Many people asked me about their existing life insurance policies - should they keep it or terminate the policy? In many cases, the policies were bought for them by their parents and are now transferred to them to pay the premiums. My usual advice is, "Keep your existing policy. You have already incurred the high upfront cost. Going forward, it should provide you with a modest return. "
However, if they have difficulty in paying the premium or they have better options to invest their savings, they can consider terminating the existing policies. Before they do so, they should calculate the return on the existing policy for the next five years. Read this FAQ.
They should think carefully before they put in more savings in a new life insurance policy. They should NEVER terminate any existing policy to buy a new policy - as it means incurring the high upfront cost all over again. They should avoid the insurance agent who makes this recommendation as the agent usually wants to make commisison at the expense of the client.
Some of these tips are given in my book, Practical Guide on Financial Planning.
Tan Kin Lian
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