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I have no investment experiences before. So want to get some suggestions.

Lately one insurance adviser was suggesting to buy one insurance policy as investment (they called it as saving plan ) . Here are the briefing.

  • Need to pay S$12K plus / year [ for 5 year ]

  • I will get S$2.5K back start form 2nd year until 15th year ( plus some non guaranteed bonus which are around 3.75% ~ 5.25%) .

  • Edited: on the 15th year, will get remaining of total of 60K as guarantee benefits.

As an insurance, there are also surrender values , death benefits.

Is it good enough too pour all those money (S$60K plus) as long term investment (15 years) for a single person like me?

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3  
2.5 * 14 years is 35K. But you're investing 60K. Are you sure these are the numbers? Or am I reading this wrong? I'm not a fan of mixing investments and insurance. There's an expression that these types of policies are "sold, not bought," meaning they are a high pressure sell, not customers shopping for these policies. –  JoeTaxpayer Feb 11 '13 at 2:40
    
Hi updated some fact. I will get the remaining amount from (total 60K gurantee benefit). –  kitokid Feb 11 '13 at 2:48
    
You're tying up money for 15 years and have no idea what you'll get back besides the original investment? I'm sorry, what are CD rates (bank deposits) returning in Singapore? –  JoeTaxpayer Feb 11 '13 at 2:52
    
bank deposits are quite varied . usually around (0.0500~0.2250) . yah.. for that insurance, as it runs by a reputable organisation in singapore.. the adviser told me that you will surely get the bonus (but he can't guarantee the % ). And I am also concern on that. –  kitokid Feb 11 '13 at 2:56
4  
In case you weren't aware of it, insurance advisers make their money according to how many insurance policies they sell. They are not going to advise you to invest in something else. –  DJClayworth Feb 11 '13 at 14:41

3 Answers 3

up vote 11 down vote accepted

Investing is good. Insurance when you have something to insure is good. But using a single account for investing and insurance is not so good.

You need to determine how much you need to invest for retirement. You also need to determine if you need life insurance. As a single person you might determine that you don't have a great need for life insurance.

If you get married, or have kids, your needs may grow. So you will want to revisit your decisions every so often. You may need to save for retirement, or setup a college fund. You may need to protect your spouse or children in case you die.

It doesn't seem to make sense to invest and insure in a plan with complicated rules, fees and schedules. What happens if in 3 years you need to blow it up and start over? What surrender charges will they hit you with?

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It's really not possible to know what your best investment strategy is without knowing more about you, which isn't the place of a site like this. However I'll make some general comments about insurance policies as savings.

Insurance policies are extremely inflexible. They lay down specific payments, and specific returns that you will get back. However typically if you don't follow the shcedule of payments laid down, you will lose almost all the benefit of the investment. Since you say you are a beginner, I'll assume you are young too. Maybe in a few years you will want to buy a house, or a nice car, or get married, or put money into some other investment opportunity. If you are committed to making insurance policy payments you will have less available for the other things you want to do.

Related to this is the 'estimated returns'. You say the 'nonguaranteed bonus is around 3.75%-5.25%'. But because an insurance policy locks you in, if it turns out that it's the low end of that - or worse - you can't get out, even if other investments are outperforming it.

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Like others mentioned you need to look at the big picture. Personally I'm not a fan of insurance based investments. They tend to have horrible track records and you're locked it and paying way to much money for them. I had one for a number of years and when I finally cancelled it I pulled out almost the exact amount I put in. So it basically grew at either zero or negative interest for 5+ years.

I ended up buying Term Life and took the difference and invested it in a Roth 401K. Much better use of my money.

The reason why insurance people push these policies so hard is that they make insane commission on it over 2-3 years (I asked my insurance guy about it and he admitted that, plus doing some research you'll find that out as well).

Hope this helps somewhat.

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