High cost of life insurance at older ages

Dear Mr. Tan
I attended a briefing session by a Financial Advisory company that talks about some of the pitfalls in investment linked insurance (ILI)

One of it that struck me was the net cash value in the policy will peak at some point and start to drop drastically. There will be a point where the net value is 0.

The reason given was quite logical. Any ILI premium will be split into 2 parts, one for insurance, another for investment.

At the start, when the policyholder is young, premium for insurance is relatively low, and most of the money will be channeled to investment of funds. But as he ages, the insurance premium will increase, and there will be a point where the money accumulated under investement needs to be withdrawn to subsidise this part. The time will come when the money will be depleted.

Question:
Frankly, I don't see a way out of this. Premium for insurance for elderly people will skyrocket. This is inevitable. The outcome seems certain. Whatver accumulated in the earlier years will be used to pay for these premium, unless investment is so successful that the returns are so high year after year (outperform the premium rise rate). And I do think all insurance have the same practice. Otherwise, they won't be able to cope with the cost esp when the national population ages.

Does that mean that whe one ages, perhaps it is better for one to take the chance and close the policy and take back all the money generated, and be without insurance?

What would be your advice?

REPLY

My advice is shown here:
http://www.tankinlian.com/faq/savings.html

Buy a decreasing term assurance for 30 years and invest your savings in a low cost investment fund.