Hey there, come closer!
Let me tell you a secret. No, make that 3 secrets your Banker doesn't want you to know. They will probably scream at us for this, but here it goes!
#1 It's Always About Commissions!
Ever heard your Banker "friend" saying, "I'm not here to sell you anything. But this plan is great for you. Trust me, I have helped many clients, I know what's best for you." Looking down at the benefit illustration, you see a few thousand dollar of premium staring back at you.
One advice for you, turn and run... Run really fast. Potentially you are about to buy an insurance plan that you may not actually need.
A banker performance is all about meeting the targets and deadlines given to them. You can call them Bancassurance specialist which is a fanciful way of saying Insurance sold through a bank, or financial advisor, their ultimate purpose is to earn commissions from your insurance plans.
#2 Don't worry about the high premiums! Just look at that beautiful cash value!
After signing the heaps of application forms, and passing your neatly signed cheque to the now smiling person, it will probably be a while before you will see your banker again, unless you are intending to buy another plan. Some buyer's regret creep in, and you think to yourself. At least I will get some cash value at the end.
For participating whole life plans, the cash value consists of both guaranteed and non-guaranteed values. This means, what you see may not be what you will get at the end. If the participating fund do well (the insurer's investment fund), you can potentially get a decent cash value amount. However, based on the current trend it is more likely than not you will get lesser than what was shown in the benefit illustration1. In this article by Ms Lorna Tan, she has written a very detailed explanation on the insurance policies.
Unless you have a lot of money to spare, otherwise, having sufficient coverage by using such plan will be very expensive.
#3 What do you mean overspending on insurance? You can never have too many plans!
Reaching home, you open your personal insurance folder to neatly file away the new insurance plan you have just purchased. With a quick glance, you see that you have 3 whole life plans, 10 endowments, 2 critical illness plans, and a very expensive hospitalization plan. You think to yourself, "I'm even more protected now!" and happily put that folder away.
The number of insurance plans you have doesn't tell you whether you are sufficiently covered or not. It is the total coverage amount that really matters. However, if each of the plans have sizable coverage amounts, it is possible that you can overspend on your insurance coverage.
The purpose of insurance is to offset potential financial burden to the insurance company (e.g. Death, disability, hospitalization…) if your total liabilities and the additional cash you want to leave behind amounts to $600,000, do you really need to be covered for $2 million? Do you really need 10 endowments to lock up your money, or a single endowment would be sufficient to cover your child's education needs with the rest being invested properly or placed into a separate savings account?
Just like you would not buy a 90 days travel insurance for a 4 days trip to Thailand. Don't overspend on insurance, use the spare cash to invest or save properly.
How FSM can help you with your insurance needs?
We don't just talk about making insurance affordable. We make it happen!
With 30% rebates off total commissions received, having your financial and protection needs covered just became much easier at FSM.
Our Investment Advisory team are salary-based, allowing investors to feel at ease receiving unbiased, customized investment and insurance advice specific to your needs. If you would like to seek assistance in reviewing your financial and protection portfolio, please feel free to contact them at advisory@fundsupermart.com
1Source: www.straitstimes.com/business/invest/make-full-sense-of-insurance-policies
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