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Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 1:39 am
by MBK
I have a question about whole-life insurance with investment aspect to it.
I have been interested in getting into investing for a while, but did not really know how to get around to it, and since at that time, I was getting my insurance revised, the option of life insurance with investment caught my attention and I signed up for the product (it`s "Life Invest" with Met Life).
However since that I have been reading up more books about finances as well as getting more informed about the options there are specifically in Japan thanks to this forum and RetireJapan site, and I can see overall negative perception of this type of mix of life insurance/investing.
From what I read the main issue with this type of insurance is with the service fees that are charged which make direct investing more beneficial (depending on the investment type "Life Invest" charges between 0.5 - 1%).
Is there any other demerit to these kinds of life insurance to keep mind on?
Is term-life insurance the way to go?
Re: Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 4:23 am
by TokyoBoglehead
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is there any other demerit to these kinds of life insurance to keep mind on?
You will be paying more, for a lot less....
These products are for those who have 0 risk tolerance for investing or special circumstances.
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is term-life insurance the way to go?
For almost everyone. However, if you are the only breadwinner and you have many deponents, it would be reasonable to get more insurance, including unemployment insurance if you can find a reasonable policy with decent terms.
Re: Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 4:48 am
by sutebayashi
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is there any other demerit to these kinds of life insurance to keep mind on?
Is term-life insurance the way to go?
I think the benefit for these types of life insurance product is for people who really just don’t want to think about investing, and happy to delegate their own financial future to a life insurer, because they want some actual insurance too anyway. It’s a convenience of sorts.
All the life insurers do, so far as I can tell, is take your money, invest it instead of you, and take out some of the returns from the investment to cover claims from those customers who make them.
Given that you obviously have an interest in your finances I would say you are not the type of person who would be a suitable customer for them. By reducing the costs by investing directly yourself you will likely achieve better returns, so long as you know what it is you are opting to invest in.
I do have some vanilla life insurance policies, for cancer treatment, unemployment, but these days I am not sure if I really need to keep paying for these either. If disaster does strike I can always pay out of pocket, I think. But they are pretty cheap so whatever.
Re: Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 6:33 am
by MBK
Thank you for reply.
TokyoBoglehead wrote: ↑Tue Dec 20, 2022 4:23 am
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is there any other demerit to these kinds of life insurance to keep mind on?
You will be paying more, for a lot less....
These products are for those who have 0 risk tolerance for investing or special circumstances.
I reckon this "pay more, for a lot less" goes for both the insurance part as well as investing part? I have read a few things about getting less on your investment with this kind of products, but where does the overpaying part figure in the insurance side of the whole-life insurance? Does that refer to the "unnecessary" length of the insurance?[/quote]
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is term-life insurance the way to go?
For almost everyone. However, if you are the only breadwinner and you have many deponents, it would be reasonable to get more insurance, including unemployment insurance if you can find a reasonable policy with decent terms.
Yes, I`m generally the only breadwinner of the family, so I`m trying to find a good balance between savings, investment and insurance which would also give my wife a peace of mind. At the moment, I feel that the insurance part we went a bit too heavy on and your comments above help to confirm that.
Re: Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 6:55 am
by MBK
sutebayashi wrote: ↑Tue Dec 20, 2022 4:48 am
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is there any other demerit to these kinds of life insurance to keep mind on?
Is term-life insurance the way to go?
I think the benefit for these types of life insurance product is for people who really just don’t want to think about investing, and happy to delegate their own financial future to a life insurer, because they want some actual insurance too anyway. It’s a convenience of sorts.
All the life insurers do, so far as I can tell, is take your money, invest it instead of you, and take out some of the returns from the investment to cover claims from those customers who make them.
Given that you obviously have an interest in your finances I would say you are not the type of person who would be a suitable customer for them. By reducing the costs by investing directly yourself you will likely achieve better returns, so long as you know what it is you are opting to invest in.
I do have some vanilla life insurance policies, for cancer treatment, unemployment, but these days I am not sure if I really need to keep paying for these either. If disaster does strike I can always pay out of pocket, I think. But they are pretty cheap so whatever.
Well said and that first sentence very much describes my state of mind at that time.
