Paying premium for life insurance policy as long as possible is one of the best form of saving you should have. I am talking about your old policies, your existing policies which are still in force now. Perhaps you stopped paying the premium because it reaches the “critical years”, or you plan to lapse the existing one in order for you to afford new insurance plans. But don’t be stupid. Beware of the worst advice from insurance agent.
Where is your premium?
Your insurance premium is not 100% allocated for your policy cash value. This is a true fact. During the first six years of a life insurance policy, the agent will be paid a certain amount of commission. Apparently, the commission comes from the premium you paid.
So what happens after six years? You can find the answer in your insurance sales quotation.
Why it makes sense to keep paying?
1. 100% allocated, no contribution to agent’s commission
After six years, there will be no more commission to be paid to the agent. In other words, the premium you paid shall be 100% allocated for the use of your policy. A small portion of the money will be deducted for insurance costs, and the rest of the big chunk will contribute to your policy cash value.
2. Skip the probate
When a person dies, his/her heirs will inherit his/her assets. The first lump sum of money they will receive is the insurance claim plus all the policy cash value. The rest of the assets will be frozen and need to go through court’s order and estate administration. In short, when an asset skips the probate, your family will get it a lot faster. The time frame is within weeks, many times faster compared to normal estate administration that takes up to 6 months to several years.
3. Force saving
Pay your premium using the credit card. You will see it as an expense. But in fact, it is a form of saving, silent saving. You can call it stealth saving, because you can hardly see the money. Don’t worry. When you are in need, the insurance money just suddenly appears!
Study your life insurance sales quotation
Below is the excerpts and snapshot from Great Eastern life insurance policy. See it yourself.
1. Whole life non participating policy
The yearly premium is RM980. Notice the cash value differences after 6 years? The cash value increase even more after 10 years.
2. Whole life participating policy
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For policies which are more than 10 years old.One would be counted as lucky if he has a great eastern policy. If you have the privilege to look thru old policies from some other companies, the SV projections are completely out, sometimes with no bonus or rediculously low bonus. As such, it may seem that the client is using good money (premium) to chase after bad money (promised SV). Too many sad stories!
@ Hanson
I am glad that I sold a lot of GE products too. They have under promised and over delivered all these years.