PruFlexi Cash policy taken by a student

A student bought a PruFlexi Cash policy and after paying the premiums for 8 months, he asked my views about terminating the policy.

I asked him to send the benefit illustration to me. The total premium for 3 years would have been $3,600 and the cash value would have been $800, giving a loss of $2,800. If he terminate the policy now, after 8 months, the loss would have been $800. It seemed to be better for him to terminate the policy. The sum insured under the policy was only $15,000.

What was the purpose of buying a policy that offered a miserably low sum insured and resulting in a loss of $2,800 in savings for 3 years? There is a complicated series of cash payments which can be accumulated with interest at 1.5% p.a. After taking all of these payments into account, the yield on the policy looks rather poor. It would have been difficult for a lay person to understand how to evaluate such a policy - as it is quite complicated.

I asked him to check out the facts with the agent, as I could have been missing some essential point.  (Note: I have changed some figures slightly, but the essential facts are shown above.)

GENERAL ADVICE

It is a bad idea for a student to buy any life insurance policy - as it does not serve any useful purpose. Consumers should also avoid buying any complicated financial product that is difficult to understand.