On Thursday afternoon, I accompanied Grandaunt to NTUC Income at Bras Basah. It was almost impossible to get me away from TFL work on a weekday afternoon, with the parcels and emails always piling up. I hardly pick up calls or reply smses in the daytime, even if they are from my mother or the Husband. But it was very rare that Grandaunt needed a favour from me. At 72 and single, she has always been very independent and self-sufficient.
On top of that, I'm the only working adult in the family that understands insurance matters and have flexible working time.
Grandaunt bought an insurance policy at age 54. That was 17 years ago. So one day, when she got my mother to help her interpret a letter of insurance summary from NTUC Income, my mum told her to terminate the policy.
Reckless is the word here. My mother did not attempt to understand the policy nature, the breakeven point, the coverage of the policy and how relevant/useful it might be to Grandaunt. Mum's logic was at 72, there was no need for Grandaunt to continue paying for a policy. She said it was a burden for Grandaunt and tried to convince me that Grandaunt was keen to terminate the policy and needed the extra cash.
Knowing my mum, I was sceptical.
So on Thursday, when Grandaunt and I were at NTUC Income, we sat down with a random financial consultant in a bid to know more about what policy my Grandaunt bought. I wanted to know what it covered, the sum assured, the breakeven point, the bonuses, their growth rates and if any interest was given for the bonuses kept with them.
Took us half an hour and 3 different staff but it was a good half an hour spent.
Deciphering insurance illustration takes a lot of patience and skill for the layman who is not interested in numbers. Tons of them. It would have been easy to just ask the consultant explain everything, without pouring through the papers. But how would we know it was really everything that was said? That the consultant did not miss out anything accidentally or intentionally? I can't be sure, so I rather do the dirty work myself.
It was a life insurance policy that covered 30 critical illnesses, total permanent disability & death. Either one happen, Grandaunt can make a one-time claim. The sum assured was pathetic. Firstly, the amount of premiums my Grandaunt has paid for the past 17 years is already more than the sum assured. Continuous payment would just tip the scales further. Secondly, apart from Medishield, Grandaunt does not have any hospitalisation or surgical policy. The sum assured will definitely not be enough if Grandaunt is diagnosed with a critical illness or TPD and requires long-term medical care. Death would have been cheaper. #justsaying
Buying a life insurance policy at age 54 wasn't a wise choice, in my opinion. For the same amount of premium Grandaunt pays every month, term insurance might have been cheaper and offers more coverage. I was still schooling when Grandaunt was 54 and had very little knowledge of insurance, compared to now. I wondered what the insurance agent had in mind when he proposed this life insurance policy to Grandaunt. I hope it wasn't the huge commission difference between selling a life insurance policy and a term insurance policy.
The only benefit is the bonuses that are distributed by NTUC Income yearly.
That was the only way this policy made any sense. The thing is bonuses are never guaranteed. It is always an assumed figure that the insurer gives in the illustration, based on past performance. The past, however, does not secure the future.
For this policy, the bonuses kept with the insurer do not grow, apart from the annual giveout. This was unlike my endowment policy with Prudential, where bonuses earn a few percent interest annually if I do not cash them out.
And you know what, it's another 16 more years before the cash value (if opting for termination) exceeds the premium paid . Early termination definitely meant loss of thousands. Based on calculations of the performance of fixed deposits, bonds and even gold, my Grandaunt would have earned more if she had placed her money in these instruments for the past 17 years. Then again, the premiums paid were accumulated over 17 years and not a lump sum amount.
Yes, it might be like a saving-for-the-unforeseen thing but still this policy does not make sense to me numerically.
Coming from a low-income background, Grandaunt was bewildered at the thought of losing thousands of dollars after 17 years. So the policy remains, because of this inequality equation:
If anything happens to Grandaunt, this policy would be profitable, so to say.
It is apparent that a portion of the premiums goes to NTUC Income's investments. NTUC, like most insurers, buys bonds and other stable securities and gives back a percentage of the returns to its policyholders in the form of bonuses. This reminds me of investment-linked policies (I never believe in those), except you don't get to choose the funds and exposure to risk is kept to the lowest.
Buying life insurance is not a way to grow your finances. It is to protect your finances if anything happens to your health. Life insurance should not be bought based on projected figures. It should always be based on what is guaranteed.
17 years ago, it would have made more sense if Mr Insurance Agent has recommended term insurance + hospitalisation & surgical policies to Grandaunt. Because along these 17 years, Grandaunt has done 2 operations which cost her thousands of dollars. Yet, she can't claim from her insurer because there is no critical illness.
So gals, before you buy anything for yourself or your parents, do your research carefully and understand your needs thoroughly.
After the financial consultant was done explaining Grandaunt's policy, he waited at the sides for a while before coming up to me and asked, "Miss, by any chance, will you be considering buying a savings policy?"
I smiled back at him and shook my head.
It was savings policy that he asked. He didn't offer to do a financial assessment for me, to see if I'm adequately covered in critical aspects. I don't know if that crossed his mind or he would ask later on, if I had agreed to speak more with him.
I understand the need for sales staff to be proactive. With the carrot dangling in front, every agent is bound to say his company's policy is good enough or better than the rest. That may or may not be true.
And I worry how the average consumer will know. Especially the older folks.
