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SimpanDuit
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9 months ago
in Investment-Linked Insurance Policy: Insurance Charges- Final Part on Meshio.com - a Malaysia personal finance blog
You can do the same thing with any investment-linked plans, be it conventional or takaful, provided that :-
1) There is a rider called "Top-Up" Rider, which operates as a lump-sum investment rider.
2) You know it helps to cut down service charges for the initial 6 years only. So if your policy is 7 years or above (or in some companies 5 years or above), there is no point in doing so.
3) You always check cash-value of your I/L policy each year so that policy does not become insufficient to pay insurance charges and lapse.
1) There is a rider called "Top-Up" Rider, which operates as a lump-sum investment rider.
2) You know it helps to cut down service charges for the initial 6 years only. So if your policy is 7 years or above (or in some companies 5 years or above), there is no point in doing so.
3) You always check cash-value of your I/L policy each year so that policy does not become insufficient to pay insurance charges and lapse.
1 year ago
in Investment-Linked Insurance Policy: Insurance Charges- Final Part on Meshio.com - a Malaysia personal finance blog
Another way to save on Insurance charges in ILP, is by dumping a lump-sum of money into a "Top-Up" rider (lump-sum investment rider). Since ILP has its unique feature of premium holiday (where you can pause payment for a period of time), you can use this feature to your advantage.
For example, Mr SmartAss (age 35) pays RM100 per month for RM250,000 death & disability coverage, with RM7,000 funeral expenses coverage from MAA Takafulink. He first paid RM100 x 2 months, to get the policy approved. He then, uses the "top-up rider" and dump in RM10,000 and stop paying the rest of the regular premium of RM100 monthly.
That RM10,000 will be put into the lump-sum investment rider, same as putting money into unit trust.
For coverage of RM250,000, it cost from RM330 per year only for age 35 (even cheaper than the rate given in the above table). For funeral expenses coverage of RM7,000 (whereby RM2,000 is paid within 24 hrs, and additional RM5,000 later), the insurance charges is only RM10 pear year. Policy fee (management fee for policy) is only RM5 per month (RM60 per year).
Hence, your total cost is only RM330 + RM10 + RM60 = RM400 per year as compared to paying RM1,200 per year, having to pay up to 60% service charge (to pay agents commission) and other charges.
The returns from your investment (bonus unit) can someway subsidize the cost of insurance charges each year. Hence, making your ILP insurance, work harder for you, instead of working hard to pay agent's commission.
** This time coming from me, an insurance manager some more, LOL **
For example, Mr SmartAss (age 35) pays RM100 per month for RM250,000 death & disability coverage, with RM7,000 funeral expenses coverage from MAA Takafulink. He first paid RM100 x 2 months, to get the policy approved. He then, uses the "top-up rider" and dump in RM10,000 and stop paying the rest of the regular premium of RM100 monthly.
That RM10,000 will be put into the lump-sum investment rider, same as putting money into unit trust.
For coverage of RM250,000, it cost from RM330 per year only for age 35 (even cheaper than the rate given in the above table). For funeral expenses coverage of RM7,000 (whereby RM2,000 is paid within 24 hrs, and additional RM5,000 later), the insurance charges is only RM10 pear year. Policy fee (management fee for policy) is only RM5 per month (RM60 per year).
Hence, your total cost is only RM330 + RM10 + RM60 = RM400 per year as compared to paying RM1,200 per year, having to pay up to 60% service charge (to pay agents commission) and other charges.
The returns from your investment (bonus unit) can someway subsidize the cost of insurance charges each year. Hence, making your ILP insurance, work harder for you, instead of working hard to pay agent's commission.
** This time coming from me, an insurance manager some more, LOL **
1 year ago
in Investment-Linked Insurance Policy: Insurance Charges- Final Part on Meshio.com - a Malaysia personal finance blog
Actually, ILP is not necessarily a bad tool for the public. It's all depends on a person's insurance planning, whether he wishes to cover his whole-life (up to age 100) or focussing more on covering "working period" (period when he is busy working, generating money). This can be up to age 55 or 60 to most people.
For those taking ILP, paying low premium and getting higher coverage, like RM100 monthly for RM250,000 death & disability coverage (at age 35), they are actually using ILP to replace Term Insurance (or Level Term). ILP can be cheaper than Term Insurance, if you are dealing with the right company like MAA Takaful (where coverage can be pushed as high as you want, as long as your cash value is enough to cover the insurance charges).
At low return of 2-3% per year, this ILP policy can last up to 20-25 years (enough to cover working period), and some more, still have some cash value in return, especially if the rate of returns is higher.
Hence, you can invest the rest to accumulate wealth.
For those taking ILP, paying low premium and getting higher coverage, like RM100 monthly for RM250,000 death & disability coverage (at age 35), they are actually using ILP to replace Term Insurance (or Level Term). ILP can be cheaper than Term Insurance, if you are dealing with the right company like MAA Takaful (where coverage can be pushed as high as you want, as long as your cash value is enough to cover the insurance charges).
At low return of 2-3% per year, this ILP policy can last up to 20-25 years (enough to cover working period), and some more, still have some cash value in return, especially if the rate of returns is higher.
Hence, you can invest the rest to accumulate wealth.
