small change, invest, Dec 13, 2009, thesundaytimes
by Ignatius Low
Buying policies: Don't go with the flow.
Main points that I strongly agree with:
- Don't just let the FA assume that you will eventually need to raise a family and you want a hassle-free way to invest your money
- Must fully understand that traditional Whole Life plans, the relatively high premiums are partially used to provide the cover, but the rest are invested in a fund that pays returns. This is why the policy eventually breaks even and later has a cash value that you can take out.
- Don't buy simply because you are young under the impression that it was cheaper if they started young. Yes, it is true that you lock in lower premiums when you buy a policy in 20s. But, for many people, a true understanding of their needs in life doesn't come until they are more mature. Is it worth that discount to get locked into a policy that may not suit you? Or is it better to wait a few years until you have a clearer view of yourself, your investment skills and the products on offer before you commit?
- Insurances are long-term products that need to be serviced for years, and often decades. And it would be tragic to chalk up these costly commitments for the wrong reasons.
- Don't buy from anyone towards whom you feel an obligation
From my own personal insurance experiences, I didn't manage to escape from "Don't buy from anyone towards whom you feel an obligation". I think I finally signed on the dotted line more of an obligation as they are my relatives and close friends and helping them to meet their sales target so they could move up in their insurance career.
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