I was sold a life insurance policy by an agent a year ago. I did not do my due diligence before signing up for this plan and now feel it may not be the right fit for me.
I am 38 years old and pay about $1,000 (Dh3,672.50) a month towards it. The premium increases every year and I have 10 years remaining on the policy. I feel this will be exorbitantly priced, especially towards the end of the policy term.
So far, I have paid about $13,000 towards the policy. In the interim, I lost my job and, while I do have a new role, my salary is greatly reduced.
This means that I am unable to afford the premium payments and am going into debt by occasionally withdrawing money from my credit card to pay the instalments.
Should I immediately cancel this policy? Will I recover the amount I’ve invested so far as premiums? SG, Sharjah
Debt Panellist 1: Steve Cronin, founder of DeadSimpleSaving.com
You and hundreds of thousands of other people have been persuaded to buy an insurance policy that benefits the agent and the insurance company far more than you.
Banks, insurance agents and financial advisers make a lot of effort to sell you these policies because they receive commission: both up front and throughout the life of the product.
To understand the problem, it helps to understand the two main types of life insurance policies.
Term life insurance is relatively cheap and simple. You pay a premium each month up to a specific age — for example, your age when your mortgage ends or your children have finished university.
If you die before that age, your beneficiaries receive a lump-sum payment. If you die after that age, or you stop paying the premiums, you get nothing.
Is this a waste of money? Absolutely not. You are paying for protection during a period when your family finances would be badly affected by you dying.
Whole life insurance combines the insurance capabilities of term life with an investing component.
While a term life policy might cost you $100 per month, whole life can easily cost $1,000 a month, as in your case. You are then covered for your “whole life” but mainly with the money you have invested — that extra $900 a month.
There are multiple problems with whole life insurance.
First, it is complex and the ongoing fees are very high — anything from 1.5 per cent to 4 per cent per year, with many hidden fees along the way.
So, your $900 monthly investment is not going to grow very fast. If the stock market can expect 7 per cent growth per year, those annual 4 per cent fees will eat up 58 per cent of your annual profits. That makes an enormous difference over time.
Second, the money tends to be invested poorly, in exotic actively managed funds with a 2 per cent to 3 per cent fund management fee — because some of that fee is paid out as commission to your adviser.
Investment in structured products is even worse — complex, risky and not easy to sell.
Third, these products are often very unforgiving if your circumstances change and you can no longer afford to pay the monthly premium.
Even if you stop paying, fees may continue to be charged as a percentage of what you would have put in had you continued to pay. So, what you have remaining in the policy starts to get eaten away by higher fees.
Fourth, if you want to stop paying and get your money back, you will pay a high “surrender penalty”.
Structures vary from policy to policy, but it’s likely that you will lose the entire first year’s premiums you paid.
Why? Because they have already been paid out or earmarked for commission or profit for the individual agent, their company and the insurer.
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The money has gone. You wouldn’t notice if you stayed in for 10 years, but if you need to take your money out early, then the true nature of such a policy is revealed.
Insurance policies vary between providers and, over time, they have been slowly getting less awful. You need to understand the fees and restrictions that apply to your own policy. However, most people have found they are better off stopping contributions and even closing down the policy.
Using your credit card is a terrible idea, as you probably can’t afford to pay this off either. There are high fees for taking out cash on a credit card, plus a high interest rate of more than 40 per cent per year.
When you stop the payments, it is likely that you should surrender the policy, too.
You are never going to get those premiums back — they have already been paid out in commission and if you left the premiums invested in there, they would probably grow slowly due to high ongoing fees.
Ask the insurance provider for the surrender value. I expect it will be around $1,000 that you can get back, although I hope it is a better policy and they offer you more.
They may try anything to keep you contributing but as you can’t afford it, you should stop.
They will also probably try to persuade you to keep the policy open. This is up to you, but many people have found it better to draw a line under this bad experience.
