invest, thesundyatime May 13, 2012. Pg 40
Risks of ILPs
Mr Bradnon Lam, senior vice-president and head of consumer investment and insurance products at DBS Bank, explained that as ILPs feed into funds, depending on the structure, some may not provide guaranteed cash values. Oftentimes, the final cash value will depend on the value of the fund that ILPs feed into.
Mr Lam also cautioned that investors have to bear the entire investment risk of the funds they buy into, unlike traditional insurance such as whole life and endowment, in which the insurer bears the investment risk for guaranteed benefits portion.
The value of non-guaranteed benefits will depend on the performance of the insurer's participating fund.
Insurance coverage rises with age. As regular premiums ILPs usually pay the insurance coverage charges by selling fund units, the liquidated amount for a fund that performs poorly may be enough to cover the rising insurance coverage costs.
In conclusion
Createwealth8888 strongly believe we should avoid ILPs at all costs as we are taking too much risks to entrust that the underlying feeding fund can perform well cross market cycles of bull and bear. During every bear market, more fund units are liquidated to pay for the rising insurance coverage charges as we age; and lesser and lesser fund units to benefits from bull market. It is really bloody dumb method of paying for rising insurance premiums as we age.
Don't ever get conned by your friendly insurance agent asking you to "invest" into ILPs. If you can't beat them, ask your friendly insurance agent to drop their comments here. Let me kick their asses!
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sad to learn this. I have a S$145/mth policy which I bought when I started work ages ago. Realized that only 1/2 goes to the funds as unit. The other 1/2 is something mortality charges & admin charges.
ReplyDeleteI hoped to cash out before it runs out of steam. Never trust these insurance agents again.
Hi CW8888,
ReplyDeleteWhat is your view on the UK Endownment investment. Was told that the yiled is 4-8%, but has exchange risk. http://www.tradedendowment.com/
Personally, I don't like this investment instrument the final yield may not be equal to the 'predicted' yield, couple with exchange risk and tie down fund during the vested period.
TKL has commented this as well. http://tankinlian.blogspot.com/2007/06/traded-endowment-policies.html
Since most of us here are working so hard to be investment savvy; why not just buy term and be our own fund mgr and save on yearly management fee?
ReplyDeleteForeign currency risk can be a double edged sword and not so easy to predict over long run.
I have bought ILP more than 10 years and recently I have received statement showing my cash value is higher than the projected 9% I have ( i have kept the print out). So I do not agreed to your statement. I only agree that if regular ilp is sold as pure short term investment program is a pure "no no" (basically misled).
ReplyDeleteHi DS,
DeleteIn any kind of "investment", there will always be a small minority who will make some money.
Ask those made some money in our Singapore great "investment scheme" by Sunshine Empire. What happened to the rest of other investors?
Read again. It is the method of paying premiums that is worrying!
Createwealth8888 strongly believe we should avoid ILPs at all costs as we are taking too much risks to entrust that the underlying feeding fund can perform well cross market cycles of bull and bear.
During every bear market, more fund units are liquidated to pay for the rising insurance coverage charges as we age; and lesser and lesser fund units to benefits from bull market.
It is really bloody dumb method of paying for rising insurance premiums as we age.