MY ILP analysis

( Initially I had very negative views about ILP but after consulting agents and flowerpod I understand why ILP is still popular, it is just how you rearrange whats in your ILP and how you can maximise your money. I am learning and reading up more about it and below are some things which I have just learnt)

I have this policy which I bought without thinking in July 2010.

-          I am paying $1907.28 for 60+years (if I were to continue till I am that old)

-          Now, the premium is split into two different funds, 50% in China-Indian fund and another 50% in Singapore Managed Fund.

-          I have this Crisis cover Provider III with an assured sum of $50,000 for 99 years

-          Total and permanent Disability with sum assured of $104650 for 44 years. I would be 64 years old by then, and I think I may need a wheelchair le, so I don’t think 44 years is enough.

Advantages
 
- Its supposed to be good when i started out young at 20 years old. Since, there will be higher charges for aged 50 onwards, I may terminate it by the time I reach 50.
 
- Low premiums
 
- You most likely get back a substantial lump sum after like 30 or 40 years if you diligently not take out any for emergencies lah and let it grow and grow.
 
- You can take out the available amount for emergency use and there is no charge, but
 

-It can also be treated as a form of diversification i guess.

-I have this crisis cover till I am 99years old and usually other policies will stop at 65 years old.
 
Disadvantages
 
- Must have balls to tahan incase econony goes down. Holding power is important and shouldn’t have cold feet and withdraw when it is at your disadvantage just like stocks.
 
- High admin fees in the first 4 years which means that 100% of premium will be invested after 4 years. If i am not wrong, first yr only 15%, 2-3year is 50%
 
- It does have hospitalisation or accident cover which i feel is more important for my age group. Right now, this I feel health related insurance is more suitable rather than death, permanent disabilty or critical illness like stroke, cancer etc although it is important too but hospitalisation should be on a higher basis.
 
What i can do to maximise money's worth now that i know that I already have an ILP
 
- Lower my death payout sum so more of my premium can go towards investmemt which most like will be able to generate more returns. For now my death payout sum is 100k, haha my life only worth a miserable 100k but, this 100k is quite a lot for an ILP, and people my age insure their death for 20-50k only.
 
- I can also reorganise my portfolio, currently its 50% in china-indian fund and another 50% in Singapore Managed fund. But i would like to diversify into the emerging market funds too. My ideal fund mix should be 40% china-indian, 40% emerging markets (or Global Equity Fund) and 20% singapore. I believe that those markets will boom within 20-40years, which is the period of time which  I am probably holding my ILP for.
 
- In addition, i was also advised to pay my premiums monthly to take advantage of dollar cost averaging. Previously, i had opted to pay yearly, because i believe with more money put in, it can generate more. Now that the market is in an upward trend, i believe i will continue to pay premium yearly for the moment. I have to read up more about dollar cost averaging before making a decision, because i think that monthly payments will also incur a little admin charge.

My next task is, learning how to check how the funds perform, next time can do it by myself without such huge chunks of my $$$ on agents’ commissions.

Firstly, must apply for my pin to log into my account to keep track of how my policy is performin

This is a print screen from my China-Indian fund factsheet

This is a print screen of my Singapore Managed Fund factsheet

My Singapore Managed Fund performance chart as at 25feb2011

My China-Indian Fund Performance chart as at 25feb2011

Well, both doesnt look very good isnt it? sian half le....

links: http://pruaccess.prudential.com.sg/prulinkfund/viewFundPricing.do

ILP

Today, this lady Samantha from Manulife called me and wanted to meet up. This incident makes me think of my impulsive mistake of buying an ILP from xxx company. It was in July 2010.

This person called Ronald and told me he got my info from SIM and wanted to meet up. I was inquisitive and went to meet him during my lunch break at work. Then he started talking about blah blah products and stuff and he is in his 20s... should have known he was too young... I naively bought this insurance which he claimed can give a minimun of 5% return every year and I asked whether i can get my principal sum back when i need the money for emergency and he was like sure of course no problem.

Then, he passed me this package one week later and I just chucked it aside. I bought this so fast and didnt even consult anyone about it. I realised eventually it was actually an investment linked product. By then, it was too late to cancel, because the refund was only valid for 7 working days and this is long over. I regret not checking up more about it on the internet or asking around and didnt even consult aaron on this before signing on. I read through the package during work after a month and realised that my money is in this indian china fund thingy and worse still, only 15% of my money is invested in the first year and 85% goes to admin fees.

By then it was too late for a termination for a full refund.

The package states that from year 2 onwards 50% will be invested and from year 4 then only 100% is invested. I called up xxx insurance company, and check up on how much i can get if i terminate it now. I put in $1907.28 in July 2010 and guess what, if i were to terminate it now in Feb 2011, the grand total i will get back is $203 only! seriously! no kidding, double checked with xxx somemore. The rest had gone to xxx's agent and his agency. I cannot blame him, I was too naive, but then again, he is not ethical! He told me that of course i can get back my principal if i were to need money for my education. WTH! And worse still, i stupidly believed him! Morale of the story, this is a cruel business world.

Ok, i have to call up and check in June 2011 before my next premium and see how much i can get back and should i just cut loss or carry on this mistake for about 20 plus years?

Lets view the below simplistic calculations- assumption is i am using simple interest rates of 5% p.a for inflation instead of compounding effect becos me too lazy to calculate haha

if i were to terminate it on june 2011 assuming that the amount i can get back is $350
my net loss will be
[(1907.28×1.05-350)÷1907.28]×100%=86.6% loss

if i were to terminate it 5 years later in 2015 the minimum amount i get is $3400. In 5 years i would have put in $1907.28×5=$9536.40 and with simple interest rate of 5% annually i would have put in 5 years is about $11920.50. My net loss would be

[(11920.50-3400)÷11920.50]×100%= 71.5% loss

if i were to terminate it 20 years later in 2020 the minimum amount i get is $40700. In 20 years i would have put in $1907.28×20=$38145.60 and with simple interest rate of 5% annually i would have put in 20 years is about $76291.20. My net loss would be

[(76291.20-40700)÷76291.20]×100%= 46.65% loss

ok, i know this is stupid to continue calculation further, the loss will probably decrease but! the catch is, its still a loss! oh my tien...hoping that china and india will have some kind of extraordinary boom and so i can at least get back $500 to cut my loss by June 2011... four months to go... 

ok, treat this as a lesson ba, so glad i mentioned to tell aaron my gold purchase in late July (this was about 2 weeks after the insurance thing) before it was confirmed and so didnt continue on  another mistake which is even more costly thanks for his assistance bcos of the email he sent me. From then on, i had this phobia of investing, i have not invested in any shares or anything else other than the occassional toto when the prize ballooned to $1million or big sweeps once in a while hehe. Knowing about what you are buying is very important be it just a shirt, investing, car or house.