have two whole life policy proposals (from NTUC Income and Great Eastern Life).Both have sum assured of $100K and premium is payable for only 20 years to enjoy whole life coverage. I am thinking of buying the policy for my baby.

I am attracted to Great Eastern's higher annual reversionary bonus rate of $10 per $1,000 sum assured + 2% attaching bonus (compared to Income's $7 per $1,000 sum assured, compounded at 0.7% p.a.). This could explain why Great Eastern's total projected protection value of $416,000 at age 65 is much higher than Income's $263,000.

Great Eastern also has higher terminal bonus and surrender bonus rates than Income. However, Income has a higher guaranteed surrender value of $65,000 at age 65 (compared to Great Eastern's $54,000).

My guess is that this shows that Income is more confident of earning a higher yield compared to Great Eastern? However, Income's total projected surrender value of $171,000 at age 65 is much lower than Great Eastern's $226,000. Under "Reduction in Yield", Great Eastern's projected reduced yield of 4.43% at age 65 is higher than Income's 3.61%.

This is very confusing. On one hand, Income is confident of guaranteeing a higher surrender value at age 65 than Great Eastern, but Income's projections for total surrender value and total protection value are much lower than Great Eastern's.

Would greatly appreciate your advice on whether I should go for Income's Vivolife or Great Eastern's FlexiLife20. Also, can you help recommend a reliable and experienced insurance agent from Income?

REPLY

I am not able to advice on the merits of these two proposals. I do not advice buying a life insurance policy for a child.

Some life insurance companies adjust their bonuses to show attractive values at certain durations. They are not guaranteed and do not give consistent values. I do not trust these types of haphazard projections.

My advice is to buy a Term insurance policy on your own life and to invest the difference. See this FAQ:
http://www.tankinlian.com/faq/savings.html