Specifically, avoid those whole life insurance policies that come with a cash payment every few years. This advice comes from Mr Tan Kian Lian, the retired CEO of NTUC Income, in My Paper today.
He gave an example and computed the overall return to be just 1% per year, even with the regular cash payments reinvested at 2% p.a.
A pure whole life insurance policy (without cash payment) should perform better at 2% per year, he said.
Highlighted in bold in the article:
“Do not invest in a plan with a cash payment every few years. You get a poor return.”
Reasons cited include:
- Additional premium needed to fund the cash payments
- High commission for the agent
No wonder insurance buyers (you and I) keep getting poorer, while insurance sellers (our friendly agents) keep getting richer – the 75th-percentile financial planner makes $9,167.
I’m sure they couldn’t have made it to “million dollar round tables” and such without these “well designed” insurance products.