Thursday, 28 July 2011

Best Bargain Must BUY: ILP

I had just received my ILP half yearly statement today.

I bought this policy from my friend when I first graduated from Uni when I have zero financial knowledge.
I was told that is good as it incorporate both investment and protection. It sound so wonderful to me then.

Let me share how "wonderful" this ILP is.

It is the "best" investment that I had ever invested in.

Policy Title: Manulife Flexi Aggressive portfolio.

Started from Aug 08, deducted $200 every month.
Change to $150/mth on Dec 09

Total premium paid to date: $6250
Current cash value as of July 2011: $1801.45
% gain/(loss): -71.18%

Where can you find such marvellous investment? Even my healthway which is currently at 40% loss cannot fight the 71.18%. Furthermore, you have no control over it.

This is the best investment cum protection plan that you can ever have. Please remember to sign up for it and get free 71.18%!


Singapore Man Of Leisure said...

To look on the bright side, at least you have got your financial literacy lesson early.

My personal take, from my own experience, is that its better to start young so that we make all our mistakes and stumbles early. There's time to recover.

Imagine you have never invested all your life and at 55 years young and very cash rich, you bought ILP from this well-intentioned "friend"?

Createwealth8888 said...

I worse than you, I only discovered after few years when Bear came to control the Market. In Bull market, you don't feel that ILP is bad.

Read? Shocking Discovery On My ILP

OT83 said...

Thanks smol for the encouragement.

uncle cw i read your link. I only understand how they anyhow sell your unit pay the charges when i saw my statement last year. what you describe in your blog is extremely true. hai..

I am thinking of cancelling it or reduce monthly contribution to 100. But friend advise say she no longer get any comm. from now on 100% of cash invested will goes into investment.

but then i wonder even if 100% how to get back the 71% loss? quite unlikely i think.

but recently got health problem. if i cancel it, my premium might be much higher if i buy another term.

maybe i wait half year more before decide...

sincere advice to all who read this post, esp new grad. pls do not buy ilp. i give you my real life example as proof.

Anonymous said...

Insurance is something that has a long time span of discretion, meaning it takes years and sometimes even decades to find out whether it is good or bad. It took me 21 years to find out the education policy by NTUC Income gave me back less than what was projected, inspite of the last 3 years NTUC Income making double digit gains on their funds. For Whole Life it will take a whole life to find out whether it is as promised, but looking at the way they cut the bonuses, even for compounded series where policyholders pay more to get more bonuses, it is evident that at the end of our lives, we have been shortchanged and we would not be around to challenge it anymore.

Anonymous said...

It is better for you to terminate the policy and cut loss NOW! Otherwise, after 20 years of installment payment, you would still get 71% loss!!! By then, it will be too late and too painful!

OT83 said...

Hi Anonymous,

Thanks for the advice. Mind leaving a name?

la papillion said...

Hi OT,

150 per month is quite a heavy investment on something that you no longer believes in. Possible to reduce the investment part to make it more protective instead of wealth accumulative?

You might want to look into getting some term plan. It'll boost your protection w/o taking to much cash from you.

Seth said...

Hi OT83,

Depending on the exact nature of your recent health problem, premium increase may not be your only concern when taking up a new policy. If it is a serious matter, do take note you may even be excluded on any new policy.

In any case, the loss has already been made in form of distribution costs (via the low allocation rate in the first few years). If your current allocation rate is 100% as your agent has mentioned, then there is little point to change out of this policy considering your new health status, and the fact that the assurance charge for the ILP is likely to be lower than a term policy. On the other hand, at $150, you are likely not getting a lot of coverage from this policy. If that is all you are willing to pay for insurance then this plan is likely underinsuring you. Also, you probably do not like the lack of quality and choice of the investment funds bundled with the policy.

If you want to review your insurance portfolio I am able to help.


Seth said...

Note: Assurance charge is likely to be lower than a term policy now but also do take note that the insurance in an ILP is often a YRT (yearly-renewable term) where the assurance charges are low during one younger years and then increases exponentially beyond a certain age. Refer to the BI for the exact charges.

OT83 said...

Hi LP and Seth,

Thanks for the advice.

I be open on this issue. Currently, the protection this plan offer is 200k CI, TPD and death for 150/mth. It used to be 100k CI, TPD and dealth for 200/mth. I had reduce it.

Personally, I would prefer to go for pure protection now. (I can invest myself). Thus, I asked my friend ask if it is possible to reduce the preimum. I was told that I could reduce it to 100/mth with the protection portion becoming 180k CI TPD and dealth. Then the $50 I can use it to buy term plan. However, I was adviced against in doing so due to my health condition. (serious back injury)because my premium might go up a lot for a new term plan as compared to another person. In addition, the 100% allocation starts in Aug 2011, thus it might be worthwhile to keep it.

OT83 said...


But I have to be fair to my friend. That time I am totally noob in investments, that why my friend ask me to buy ILP. Nowaday, I told my friend that I investment myself. The friend no longer ask me buy ILP le.

la papillion said...

Hi OT,

You don't have enough coverage for CI or life coverage (usually life and TPD is under the same coverage, so I actually mean both)? If it's life coverage that you're lacking, then based on saf aviva group plan, you can cover 400k based on the 50 per month. You might not even need 400k worth of life protection, since you might have other plans as well.

For CI, you either have to get a standalone or whole life. From what I understand from your situation, it might be tight on your cashflow. Actually I think 200k CI is very very decent already.

You don't have to worry about your back injury. It's something that the insurer have to worry about. You might just want to ask for quotes and see if there's really loading or exclusion for the back injury and then decide from there. No point talking about hypothetical scenario.

I like it when you say you don't blame your friend. Eventually you're the one who signed it. Always take personal responsibilities for your own decision.

June said...

Hi OT, would like to share with you that i have terminated my ilp. I am supposed to put in a lump sum of $1907 on a yearly basis. But after after 1 year, i terminated it and the cash value was a miserable $197 :((( the $1700 loss is a big amount for a 20yr old student. I forsee i gotta starve for afew mths to recover haha

i guess its better to cut loss early then wait and hope for a miracle and by then the absolute amount is too large. And i have learnt my lesson not to let greed cloud my mind.
Just sharing my experience :) have a great wkend!

AhmadArjun said...

From what i understand, the manulife flexi plan is a long term plan right? you will only start making money from 10 years onwards? correct me if i am wrong..

OT83 said...

Hi Ahmad,

All of the adviser will tell you its a long term plan and you will earn eventually. 10 years is a long time, your adviser might not be in the same job after 10 years. What the adviser told you is not important, most important is they had already earn they big commissions from you.

Frankly, I have doubts if it will break even from 10 years onwards given that they had drawn so much $$$ from you from the initially few years - compounding effects from the policy is lost in this manner. They usually told you that there will be a projected return of 3.75% to 5.75% annually. How sure are you that the 3.75% will come true? What if manulife suddenly collapse? What if the market collapse? When the market down, the company will tell you general market is down so you lose money is normal. When the market is up, if you ask the company why you earn so little, they will tell you that you need to pay their for your insurance and policy. Regardless of whether market up or down, the company will earn from you.

Please think carefully before you sign any ILP.

(On a side track, if you just buy singtel with a decent entry price of 3-4% of yield, you could easily get at least 30-40% dividend after 10 years and beat the so called ILP. Of course, your protection component could be cover by term plan.)

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