Traditional whole life and endowment policy are able to give you a form of guarantee cash value, however the initial cost factor is very high in the initial years. The advantage is company will be able to give you long-term guarantee coverage.
Operation cost will refer to the distribution cost. Distribution channel refers to the insurance company doesn’t take the risk on its own. Usually they distribute the risk to other re-insurance companies. In exchange, the risk came in as a cost fact when the insurance company engages actuarial and under-riders.
A product that is developed from actuarial and under-riders will then further be distributed by the company in different channels to the agents or financial planners before to the customers.
This process of distribution channel form the company via the financial planners to the customers comes in a few ways:
1. Agency
Managers will distribute the financial product (e.g.: Insurance) to the supervisors before they assigning to the agent. The agent will then source out to their customers before advising and selling them the product. This cost naturally will come in through the over-riding from one to another.
2. Company
They will distribute their customers directly via the financial planner.
3. Brokers
If customers require advise or information from the brokers, they will charge them a profession fee.
4. Company to full time staff
Company will assign the full time staff to advise on the customers in whatever doubts they have.
All the above factors are cost factored in and will affect the total cash value that the customer will require to pay before they are able to seek some advise from the professional.
The cost can all differ by having the agents to allow you to save the time and reduced the suffering when come to choose an ideal plan for the customers that will suit to their needs.
Non-traditional policy such as the investment plan will have other fees involved. These include advisory fees given to your financial planner or brokers; policy fees to the company when they created your policy; annual management fee given to the fund managers, etc. It is important to look at all these cost factors before consider buying an investment plan either through the Internet or agents. If one doesn’t know how to do proper investment, it is important to consult a financial planner who will be able to give you their most professional advice to assist you.
Other than that, there’s bid offer spread and some are higher especially in bank and the lower is through the Internet. Sometimes, Companies such as NTUC income gives lower or no bid offer spread. One such example is REVOSAVE.
Before you do any investment in future, look at the terms and conditions that a company will offer to prevent yourself from getting bankrupt.
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