Invest separately for higher return

Dear Mr Tan,
Thanks for your great advice in your blog, I always thinking that NTUC is the best insurance company in term of its low premium compared to other companies. However, after go through your article, I start to wonder.

Recently I have just bought a living policy (VIVO life) for my wife, my son and me, I attached the policies for your reference.

Would you mind to advice me whether I should continue or cancel this policy and change to Term policy instead?

REPLY

In the table below, I tabulate the cash value for each policy at the end of 20 years (based on 3.75% and 5/25%) and the amount that you can get by investing the same premium to earn a net yield of 4.5%

policy      Annual     Cash value 20 years     Amount
              premium    @3.75%       @5.25%    @4.5%
Self          $1,454      $31,294      $34,907      $47,666
Wife         $1,217      $26,428     $29,478       $39,890
Son           $1,171      $27,105     $30,234       $38,389

You can get about $10,000 (or 30% more) more for each policy by investing separately. If you buy decreasing Term insurance to provide the protection, the cost is very low. The Vivolife policy gives a poor return due to its high expenses, which are taken away from your savings.

It is better for you to buy Term insurance and invest the difference, as explained in this FAQ:
http://www.tankinlian.com/faq/savings.html

You should have adequate life insurance cover on your life (say about 5 years of your income). You can buy a 20 year Decreasing Term or level TErm insurance.

REad this FAQ:
http://www.tankinlian.com/faq/benchmark.html

I hope that this information is helpful for you to make an informed decision.