Why Rich People Do Not Buy Insurance and Unit Trusts ?
Why did Warren Buffet buy an insurance company ?
I just returned from a harrowing experience at this local insurance company and a morning of blank faces and passive responses to my torrent of questions.
Why have I been paying 7k per year and getting all these optimistic updates on fund performance and after 10 years I end up losing more than 40% of my premiums ?
Investment linked what ?
You see, I had blindly signed the papers when my mom suggested I buy a bunch of investment linked products over a decade ago, and had paid scant attention it until urged by an insurance adviser recently.
The realisation that I have been paying very very expensive term premiums over 10 years does not sit well with me and some introspection was required.
That amount that I had paid could have well gone into a term life policy such as the universal life, for example, buying me the same coverage for a fixed payment with loan of 70%.
If we assume that a Universal life premium of SGD 120 k buys SGD 1 mio cover for someone aged 30 ? [note that this is probablyfor international insurance firms and not the local companies that insist on ripping folks off with their simply exorbitant premiums that they force some local banks to fund]
So my premiums paid could have gone to buying a whole life coverage till 110 instead.
The blank faced staff gave me a scornful look and said if I continued paying I would reap the rewards from it too !!!
Yes, if I had an IQ of 50 maybe. If I continue paying another 10 years, I would perhaps breakeven ?
Why don’t the rich folks buy these products ?
Why don’t the private banks sell unit trusts ?
Because these are the black box priced deals that the public has no chance of fighting against. No transparency and no restitution (don’t even think of going to court).
Private bankers themselves only ever buy term life and medical policies leaving the investment bit out.
Investments are separate.
And all these articles in the papers telling people that insurance is the way to go for retirement and I just recently discovered that financial planner is another word for insurance agent. http://www.businesstimes.com.sg/banking-finance/retirement-the-business-opportunity
It makes me worried.
Because Warren Buffet knows how profitable it is.