pay yourself first

just last monday, i was referred to a prospect who wanted a comprehensive review of his wealth protection portfolio.

one of the most significant advantages of doing this is to enjoy an updated status of your financial health which is very much like going through an annual health screening. and of course, the results of the annual health screening may save your life in terms of uncovering health conditions which may or may not be life threatening. in the same way, the outcome of the review will reveal the diagnosis of whether the prospect/client:

a. is under-insured or
b. is over-insured or
c. is paying more for his/her coverage and benefits or
d. has gaps in the coverage or
e. has more than 1 of the abovementioned items.

my comments:

this prospect was not too happy on one of his policies which required him to pay more with each policy anniversary when i pointed this out to him. and of course, he was none the wiser until i highlighted this fact to him. and no, i'm not referring to a regular premium ilp product but a good guess anyway. and surprise (or perhaps not), he has no comprehensive h&s plan but is only on the basic medishield coverage. and yes, no disability income protection as well.

as to paying higher premium on each policy anniversary, do u wish to hazard a guess as to what type of plan this is?

yes, u guessed it. this prospect has been sold a yearly renewable term policy that reprices the premium on every policy anniversary when the life insured attains a higher age and so on and so forth.

for the record, he took up the yearly renewable term policy at age 35 (last birthday) with a sum assured of $300,000.00. the premiums payable from inception is just $422.00 but is repriced yearly till it reaches $18,273.85, at age 75. and i was also surprised his financial adviser did not recommend another layer of protection to the plan which is to add the enhanced waiver of premium.

what i recommended was another similar term plan till age 65 (his attained age is now age 39 next birthday) but with an enhanced waiver of premium based on his financial needs analysis.

the yearly premium payable is just $918.00 and $963.20 (with the enhanced waiver of premium). total premiums payable will be $23,868.00 and $25,043.20 respectively till the end of the term of coverage, assuming no repricing of the enhanced waiver of premium rider.

for his current yearly renewable term plan (without enhanced waiver of premium), the total premiums payable will be $68,622.00 till age 65 and a truly astonishing $191,519.00 at age 75.

after giving him my recommendations, he thanked me for my 'homework' and said he will get back to me.