This article was first published by Budget Babe.
If you need another reason to cancel your investment-linked policy (ILP) which you may have bought a few years ago, consider this: a lot of financially-savvy folks are cancelling have already cancelled theirs.
I bought my first insurance policy, an ILP, at the advice of my then-financial agent. 2 years later, I cancelled it once I realized how I had been misled to think favourably of a policy that clearly wasn’t that beneficial to me. The biggest flaw I didn’t spot then was the distribution fees, which entitled the fund managers and my insurance agent to be paid rather handsomely for managing my investments.
At that point, I was thinking, if I’m already spending so much time swopping my funds, why should I be paying the fund managers? If I’m paying someone to manage my investments for me, then they better do a job good enough where I don’t even need to interfere. Furthermore, I can manage my own investments, so why continue with this useless ILP which I have to pay for over 20 years before I can even breakeven?
I’ve not regretted my decision ever since.
A friend of mine whom I consider to be rather financially-savvy also recently terminated his ILP, and publicly shared his cancellation experience on Facebook. I reproduce the conversation here:
On another note, I’ve been quite busy in the last 2 weeks, but yes, I did get the emails from some of you who wrote in asking about insurance. I’m currently in the midst of drafting up a proper guided post on that and putting all my answers together, so stay tuned.
Till then, stay clear of ILPs (or at least reconsider whether you realllllly need one).
P.S. Whose pockets are ILPs reallllly lining?
Budget Babe is an ordinary lady striving to achieve financial freedom in Singapore before the age of 45. She writes in order to empower fellow Singaporeans on taking charge of their own lives and finances, and to eventually break free from the competitive rat race.
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