What to look for in an endowment policy

At the CNA program on financial planning, a panel speaker said that consumers should look at the guaranteed and the non-guaranteed portion of the benefits under an endowment policy.

This is only partly true. The consumer should also look at the following figures (available from the benefit illustration):

a) The distribution cost
b) The effect of deduction.

The consumer will be shocked that the distribution cost is usually more than one year's premium. What is this figure? It is the amount taken from your savings to pay the insurance agent. Imagine that you work hard to save $6,000 a year. Do you want more than $6,000 of your savings to be taken away to pay the agent?

What does the agent do for the consumer to earn such a large sum of money? Frankly, the agent does not help the consumer to get a higher yield. The consumer can get a higher yield on his or her own by investing in other more appropriate investment products - as explained in my book on financial planning.

To understand what happens when you buy a life insurance policy or an investment linked policy, you can read my book on life insurance.

These books are available from www.tankinlian.com/ishop. You enjoy a discount when you buy from i-shop. More importantly, you can save a lot of money by avoiding the wrong financial products.