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Financial Planner

Planning For Your Children’s University Education With A Limited Pay Endowment Plan

If you are serious in planning for your children’s University Education with an Endowment Plan, do you know that beside the traditional or usual types of plans that ask you to:

  • Pay For ‘X’ number of years for the same ‘X’ years of coverage term
  • Pay For ‘X-5’ number of years for ‘X’ years of coverage term plus the option to withdraw a certain percentage of the  Sum Assured for the last three years (meant as a form of using it to service the child’s first year followed by second to third year of university education)…

There’s another type of Limited Pay Endowment Plan that allows you to service like 5 years only and the plan continues to the end of the coverage term (and most importantly… the maturity return can be like 40% – 60% potentially higher than those plans mentioned above)?

If you are unaware and you are interested to know more, do continue to read on…

What You Need To Know About This Type of Limited Pay Endowment Plan

As mentioned, the main attractive feature of this type of Limited Pay Endowment Plan is that you need to service like 5 years of Premium Term and the plan continues to enjoy the insurance company’s annual bonuses till the end of the coverage term (usually in the range of 15 years and beyond)

The next attractive feature is that the returns can be potentially higher than most of the usual endowment plans, including those termed as Education Funding Plans. And this is despite the fact that the total premiums paid for this versus others are mostly the same!

How Can This Type Of Limited Pay Endowment Plan Get You Potentially Higher Return?

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The Cons Of Having Many Of The Same Policy Types

This post is a response to one of the readers who has recently posted a comment on this post. Therefore I do hope that, with this post, I can help to bring out some pointers on the cons of having the many of the same insurance policy types…

When Are There Cons To Having Too Many Of The Same Policy Types?

The existence of cons depends on the terms and conditions stated by various insurance companies. So it is always better to check with the Financial Planners representing each of them. Things worth checking out:

#1 The Maximum Amount Of Insurance Coverage

Some insurance companies tie the maximum amount of insurance coverage against Death and/or Critical Illnesses against a factor of one’s annual income. For example, some insurance companies may set 16 – 20 times of annual income as the maximum sum assured for a whole life or term insurance. So if you are earning $100,000 per year, the maximum amount of insurance coverage that you can get may be set as $2,000,000. Any amount beyond that may mean that you are over-insured and insurance companies may just pay up to that limit.

If you are thinking that it’s unfair since you have the means to pay the premiums, but do think of people who may take advantage, e.g. a person deeply in debt and unemployed but has some savings to tide him over… he decides to get a $1 million dollars term insurance to cover himself and he decides to commit suicide after a year (of which the premium paid is just a few thousands). This will be unfair to the Insurance Company and to the pool of policyholders, do you agree?

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Why Most Singaporeans Will Never Get Enough Insurance Coverage

If you are a Singaporean, you will definitely have read that for the last few years, the newspaper has been stating that most Singaporeans are under-insured by as much as $100k – $200k, given that the average insurance coverage that one should get to protect him/her against unforeseen circumstances like Death, Permanent Disability should be around $450k+…

This Situation Will Not Improve For Years To Come – Financial Planner Version

I was speaking to my ex-colleague some time back and she was highlighting that there’s been a change in the sales requirements (or in their context, the minimum sales amount they need in order to stay in that job). Their requirements would need them to “sell” at least $15,000 (and above) of annual premium, $100,000 (and above) of single premium and around $5,000 of annual premium in Investment Plans…

If you are able to hit these amount and go beyond, you will be look upon by your sales manager and group sales director and you will get rewarded with more perks and benefits. If you are way below these amount, you may lose your job, get invited to a one-to-one sales motivational talk by your manager or be made to attend “sales clinic” to improve your selling skill…

Looking at the range of insurance plans that a Financial Planner can recommend, e.g. a Whole-Life Plan vs Term Insurance Plan and a person who really need some form of insurance coverage, e.g. Critical Illnesses… which of the above plan will the Financial Planner recommend? Make a guess… if you have talked to Planners before, you will definitely see a trend… they will recommend the Whole Life Plan… they know you need the coverage and they will do some planning for you and suggest a minimum sum assured of $100,000.

For a typical 30 years old guy, working and healthy, the average monthly premium for a whole life insurance plan can be at the range of $200/month or $2,400/year. If that guy is not willing, the recommended amount may be reduced by half to a sum assured of $50,000 with an average premium of $1,200/year. The next stage for this Financial Planner is to suggest that this new client should have his yearly review and to increase the coverage (=higher premium) if possible.

Deal is closed and this Financial Planner would just need to find around 11-12 of such similar type of client and he is more or less made it through that sales month…

If we look into another type of Financial Planner who believes in planning for others and would want to plan well, he may suggest that prospect to take on Term Insurance that may cover him for $200k and above for just $30/month (or $360/year). You see the difference in the premium amount and the coverage suggested?

Should the first Financial Planner behave like the second Financial Planner, he would have to find an average of 40 clients (I believe this Financial Planner may just collapse and eventually quit the industry because of over-exhaustion…)

Other Factors Include (Not Ultimately The Whole List):

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An Insider Story – Do You Really Give/Need Vouchers For Your Insurance Plans?

It’s quite a sad moment as I wrote this because I have just overheard that one of my ex-colleagues was fired and asked to resign with immediate effect because of “giving too little” shopping vouchers to the client as one other insurance agent has decided to offer “two times more…”

The Insider Story – The Art Of Giving Shopping Vouchers

I can be honest that the act of giving monetary rebates are not legally correct according to the Insurance Act but we, as Financial Planners, usually do give some form of shopping vouchers to our clients as a form of “thanking them” for taking out time to meet us and to giving us a chance to plan for them, and also that we recognize the fact that there are many other agents out in the market fighting for their business…

And we do recognize that we are not allowed to give direct cash rebates back to the clients and most of the time, they are compensated in the form of shopping vouchers either by a stipulated amount decided by the insurance company or based on personal discretion (usually depending on the commissions received…)

And usually the amount can go higher if the commissions received are high as well… (this is the extent that some Planners will go just to secure their insurance business and to hit their sales target)

This is why being a Financial Planner can be tough at times…

To Those Who Need Financial Planning – Do You Really Need To Have Vouchers?

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