Well... the answer to this would be NOT to buy a policy to have forced savings. I studied the investment rate of returns of most life plans and found out that they give you a rate of about 3% per annum. Inflation tends to be higher than the rate of return given by the insurance companies. In fact, you are WORSE OFF by forcing yourself to contribute to a policy. Your money is getting weaker everyday.
Solution: Buy a term policy. It is cheap, does the job of covering you in the event of unfortunate circumstances.
So why do insurance agents push life policies? Simple: It pays the highest commission. In some instances about half of the premium paid actually goes into the agent's pocket. (If you pay $200 worth of premiums a month, some companies pay up as high as $100 to the agent! This is before his bonus and incentives.) Moreover, companies need to earn their fair share as well. Where do you think they get the money to place huge bus adverts which go around Singapore everyday?
What to do with the extra money? Buy a property if you can! Property prices track inflation closely. Rentals are even bench marked closer to the economy and inflation. If you have sufficient cash on hand, you can pay off the property and live on the rental. In time the property should appreciate as well. I don't think you can pay off your life policy and then your policy value will keep on growing. If I am 30 years old I cannot tell my insurance company that I want to pay future premiums till the day I die.
I completed my Certified Financial Planner (CFP) course in 2010 and I know what I am talking about. Sorry to all insurance agents out there. Real estate is a much safer bet.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
