Misleading arguments by life insurance agents

Life insurance agents are trained to present strong arguments to get the unsavvy public to buy life and investment-linked policies that pay high commission to the agents. Here are some of the arguments put forward by them against term insurance:

a) Term insurance is for a certain period. After the period is over, you will not have any more life insurance cover.

b) Term insurance covers a fixed sum, which does not keep up with inflation.

These arguments are misleading and do not present an honest picture. Here are the reasons:

a) You only need life insurance cover when your children still depend on you financially. After 25 years, they have grown up. During this period, you would have accumulated sufficient savings to surpass the sum insured and will not need life insurance any more.

b) If your term insurance covers a level sum, the accumulated savings will be more than adequate to compensate for the effect of inflation. Actually, a decreasing sum insured may be adequate for most people.

The greatest danger of inflation is not on the death benefit, but on the savings in a life insurance policy. A net yield of 2% provided by a life insurance policy is not sufficient to cover inflation. It is important for a policyholder to invest the savings more wisely to get a higher return (say 4% or more) to cover inflation. A life insurance policy does not provide a fair return, due to the high charges for commission and profit.

Many agents know the facts, but they are dishonest in presenting misleading arguments, in the chase for the lucrative commission.

Tan Kin Lian