YC Tan asked 2 years ago
Hi K.C Lau,
My husband and I have signed up AmMetLife’s AmMedic Flexi Plus back in 2016. Recently, we received letters from AmMetLife in regards to revision of insurance charges for AmMedic Flexi Plus (unit deducting rider). However, our plans are investment linked plans and I recently learned from of your webinar earlier (ILP Insurance) that investment linked plan is not a good insurance choice plan. I now learned of other reasons why it is not a good choice made on our part. In the terms agreement came with the letter, it said;
We would like to make known to you that the Regular Top- Up Amount recommended is based on the incremental of medical insurance charges, hence even with the recommended revised premium, your account value may not be sufficient at all times to pay for your insurance charges as well as other fees and charges (if applicable), which may result in the disruption of your medical coverage. The sustainability of your account value may also be subjected to reasons such as the investment performance of the investment linked fund(s) which you have selected. Your are encouraged to refer to your annual statement and discuss with your servicing agent to review your policy sustainability regularly to ensure continuity of your policy until the end of the coverage term.
Note: Waiver of premium rider is the rider that provide waiver of premium benefit.
The letter also mentioned the difference between premium and insurance charges;
Premium: the amount you pay to AmMetLife Insurance Bhd for your policy. For an ILP, a part of the premium paid under Insurance Portion and Investment Portion will be allocated towards purchase of units in the selected investment- linked fund (s) according to the allocation rate while the remaining amount will be used to pay upfront charges for insurance expenses and total distribution costs.
Insurance charges: is deducted monthly from account value of your ILP to pay for your insurance coverage, Typically, insurance charges go up as your age increases.
Am I right to understand that what I paid is for investment in the ILP first and remaining will then later be my insurance coverage? In this case, this doesn’t sound like a fair deal to me and my husband because our main intention for buying insurance is for life and medical purpose. Anything investment related is secondary and a bonus of course. This is what we understood when our agent introduced this plan to us. I am 45 and my husband is 48 and the way I see it, is our plans will continue to be costly as we grow older. May I know if this plan is right for us? Should we continue revising our coverage to match our future medical coverage? Kindly advise if there is a better step for us and where do we go from here? Your kind advise is much appreciated.
Thank you.
Sincerely,
Tan
KCLau Staff answered 2 years ago
Hi Tan,
Thank you for reaching out and for sharing the details of your situation.
First, I want to clarify that my previous webinar didn’t imply that ILPs (Investment-Linked Plans) are not a good choice. Rather, it’s important to understand how they work. ILPs can be a good option for those seeking protection at a potentially lower cost, but they do have some complexities that need to be understood.
Understanding Your ILP:
- Premium and Insurance Charges: In an ILP, your premium is divided into two portions: the investment portion and the insurance portion. The investment portion is allocated towards purchasing units in selected investment-linked funds, while the insurance portion covers the cost of your insurance. As you age, or if the company revises charges, the cost of insurance (insurance charges) increases, which can lead to your premiums being insufficient to cover these charges.
- Impact of Age: As you and your husband grow older, the insurance charges will continue to increase, which is a common feature in ILPs. This could lead to higher costs over time, potentially reducing the value of your investments. But if you bought other traditional policy, the cost are even higher, right from the very beginning.
Next Steps:
- Review Your Policy: It’s crucial to review your policy details carefully. You may want to email your policy details to me for a closer look, and I might consider featuring it in future webinars to help others understand similar situations. You can send your details to us via this link: https://kclau.com/support.
- Consult Your Agent: It’s also a good idea to consult with your servicing agent to review your policy’s sustainability and ensure it continues to meet your needs. They can help you understand the implications of continuing with this plan versus exploring other options.
Please feel free to reach out with any further questions or concerns, and I’ll do my best to assist you.
Best regards,
KCLau