Since then I got my iDeco going, NISA for whole family going, and realized that this investing thing is far from as complex as I thought it might be (naturally, if can get as complicated as one wants it to be) with focus on index funds.
Comparing the rate of eMaxis to the life insurance just made me cringe, since I don`t feel that for that extra payment, I`m receiving any additional service nor that the funds available through Met Life have a tendency or history to majorly overperform the market.
I will need to look deeper into their 払い済 options to get a better idea how to fade the insurance out.
For comparison, if anyone has that information, what would a term life insurance cost for let`s say 15 years in a range of 25 million JPY ? I`m currently 37 with no history of health issues.
Re: Life Insurance with Investment Aspect
Posted: Tue Dec 20, 2022 8:36 am
by captainspoke
Depends on the workplace, but I carried term insurance thru work (there are some other options for family members, hospitalization, etc). No contract to sign, no pressure, just sign up via HR/人事課 and it's a payslip deduction rather than a separate bill to keep track of. That said, it wasn't level term, so the cost for the life insurance part did go up when I got older.
Re: Life Insurance with Investment Aspect
Posted: Wed Dec 21, 2022 9:31 am
by beanhead
I have a very small 'pension'/life insurance product with one of the western insurance companies here.
I think of it as a poor man's annuity. I can't start collecting it until I reach 75.
Re: Life Insurance with Investment Aspect
Posted: Mon Dec 26, 2022 3:41 am
by MBK
I have made further confirmations with the insurance companies to get a proper breakdown on the service fees as well as options of finishing the contract.
The investment products are that of Pinebridge Investment and Fidelity and I`m enlisted in two active funds - Global(my primary) and US - charging 1.1% respectively 1%. The third fund I`m invested in charges 0.77%.
On top of that, there is the monthly charge of 0.45% for the insurance part, so in total on average pay around 1.5% on fees monthly.
This is in relation to a monthly payments of 45,000 JPY totaling the total insurance coverage of 36 million JPY.
If I finish the contract now, pretty much the whole amount paid which is around 500,000 JPY will be "wasted" though a small part will remain towards life insurance.
I want to check if with the above, going with direct investment and term-life insurance is better option? Any advice would be much appreciated.
Re: Life Insurance with Investment Aspect
Posted: Mon Dec 26, 2022 6:40 am
by TokyoBoglehead
MBK wrote: ↑Mon Dec 26, 2022 3:41 am
I have made further confirmations with the insurance companies to get a proper breakdown on the service fees as well as options of finishing the contract.
The investment products are that of Pinebridge Investment and Fidelity and I`m enlisted in two active funds - Global(my primary) and US - charging 1.1% respectively 1%. The third fund I`m invested in charges 0.77%.
On top of that, there is the monthly charge of 0.45% for the insurance part, so in total on average pay around 1.5% on fees monthly.
This is in relation to a monthly payments of 45,000 JPY totaling the total insurance coverage of 36 million JPY.
If I finish the contract now, pretty much the whole amount paid which is around 500,000 JPY will be "wasted" though a small part will remain towards life insurance.
I want to check if with the above, going with direct investment and term-life insurance is better option? Any advice would be much appreciated.
1.5% in fees is huge.
Run a basic fee drag calculation here -
https://www.buyupside.com/calculators/feesdec07.htm
You'll see that that 50万 you 'lose' doesn't mean much in compassion to what you'll lose to fee drag over decades.
Re: Life Insurance with Investment Aspect
Posted: Wed Dec 28, 2022 4:49 am
by Roger Van Zant
TokyoBoglehead wrote: ↑Tue Dec 20, 2022 4:23 am
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is there any other demerit to these kinds of life insurance to keep mind on?
You will be paying more, for a lot less....
These products are for those who have 0 risk tolerance for investing or special circumstances.
MBK wrote: ↑Tue Dec 20, 2022 1:39 am
Is term-life insurance the way to go?
For almost everyone. However, if you are the only breadwinner and you have many deponents, it would be reasonable to get more insurance, including unemployment insurance if you can find a reasonable policy with decent terms.
What is "term-life insurance" in Japanese?
What is the other type called in Japanese....the one with investing involved as well?