On top of that, I'm the only working adult in the family that understands insurance matters and have flexible working time.
Grandaunt bought an insurance policy at age 54. That was 17 years ago. So one day, when she got my mother to help her interpret a letter of insurance summary from NTUC Income, my mum told her to terminate the policy.
Reckless is the word here. My mother did not attempt to understand the policy nature, the breakeven point, the coverage of the policy and how relevant/useful it might be to Grandaunt. Mum's logic was at 72, there was no need for Grandaunt to continue paying for a policy. She said it was a burden for Grandaunt and tried to convince me that Grandaunt was keen to terminate the policy and needed the extra cash.
Knowing my mum, I was sceptical.
So on Thursday, when Grandaunt and I were at NTUC Income, we sat down with a random financial consultant in a bid to know more about what policy my Grandaunt bought. I wanted to know what it covered, the sum assured, the breakeven point, the bonuses, their growth rates and if any interest was given for the bonuses kept with them.
Took us half an hour and 3 different staff but it was a good half an hour spent.
Deciphering insurance illustration takes a lot of patience and skill for the layman who is not interested in numbers. Tons of them. It would have been easy to just ask the consultant explain everything, without pouring through the papers. But how would we know it was really everything that was said? That the consultant did not miss out anything accidentally or intentionally? I can't be sure, so I rather do the dirty work myself.
It was a life insurance policy that covered 30 critical illnesses, total permanent disability & death. Either one happen, Grandaunt can make a one-time claim. The sum assured was pathetic. Firstly, the amount of premiums my Grandaunt has paid for the past 17 years is already more than the sum assured. Continuous payment would just tip the scales further. Secondly, apart from Medishield, Grandaunt does not have any hospitalisation or surgical policy. The sum assured will definitely not be enough if Grandaunt is diagnosed with a critical illness or TPD and requires long-term medical care. Death would have been cheaper. #justsaying
Sum assured < premiums paid over 17 years
Buying a life insurance policy at age 54 wasn't a wise choice, in my opinion. For the same amount of premium Grandaunt pays every month, term insurance might have been cheaper and offers more coverage. I was still schooling when Grandaunt was 54 and had very little knowledge of insurance, compared to now. I wondered what the insurance agent had in mind when he proposed this life insurance policy to Grandaunt. I hope it wasn't the huge commission difference between selling a life insurance policy and a term insurance policy.
The only benefit is the bonuses that are distributed by NTUC Income yearly.
Sum assured + bonuses accumulated over 17 years > premiums paid
That was the only way this policy made any sense. The thing is bonuses are never guaranteed. It is always an assumed figure that the insurer gives in the illustration, based on past performance. The past, however, does not secure the future.
For this policy, the bonuses kept with the insurer do not grow, apart from the annual giveout. This was unlike my endowment policy with Prudential, where bonuses earn a few percent interest annually if I do not cash them out.
And you know what, it's another 16 more years before the cash value (if opting for termination) exceeds the premium paid . Early termination definitely meant loss of thousands. Based on calculations of the performance of fixed deposits, bonds and even gold, my Grandaunt would have earned more if she had placed her money in these instruments for the past 17 years. Then again, the premiums paid were accumulated over 17 years and not a lump sum amount.
Yes, it might be like a saving-for-the-unforeseen thing but still this policy does not make sense to me numerically.
Coming from a low-income background, Grandaunt was bewildered at the thought of losing thousands of dollars after 17 years. So the policy remains, because of this inequality equation:
Sum assured + bonuses accumulated over XX years > premiums paid
If anything happens to Grandaunt, this policy would be profitable, so to say.
It is apparent that a portion of the premiums goes to NTUC Income's investments. NTUC, like most insurers, buys bonds and other stable securities and gives back a percentage of the returns to its policyholders in the form of bonuses. This reminds me of investment-linked policies (I never believe in those), except you don't get to choose the funds and exposure to risk is kept to the lowest.
Buying life insurance is not a way to grow your finances. It is to protect your finances if anything happens to your health. Life insurance should not be bought based on projected figures. It should always be based on what is guaranteed.
17 years ago, it would have made more sense if Mr Insurance Agent has recommended term insurance + hospitalisation & surgical policies to Grandaunt. Because along these 17 years, Grandaunt has done 2 operations which cost her thousands of dollars. Yet, she can't claim from her insurer because there is no critical illness.
So gals, before you buy anything for yourself or your parents, do your research carefully and understand your needs thoroughly.
After the financial consultant was done explaining Grandaunt's policy, he waited at the sides for a while before coming up to me and asked, "Miss, by any chance, will you be considering buying a savings policy?"
I smiled back at him and shook my head.
It was savings policy that he asked. He didn't offer to do a financial assessment for me, to see if I'm adequately covered in critical aspects. I don't know if that crossed his mind or he would ask later on, if I had agreed to speak more with him.
I understand the need for sales staff to be proactive. With the carrot dangling in front, every agent is bound to say his company's policy is good enough or better than the rest. That may or may not be true.
And I worry how the average consumer will know. Especially the older folks.
A random picture to end off this post! I love parcel posting at the airport! Long opening hours + No heavy lugging with the readily available trolleys, no matter how many bags I have! Woohoo!
Metta,
欣雨 Xinyu