Then you can focus on paying off your card debt, get a cheap term life insurance policy if you need one, and learn how to invest sensibly and cheaply through a robo-adviser or doing it yourself via low-cost exchange-traded funds and an international brokerage.
It's important to understand the terms and conditions of your policy, including any cancellation provisions, surrender charges, and potential refunds.
You should review your policy documents and contact your insurance agent or insurance company directly to get a clear understanding of the implications of cancelling your policy at this point in the contract.
In some cases, cancelling a life insurance policy before the end of the term may result in a loss of premiums paid, especially if the policy has surrender charges or other fees associated with early cancellation.
The amount you may be able to recover will depend on the specific terms of your policy, such as whether it is a term life insurance policy or a permanent life insurance policy.
You may have an option to defer payments or take a payment break to help ease pressure in the short term while you decide on your next steps.
You may have an option to defer payments or take a payment break to help ease pressure in the short term while you decide on your next steps
Carol Glynn,
founder of Conscious Finance Coaching
Check the policy terms and conditions or have someone independent review them and confirm your understanding.
It's also important to consider the long-term financial implications of cancelling your policy.
If you have dependents who rely on the life insurance coverage for financial protection, cancelling the policy could leave them exposed to financial risks in the event of your death.
Given your current financial situation, it would be wise to consult a qualified insurance professional, who can provide personalised advice based on your specific circumstances.
They can help you understand the options available and weigh the pros and cons of cancelling the policy, taking into consideration your financial goals and needs.
They can potentially provide a more affordable policy that still meets your needs.
Cancelling a life insurance policy is a complex decision that should not be taken lightly.
It's important to carefully review your policy, understand the potential consequences, and seek professional advice before making any decisions.
Debt panellist 3: Keren Bobker, financial adviser and senior partner at Holborn Assets
As a qualified and regulated financial adviser for many years, I find it disappointing that people are still not given proper information when they take out life policies and other plans.
Literature from the insurance company should also be provided and investors need to take the time to read that.
The premiums sound rather high, so I can only assume that you have what is known as a “whole of life” policy.
They are frequently mis-sold as also being a saving plan, whereas any cash value that builds up in them is primarily designed to offset higher premiums at a later date.
There will be no cash in value for some time, depending on how exactly the plan has been set up. It appears that this has only been in force for 13 months. The insurance company should be able to provide you with details of your options.
You will not get back all the premiums as you have been paying for life cover, in the same way that you do not get a return of premiums if you don’t claim on a motor insurance policy.
It is likely that a cash value will accrue after a longer period, depending on exactly how the plan has been set up.
It is often better to keep life cover and investments separate, not least as many of the hybrid plans sold in this region are restrictive, expensive and very limited in respect of the investment element.
I do not have full details, so cannot give specific advice; despite being legally authorised to do so in the UAE.
In most cases, a policyholder can be late paying up three months’ premiums before a plan is invalidated. You will need to check this with your insurance company.
While I do not endorse going into debt to pay into a policy, if the priority is to have life cover to protect a family and/or cover a debt, I don’t recommend that the plan be cancelled.
Depending on this situation, it may be sensible to arrange an alternative term assurance policy to protect dependents. This is likely to be significantly cheaper. Investment can then be made separately into a vehicle that is far more flexible and cheaper.
Assuming life assurance is required for family, the existing plan must remain in force until a replacement has been underwritten and is ready to start, so that you are not left without insurance, potentially putting your family at risk.
This goes to show why proper independent advice matters, from experienced and qualified advisers, where real advice is tailored to an individual situation. Too often, people are simply sold a plan and there is no continuing advice when it is required.
