The 2nd one is now called 'Investment-link Life Insurance'. This is more popular nowaday. However, people will ask :which plan is better ? It depends your age, what level the risk you can take, how many return you want to get from your plan, how many year of the plan run. Those are very crucial elements when you decide to choose the plan. I can give you an advice for those elements. My name is Kenny, Tel: 92225355 from AIA Insurance Co.
Let's put it this way, the main difference between 1 and 2 is this:-
1 mainly invest in long-term national bonds (but you no control of) with guaranteed cash value, so if the market goes down, there's still guaranteed saving there.
2 you can choose your investment portfolio but there's no guarantee portion in the account.
Cannot say if she's correct or not 'cos it really depends on your viewpoint on risk and return. If you think you're a risk-taker, you can think of no. 2, keeping in mind that return could be high but at the same time you're bearing higher risk as investment products do not offer any guaranteed cash value.
Normal pattern of clients' choices:-
1) if this is client's first policy, they ususally choose 1 to attach all the riders (e.g. medical, critical illness, accident) so as to avoid lapsing of policy when the going gets rough
2) if there's not much rider in the policy, choose 1 if you're a conservative person, choose 2 if you're a risk-taker
If you need further information, please email me.
Teresa, Manulife
Q: Is that true of what she said?
There is no guarantee on the return, so she may only tell you estimate or around… so whatever the % is, it doesn’t really matter… right?! Focus on the coverage and flexibility, e.g., increase coverage, payment holiday (skip payment), or add riders, and ask her when and how you can take out the money in the account, do you have to pay interest or just take out without penalty.
2. which one is recommended?
Ask yourself what you concern most, protection or investment?
If protection is important, make sure you have enough amount of coverage and cover till your age of 100; some may till your 65, and then end…
If you want investment, just open an investment account with no insurance on it, because Investment-link Insurance plan will charge you more, like admin fee, bid & offer or switching charges, and most your money goes into cost of insurance, end up you have only very small portion in your investment.
May be you want both protection and investment, open two different accounts, one for your protection, and the other one for you investment.
I myself have 3 accounts;
I have a Universal Life Insurance account, cover my life till age of 100, which I can increase or decrease my coverage in my different need in my life, e.g. now I am single, I only need coverage for my parents, until I married, I need to increase my coverage for my children or maybe mortgage, when my children grown up or after the mortgage paid up, I may decease my coverage to just protect my last expense for the funeral. I can skip payment anytime, or I can withdraw the money with no interest…
The other account is Saving Investment account; I save money regularly, and investment in mutual funds.
The 3rd account is a Lump Sum Investment account, which is a fixed amount investment, also investment in mutual funds.
I do recommend Universal Life Insurance, not so many insurance companies have this product, I believe it released only couple years in Hong Kong, but it is very popular in North America, if you can’t find one I can refer.
There are 2 kinds of investment insurance plans.
One have Sum Insured e.g. HK$500,000. Part of the premium is arranged for investment, and part for cost of insurance. If the insured person died, the beneficiary can have this amount of money HK$500,000 at least.
The second kind we usually called 101 plan. It's purpose is mainly for fund investment. There is account value of this kind of insurance policy. Account value affected by amount of premium paid, fund investment profolio, service charge, etc. If the insured person died, the beneficiary can obtain 101% of the account value of this policy.
For your question 1. depends on what funds you choose to invest for your plan and what kinds of funds can the insurance company provide 2. investment-linked product, 101 plan is more suitable for people who does not heavy family burden
