Training Day 2

The insurance model would touch on 3 main aspects: Protection, Savings, Investment

One way to manage the funds would be the BTIR [Buy Term Invest the Rest] model.
- Purchase a term life insurance, which is significantly cheaper then the other policies. as an example, my whole life policy p.a. costs $1200. For the same amt of death and TPD coverage, term will cost <$300.
- Invest the savings

Pros
- Probably lower distribution costs
- No conflict of interests. Can still keep insurance while redeeming investments.
- Allows client to be adequately insured at affordable premiums

Cons
- Don't have Critical Illness coverage
- Requires discipline [no premium holidays, client has to make sure he sets aside the difference for savings/investment]
- Premiums might increase year on year
- Buyer has to be very clear on what he wants. Many give up on term insurance because of the feeling of paying for 'nothing'.

Second way is to purchase a WL plan. WL combines protection and savings element. There is a guaranteed return every year and it keeps accummulating until eventually it will be more than the premiums paid.

Pros
- Creates an immediate estate
- Payout definitely exceed premium [eg. $1200 p.a. limited premium for 15yrs with coverage of $80,000]
- cover is for whole life
- covers critical illness and TPD [subject to rider]
- client may redeem policy for cash value if he needs it [not advisable - a WL plan is meant primarily for whole life]

Cons
- expensive. May be unaffordable for some.
- Some are of the view savings and protection should be kept seperately.
- When redeeming cash value, protection ceases.
- Lower rate of return as compared to endowment

Third way is Invesment-Linked Policy [ILP]. This combines investment and protection. Clients are able to add on riders.

Pros
- Convenient. Buy one, settle two aspects.
- Covers Critical Illness [subject to rider]

Cons
- High distribution costs
- Increasing premiums [might be unsustainable in the long run]
- Some companies may cease protection when investment ceases [and people seldom keep one investment for life]