The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to pf@thenational.ae
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Royal purification
The entire coronation ceremony extends over three days from May 4-6, but Saturday is the one to watch. At the time of 10:09am the royal purification ceremony begins. Wearing a white robe, the king will enter a pavilion at the Grand Palace, where he will be doused in sacred water from five rivers and four ponds in Thailand. In the distant past water was collected from specific rivers in India, reflecting the influential blend of Hindu and Buddhist cosmology on the coronation. Hindu Brahmins and the country's most senior Buddhist monks will be present. Coronation practices can be traced back thousands of years to ancient India.
The crown
Not long after royal purification rites, the king proceeds to the Baisal Daksin Throne Hall where he receives sacred water from eight directions. Symbolically that means he has received legitimacy from all directions of the kingdom. He ascends the Bhadrapitha Throne, where in regal robes he sits under a Nine-Tiered Umbrella of State. Brahmins will hand the monarch the royal regalia, including a wooden sceptre inlaid with gold, a precious stone-encrusted sword believed to have been found in a lake in northern Cambodia, slippers, and a whisk made from yak's hair.
The Great Crown of Victory is the centrepiece. Tiered, gold and weighing 7.3 kilograms, it has a diamond from India at the top. Vajiralongkorn will personally place the crown on his own head and then issues his first royal command.
The audience
On Saturday afternoon, the newly-crowned king is set to grant a "grand audience" to members of the royal family, the privy council, the cabinet and senior officials. Two hours later the king will visit the Temple of the Emerald Buddha, the most sacred space in Thailand, which on normal days is thronged with tourists. He then symbolically moves into the Royal Residence.
The procession
The main element of Sunday's ceremonies, streets across Bangkok's historic heart have been blocked off in preparation for this moment. The king will sit on a royal palanquin carried by soldiers dressed in colourful traditional garb. A 21-gun salute will start the procession. Some 200,000 people are expected to line the seven-kilometre route around the city.
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On the last day of the ceremony Rama X will appear on the balcony of Suddhaisavarya Prasad Hall in the Grand Palace at 4:30pm "to receive the good wishes of the people". An hour later, diplomats will be given an audience at the Grand Palace. This is the only time during the ceremony that representatives of foreign governments will greet the king.
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Your UK residence status is assessed using the statutory residence test. While your residence status – ie where you live - is assessed every year, your domicile status is assessed over your lifetime.
Your domicile of origin generally comes from your parents and if your parents were not married, then it is decided by your father. Your domicile is generally the country your father considered his permanent home when you were born.
UK residents who have their permanent home ("domicile") outside the UK may not have to pay UK tax on foreign income. For example, they do not pay tax on foreign income or gains if they are less than £2,000 in the tax year and do not transfer that gain to a UK bank account.
A UK-domiciled person, however, is liable for UK tax on their worldwide income and gains when they are resident in the UK.
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The Uefa Nations League, introduced last year, has reached its final stage, to be played over five days in northern Portugal. The format of its closing tournament is compact, spread over two semi-finals, with the first, Portugal versus Switzerland in Porto on Wednesday evening, and the second, England against the Netherlands, in Guimaraes, on Thursday.
The winners of each semi will then meet at Porto’s Dragao stadium on Sunday, with the losing semi-finalists contesting a third-place play-off in Guimaraes earlier that day.
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Stuck in a job without a pay rise? Here's what to do
Chris Greaves, the managing director of Hays Gulf Region, says those without a pay rise for an extended period must start asking questions – both of themselves and their employer.
“First, are they happy with that or do they want more?” he says. “Job-seeking is a time-consuming, frustrating and long-winded affair so are they prepared to put themselves through that rigmarole? Before they consider that, they must ask their employer what is happening.”
Most employees bring up pay rise queries at their annual performance appraisal and find out what the company has in store for them from a career perspective.
Those with no formal appraisal system, Mr Greaves says, should ask HR or their line manager for an assessment.
“You want to find out how they value your contribution and where your job could go,” he says. “You’ve got to be brave enough to ask some questions and if you don’t like the answers then you have to develop a strategy or change jobs if you are prepared to go through the job-seeking process.”
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