Ask the right questions

A reader was given a Benefit Illustration for a life insurance policy (PayMyUni). He did not understand the product and asked for my advice.

The Benefit Illustration contained many pages of information. It is quite complicated to read through the details. Most of the information are not relevant to the consumer who has to make the decision.

The consumer should ask a few questions to the financial adviser:

1. What is the amount that I can get back at the end of the term, based on a projected yield of 3.75% and 5.25% p.a. ?

2. What is the amount that I can get by investing the same premium over the same period to earn 4% p.a. ?

If you buy Term insurance (and spend 5% of the premium) and invest the remaining 95% in a low cost investment fund, you should be able to earn a net yield of at least 4% p.a.

The insurance agent will tell you a lot of other information, that are usually irrelevant to your decision. You should not be distracted by the sales talk. You should focus on getting the relevant figures for your decision.

My advice is to avoid all life insurance products sold by insurance agents, as they have high expenses. To save for a child's education, you can follow the tips here:

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