A strong warning about insurance

If you’re thinking of buy insurance, this is for you.

A friend recently went to buy insurance. From AXA. It was a hybrid whole life and term insurance in which the term part would stop when she’s 65, and the life insurance would continue from there but at a lower coverage. Yearly payment is about $1,400. The sum assured, wait for it… $140,000. I’m not even sure what is the lower coverage after the term component stops. Seriously this was the first time I heard about hybrid whole life and term insurance.

Maybe you’re not sure what to think about the numbers above. I’m here to tell you, I don’t think it’s okay. It’s pretty scary.

Insurance agents aren’t bad

I’m not saying that insurance agents are bad. They do the leg work for you if you’re too busy or lazy to compare plans. They prepare forms for you, without you navigating the various web portals for the right forms. When emergency hits, you’d want to have someone to call up and advise you instead of panicking and scouring for information yourself.

For this, I prefer having my own advisor instead of DIY (do-it-yourself) which could be slightly cheaper.

But before you get led by the nose by an insurance agent, know what you want and what you need.

Insurance agent and (hopefully not) you. Credits: Alamy stock photo.

What is whole life insurance?

Basically, it is for the case of death, usually coupled with total permanent disability. The basis to life insurance is this: is it guaranteed. Your dependents will definitely get the payout upon death.

Many of the whole life insurance offered are coupled with some sort of a ‘savings’ component like an endowment plan. “If you need the money at 60, or 65, you can withdraw it out”. I had a life insurance policy but I chose to cancel it, even though it meant losing a few thousand dollars. Why?

  • The percentage increase per year is paltry
  • I just want insurance in the basic sense (covers my life) and not some endowment mash-up
  • The payments ($1,600 yearly) are too damn high for the sum assured
  • The $100,000 that I was covered for will be peanuts by the time I’m old

What is term insurance?

Term insurance covers death and TPD. It can be formulated to cover critical illness also. Maybe you’re worried that it will stop after some years then you’re not covered for life. Here are some points to consider:

  • Do you really need the coverage when you’re 70 and your kids are grown up? Do you really want them to wait for you to die for their payouts/windfall?
  • For taking up a term insurance, my premiums (payments) are about the same for 10 times the sum insured (coverage). Which means I get covered for $1 million in the event I pass on before the end of the term. Isn’t that what insurance is about? Rather than ‘withdrawing’ a sad sum of $100,000 in my golden days and effectively ending the policy I was paying for with my hard earned money in my younger days?
  • If you really want the payouts guaranteed, how about considering term insurance until 99 years?

How you should buy insurance

Here are some tips for you when you’re getting insurance:

  1. Read up a little bit. I know we have the tendency to procrastinate. If you’ve read my article at least, you already know something so good for you!
  2. Go into the meeting with the insurance agent or financial advisor knowing what you need and what you want. In fact, meet a few to get a better gauge of who is better for you.
  3. Feel free to question them on anything until you get your answers. They are the experts and they should know!
  4. Feed one agent/advisor’s information or proposal to the other. “What do you think about -blah blah- policy?” Then decide for yourself.
  5. Never feel afraid of losing a bit today. If you’ve made a mistake, remember that it costs you much more to hold onto that mistake.


Remember one thing: Insurance agents get paid depending on what they sell you. They get paid more for products that aren’t fantastic. Here’s an article about how much commission they get.

I was unable to convince my friend as she just wanted to get insurance out of the way and never have to think about it again. Since she was just starting out in understanding financial literacy, I let her make her own decisions and perhaps one day she might become more aware.

Another friend committed to an investment-linked policy because he didn’t have the time to research and believed that this policy could help as a vehicle of investment for him. He found it too troublesome to change so he continued paying high premiums. Never confuse investment with insurance!

If you need some help with insurance, I can share more with you directly on my plans or provide my advisor’s contact. In any case, it doesn’t matter who is your agent or advisor — knowledge is key. You still need to stick your ground and know what’s most important to you.

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