Your Questions Answered HereCategory: Insurance'Legacy' cum Life Plan / Coverage
Joe asked 8 months ago

I had been proposed a ‘Legacy’ cum Life Proposal from AIA to cover up to RM 500k for Death / TPD.

annual premium about RM 7500 with a 20 years payment.

maturity at age 70, coverage until age 70.

apparently upon maturity, i will also be entitled to an estimated Boost / Bonus payment of around RM 0 to RM 450k, on top of whatever inside my Cash Value at that time.

should i survive until maturity (age 70), i will be able to get potentially RM 450k + cash value of between RM 50k to RM 250k.

in between there is extra coverage of overseas CI of RM 250k.

kindly advice.

7 Answers
CHING FOO LIEU Staff answered 8 months ago

Hi Joe

Welcome to Askcf.com

First of all, can we understand your primary purpose of getting a 500k insurance…?

What is your age & job nature?

Why do you think getting that 500k is important now, and not later?

Joe replied 8 months ago

hi CF, thanks for the reply…

i’m about to turn 38, i’m an engineer, main breadwinner for my family of 2 kids…. with 2 houses under my name and installments, total outstanding current loan for the 2 houses are approximately RM 1.2 million.

a lot of untimely deaths had been occurring lately, therefore i’m thinking / planning for my young family’s future….

upon comparison and calculation, at this juncture, i can probably afford the yearly premiums for a 500k coverage only…. or should i push it to closer to RM 1 million, just in case?

CHING FOO LIEU Staff answered 8 months ago

Joe

When you said ‘I can probably afford 500k only’, what is that annual premium you are referring to which you think it’s affordable to you?

Also, we opined that that 1+ mil cover for death is very important to you for the next 20 years, after 20 years, not so much because your kids finish college already (likely), is this your thoughts?

When you are saying you got 2 houses with loans 1.2 mil, are BOTH of them important to you as shelter for family if you die today? Or only 1 of them?

Is covering for Death more important to you? Or covering for critical illness (CI) more important to you? of course ideally, BOTH but if you have limited budget, you need to choose one, there’s no in-betweens. The purpose of Death & CI coverage is very different – one is to settle your huge debts (+ cover living expenses for family) when you die, the other is for covering your living expenses + financial commitment when you are critically ill and you can’t work to generate income…

Have you been looking at AIA only so far? If yes, why? If not, why?

Joe answered 8 months ago

HI CF,

thanks for your insights so far….

in terms of the 2 houses, yes 1 is our current shelter and the other is under construction (future upcoming shelter)

as you said ideally, we should strive to cover for both Death / TPD and CI….

let’s say if i can stretch my annual budget for payment of premiums for both the above, to an approximate RM 7k to 8k, do you think i am able to get a decent coverage for both?

so far, i had indeed obtained quotations from most of the common insurers, and AIA seems to be the most attractive in terms of it’s ‘Booster / bonus benefits’, though i am open to anything reasonable.

kindly advice sifu!

CHING FOO LIEU Staff answered 8 months ago

I think that’s fine, the only thing is that you got to decide if you’re going to get, say 1 mil Life, 250k CI or say, 500k Life, 500k CI.

Use some of the lessons below to help you:

https://askcf.com/stupid-smart-way-to-buy-large-sum-of-insurance/
https://askcf.com/needs1/
https://askcf.com/needs2/

CHING FOO LIEU Staff answered 8 months ago

Additional note:

We ran a simulation for a 38 yo male, and FYI, 8k/year budget, if you are to stretch it, and you go for PURE protection (instead of looking at how much cash value you’re going to get back in 20 years)…

…it can get you 900k of LIFE cover with 250k of CI cover, immediately.

Which made us think you’ve been over-quoted by the AIA agent you’ve been talking to. See below.

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Joe answered 8 months ago

Dear Sifu Lieu,

when you talk about PURE Protection, that means it is pure standalone life insurance? am i getting this correct? which means, i pay the annual premium until death? or certain age?

should i choose to surrender the policy at say, age….70, there will be no cash value to be returned to me?

is this the case here for this 900k protection with 250k CI?

kindly advice..

CHING FOO LIEU Staff answered 8 months ago

Joe for your case, it means minimizing the premium you’ll be paying which means you won’t care about how much cash value you’re getting back at maturity thru whatever ‘boost feature’ you are referring to. Which we’ve shown you a snapshot of such example above.

Insurers are profit making entity; there’s no free lunch. If you are attracted by whatever projected cash value you’ll be getting back after 20-30-40 years, on top of the guaranteed protection value, of course you’ll end up paying for more from day one.

Of course this is not what the general public wants to hear because people like the “2 in 1” concept, which insurers know too well, therefore they designed their product offering such way so it is sell-able. Also because financial literacy is not a subject taught in any education system, so no matter you are a doctor/engineer/lawyer, you’ll mostly still end up getting short-changed. For independent FAs like us, these things don’t elude us – we know how to dissect the numbers. Of course, insurance agents won’t tell you this because:

1) it’s not in their best interest because they need to sell more to meet sales quota. Quote you higher premium = meet their sales quota faster = qualify for their incentive trips
2) they themselves are not that financially literate anyway, just a glorified sales person who probably drives a BMW, which you find is impressive but your premium payment is funding their luxury cars
3) Both of the above

Which is why clients who came to us to get the products/solutions most of the time because they know, paying minimum for insurance means you win more in the long term. We can be transparent to our clients due to our positioning not as tied agent but as independent FA not bound by all those sales quota bullshit. Clients feel we have their best interest.

Truly, the amount saved from overpaying insurance premium can be channeled to proper investment (as straightforward as things that gets you 6% per year, like EPF). That will get you more mileage in the next 10-20 years.

Does that make sense?