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Life Insurance too good to be true? 75% ROI

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  1. #21
    Quote Originally Posted by chris_in_hk:
    Hi guys,

    Don't think you're thinking about things the right way.

    The purpose of life insurance is to provide a lump sum to your dependents should you pass away early. You can think of it as replacing X years' worth of your salary or providing Y years' of living expenses for your dependents. So think about the lump sum you want to provide and how long you want this protection to be in place, for example, 20 years so all your kids will be adults by then. And then buy term life insurance for that amount and for that period of time or as close to it as you can reasonably afford.

    In my opinion, it shouldn't be mixed up with investing. You'll get better bang for buck by buying term life insurance and investing the difference properly & regularly.

    The purposes of life insurance and investing shouldn't be confused.
    Absolutely agree with this. One can be covered for $700,000 for $700/year guaranteed for the next ten years. Once the kids are grown up and on their own, they can wait it out for their inheritance.
    shri and traineeinvestor like this.

  2. #22

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    The best policy i have actually seen, that matches our life needs, is something call decreasing term policy.

    Assuming i am 30, i get one for 1mio $.. the coverage will fall, e.g. 3.3% every year for the near 30 years. So by the time i am 60 i am totally uncovered by this policy

    Why is this good ?

    - Cashflow :: You only need to be covered now when kids are young, mortgage are outstanding. By the time you are 60 we assume you would have saved up enough and used the savings to invest prudently. Kids have grown up. etc.

    - Cost :: The highest payout is when you are young, where the probability of death is lowest. And as the probability of death increases, your payout is lowered making the expected payout for the full 30y must lower than a normal fixed term. Makes cost of this policy on a risk neutral basis much lower than term/life policies.

    - Mindset :: Most people are against term policies, because crossing from year 30 to year 31, your insurance coverage suddenly goes from 1mio to 0. People get unhappy that the insurance company managed to skim thru and so they went for the life policies with investment value.. Which usually are a much bigger rip off simply because of the larger amount of money involved...

    - To the insurance company :: They usually don't like the decreasing term policy, because you pay constant amount across 30years, but your coverage decreases.. So likely initially your payment amount is lessor than the coverage amount and only after 5~10 years after the coverage reduces, your premium is higher than the fair value of risk of the coverage. Technically one can get into this policy, and terminate this after 10years.. the insurance companies would have ran some paper losses as their expected profit doesn't come in later.


    I managed to get one when i was in singapore.. they made you tie it to the mortgage.. so if you don't have a mortgage they didn't want to sell you that.. the assumption was that if you have a mortgage your choice of cancellation is must reduced...

    chris_in_hk likes this.

  3. #23

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    I managed to get one when i was in singapore.. they made you tie it to the mortgage.. so if you don't have a mortgage they didn't want to sell you that.. the assumption was that if you have a mortgage your choice of cancellation is must reduced...
    This does sound good - but I don't think I have come across such a policy at retail (with or without mortgage) here in HK.

  4. #24

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    Mine was actually from aviva.. it was called a decreasing mortgage term policy.. you can ask specifically they might have.. just the cost is half of a regular term and i doubt agents like to sell them

    shri likes this.

  5. #25

    I agree with freeier. Decreasing term life is even better. If you can get it


  6. #26

    Another thing to do if you're high-income is take advantage of the tax breaks offered for entering a retirement scheme. For example, a voluntary MPF contribution.

    Put $10000 into your MPF. Reduce your tax bill by $1700. Take $700 to pay for the term insurance. Put the other $1000 in your wallet. You end up spending $9000 per year, are covered by life insurance, and make an instant 11% return on your contribution. You then even have the ability to just spend the money when you reach 65.

    If you die, your children will get the $700,000 from your insurance plus the accumulated MPF contributions.


  7. #27

    I'm sure I'm missing somethig but when did voluntary MPF contributions become tax deductible? According to this HKSAR govt website:
    https://www.gov.hk/en/residents/taxe...ctions/mpf.htm

    "Under the provisions of the Inland Revenue Ordinance (IRO), mandatory contributions to MPF schemes are deductible in computing your assessable income as an employee or assessable profits as a self-employed person's own contribution. All contributions other than mandatory contributions are voluntary and are not deductible. The maximum deduction for each year of assessment is ... HKD18,000,"


  8. #28
    Quote Originally Posted by traineeinvestor:
    I'm sure I'm missing somethig but when did voluntary MPF contributions become tax deductible? According to this HKSAR govt website:
    https://www.gov.hk/en/residents/taxe...ctions/mpf.htm

    "Under the provisions of the Inland Revenue Ordinance (IRO), mandatory contributions to MPF schemes are deductible in computing your assessable income as an employee or assessable profits as a self-employed person's own contribution. All contributions other than mandatory contributions are voluntary and are not deductible. The maximum deduction for each year of assessment is ... HKD18,000,"
    Should have looked a bit deeper - looks like this has changed and deductions of up to HKD60K can be claimed for individuals (HKD120K) making MPF contributions beyond their mandatory requirements: https://www.scmp.com/business/bankin...st-tax-savings

    Question would be whether the one-off tax deduction would outweigh the higher MPF fees paid for the number of years the money is stuck in the MPF quagmire?

  9. #29
    Original Post Deleted
    Thanks - remembered that just after I posted. Clearly you can spot the retired poster here. :-)

  10. #30
    Quote Originally Posted by traineeinvestor:
    Should have looked a bit deeper - looks like this has changed and deductions of up to HKD60K can be claimed for individuals (HKD120K) making MPF contributions beyond their mandatory requirements: https://www.scmp.com/business/bankin...st-tax-savings

    Question would be whether the one-off tax deduction would outweigh the higher MPF fees paid for the number of years the money is stuck in the MPF quagmire?
    That's hard to gauge. I think one could beat the ROI of the life insurance plan though.
    Last edited by civil_servant; 25-03-2019 at 03:29 PM.