Existing Life Insurance Policies

A few people have asked for my views on whether they should continue their existing life insurance policies, as the return is rather poor. I asked them to read this FAQ and get the relevant figures to make a decision.

Generally, it is better to continue with the existing policy. You have already incurred a high upfront cost during the first few years of the policy, which gave you a bad start. But, excluding the upfront loss (which you have to write off), the going-forward return should be better, maybe 3% to 4% per annum, compared to alternative investments.

Never give up an existing policy to buy a new life insurance policy. You will incur the upfront cost again. My insurance agent will tell you that a new policy is better. This is bad advice. It is also unethical, as they are earning a large commission again, at the expense of the client. This is called "twisting" and is illegal in some countries.

Tan Kin Lian