10-12-2010, 08:16 AM
(10-12-2010, 01:26 AM)d.o.g. Wrote: [ -> ]Take a hard look at the numbers and it will be obvious that investing the difference will leave you better off unless you are totally incompetent at investing AND do not have the discipline to invest in an index fund. If you are a competent investor you will easily beat the insurer. If you invest in an index fund you will probably still beat the insurer since your costs are lower. Since your daughter is only 2 years old you have over 15 years before you need the money. That is a great time horizon to be investing in stocks.
This discussion is indeed turning out to be a very good one.
D.o.g.'s point is very true. I recently bought a term insurance on my life with critical illness , accident and TPD cover DESPITE my financial advisor repeatedly trying to get me to take on an ILP.
Why? That's because I ran the numbers through. I took the difference paid in premiums between the ILP and Term (for the amount, I was looking to cover, I think the difference was some $200+ per month), plugged in an arbitrary 5% returns and it still came up tops over the NON-Guaranteed benefits illustration provided by my financial advisor. Of course, when I showed my financial advisor the illustration I had, he gave all sorts of arguments like "Are you sure you can consistently get 5% p.a?" or "My firm, XX, has the financial clout to ensure that your returns are protected." but it's human nature to not understand something when your salary depends on not understanding it.
For those in a similar situation (where you have a so-called 'professional' advising you otherwise), it may be beneficial to go through the same exercise and you will feel much more empowered to make a clearer decision.
As Buffet said, "Never ask a barber if you need a haircut."