Some people wondered why I write about the bad points of life insurance, when I had headed a life insurance coperative for 30 years.
Life insurance can be a good financial product, if it provides protection and allows the policyholder to get a fair yield on the savings. It becomes bad only when the insurance company give a poor yield to the policyholder through high charges for commission, expenses and profit.
In my book, Practical Guide on Financial Planning, I gave a benchmark on the "effect of deduction" for various durations of the policy. If you find an insurance product with an effect of deduction that is lower than the benchmark, it is a good product. If it exceeds the benchmark, the products should be avoided.
So, what is good or bad, depends on the pricing of the product and the net yield to the policyholder. When I headed the cooperative, I made sure that the policyholder gets a good yield on their savings.
Tan Kin Lian
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