If given a choice to properly plan for yourself, would you trust a Book that touches on the topic of what you need to know about Insurance Products or a Financial Planner who is not a newbie in the industry and qualified to give proper advice? Or would you have the combination of both?
And if you are amazed by what is being asked above, it’s not something new as there are people who plan for themselves with the help of a book. Though there’s nothing wrong with that because there are some good books that give you proper advice and even proper steps to work through your budget to sorting out your priorities to knowing what’s the order of importance in terms of getting an insurance plan.
The only concern that one may have is grabbing hold of a book that do not really guide the reader much but only list down on what’s the highly recommended insurance plan(s) in that author’s point of view and penalizes the other types. For example, I came across an author who only endorses Term Insurance, penalizes Whole Life Insurance and favors a particular type of Stock Investment in the book.
A Client Who Followed That Book And Did Changes
I have the real-case experience of having a Client who contacted me to request for a termination of the child’s Whole Life Insurance after it has been in-force for the past five years and another five more years to go before that client stops paying for that policy for the child – just because that client has read that book that says Whole Life Insurance has high expenses and fees built-in and the client is expected to face heavy losses should the policy continues…
I advised that should the client really decide to terminate that policy, the client would expect to suffer heavy surrendering charges which can amount to 60 – 70% of what was being paid till date. The client says it would be best to follow that book and confirmed that it would be best to terminate it and suffer the initial bit of losses.
Another colleague did helped to persuade that client but seemed like the client has really made up the mind and that policy was terminated on that date.
What Can You Learn From This Particular Incident
If a book is written to share the Author’s Point of View – it’s better to consult on what’s being shared in it with one or maybe a few Financial Planners if they agree with what’s being shared…
Here’s Three Pointers For You To Take Away:
1. Expenses & Fees Are High For A Whole Life Insurance. If you compare this to a Term Insurance, this statement holds true but in exchange you get to have some form of savings (+ enjoy insurance company’s bonuses). And if you are referring to different age groups, it gets higher as one gets older. That’s why there’s an age-old saying that it’s advisable and cheaper when you buy insurance at a younger age – such as the case for a toddler.
2. One Should Always Avoid Whole Life Insurance. If you are disciplined enough to save & grow your money and trust me – it’s not possible for everybody – I do have friends who are earning a high income but saves less than 5% of that amount for each month – you are better off without a Whole Life Insurance but with a Term Insurance for Protection Purposes. You should also avoid when you are older (even though you may not have such plan before) – as explained in Pointer #1.
3. All Whole Life Insurance Are Created Equally. If you are reading this for the first time, the answer is no if you are comparing to the Traditional Type whereby one has to keep paying the premiums till a certain age, e.g. age 85. Some Whole Life Insurance allows you to as short as 5 to 10 years and continues to protect & enjoy bonus savings for the life assured for whole life. And also, do you know that despite the many premium terms (in options like 5, 10, 15, 20, 25, till age 65 & age 85) and taking the first four options as a discussion point – you may pay lesser premium for a shorter premium term despite having the same amount of coverage. In some cases, you may even enjoy a shorter break-even time frame (which means your policy is in profits).
If you are holding on to such a book and especially if it’s a really thin book – do you notice that, just merely on Whole Life Insurance, there’s a lot of possibilities and scenarios to consider for anybody on different life stages. And if the concept of planning for yourself can be explained in such a thin book – there’s no need for Financial Planners to exist and there’s no need for one to go through a Financial Needs Analysis to understand one’s priorities and needs.