How do you see Insurance as a saving vehicle?

chew_ronnie — Tue, 17 Feb 2009 16:12:39 +0800

There are many arguments all around that says that saving in insurance products are a total waste of time and the rate of returns are rubbish.

Apparently there is no right or wrong answer to this as insurance saving plans are also categorised as a safe financial instrument or investment vehicle that yields a certain oercentage on the invested capital, which is virtually NO risk as all insurance companies in M'sia are being regulated by Bank Negara Malaysia (BNM).

Below listed are some of the more popular investment vehicles available in M'sia.

Stocks - Mesdaq or Second Board counters - High Risk and Returns can be very high or very low
Main Board or Blue Chip - Medium Risk and Returns can be high or low
Unit Trust / Mutual Funds - Equity, Managed, Growth - Moderate risk and Returns can be moderate high or low
Bond, Money Market - Low risk and Returns can be quite low
Forex and Futures - High risk and Returns can be very high and very low
EPF - Low risk and returns can be moderate high or low (but power of compounding makes a vast difference)
Fixed Deposit - Low risk and low return (quite flexible)
Insurance Saving - Virtually no risk and Returns can be low but there is a guaranteed that the product will give POSITIVE GROWTH over time. (Normally more than 20 years)

So in general rule of thumb, insurance saving plans is often categorised as long term saving plan and not meant to be withdrawn halfway of early (way before its maturity). Also the returns can be expected over the long term hence it is a good financial tool for retirement planning. And when its refered to retirement planning, it is not always the choice to have just an insurance saving plan for retirement, it shall be consist of a portfolio of investment including stock, mutual funds, EPF, FD and Insurance Saving policies.

Comparing rate of returns of Insurance Products (Standard Plans in the M'sian Market)
6 yrs, 8 yrs, 10 yrs, 12 yrs, 15 yrs, 20 yrs, 25 yrs, whole life:-
when surrendered @ 20 yrs - 1.2 to 1.6 times of capital
@ 30 yrs - 1.7 to 2.6 times of capital
@ 40 yrs - 2.8 to 4.5 times of capital

So it all depends on the budget and tenure and most importantly the purpose of doing so.

Good luck shopping and you can PM me if you need some help on this.

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How do you see Insurance as a saving vehicle?