Wednesday, October 27, 2010

Easier to Exploit Ignorant People

Someone wrote in paper say >50% future accumulated savings taken from consumers buying whole life/Investment-linked policies. Easier to make $ when people are ignorant.

School teach those useless topics like calculus, binomial theorem etc but never teach how to manage & grow $. Ever wonder why? This is something that puzzles me since my teenage years.

Ignorant people easier to exploit & fleece $ from them. Ignorant people easier to control. Ignorant people blindly swallow whatever is spewed out from the government controlled mass media. Ignorance when it comes to $ is not bliss, is pain.

"Life insurance company also earns a large profit from each policy. Consumer is not aware of the high margin in the life insurance policy that is sold by a highly trained & motivated agent.

Many benefit illustrations of the whole-life or investment-linked policies sold in the market today take away more than 50 per cent of the future accumulated savings from the consumer.

For example, if a consumer pays a monthly premium of $500 & the investment yield is 5 per cent per annum, the total accumulated amount would be $418,000 at the end of 30 years.

If 50 per cent of this amount is taken away, the consumer will get the non-guaranteed cash value of $209,000.

The balance will go to the agent & the insurer. Real cost of the insurance protection should be less than 10 per cent of the premium & not 50 per cent.

If an insurer or its agent can earn so much by selling a whole-life or investment-linked policy, why should they want to sell term insurance?

Why are consumers willing to give away more than 50 per cent of their accumulated savings in a life insurance policy?

Simple answer is they do not know or understand the benefit illustration & are not aware of the high costs. Benefit illustration is confusing to a lay person & allows the insurer to get away with predatory products." - Tan Kin Lian

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