Samsung life insurance as an investment in Thailand?

[DavidMavec]

Hello...

I have a Thai acquaintance who sells life insurance through Samsung Life Insurance. She has said that this is a good investment and pays an approximately 8% return. I am very skeptical because why wouldn't more people invest in it instead of fixed bank accounts, etc.

Is anyone knowledgable about this and/or buying life insurance as an investment in Thailand? I don't really understand how this would work as I previously thought life insurance was simply a means to protect your loved ones in case of your untimely death.

Thanks for any knowledgable responses.

[Cloggie]

>> I don't really understand how this would >> Then stay away from it as far as you can.

Only buy product you understand for 100% so also understand how much you can loose!

[RichCor]

I know a lot of people who would LOVE to meet you.

Just saw a Wall Street Journal article: "Samsung Life Public Welfare Foundation is selling about $500 million of shares in Samsung Life Insurance Co." [...] "The Foundation is selling 5 million shares of Samsung Life Insurance, or 2.5% of the insurer's shares outstanding, in a range of 99,275 Korean won to 101,365 Korean won ($97.50 to $99.50) per share, representing a 3% to 5% discount to Thursday's closing price"

Selling Life insurance is a Statistical and Actuary Table numbers game. Those that understand it can make a LOT of money. Those who invest in those that understand it can risk their money to make some money. Those who actually buy the products are usually people who are bad at math, can't invest money on their own, neglect to see that the policies only pay off under limited conditions, neglects to tell others a policy exists, and fail to file claims at time of their death -- leading to lack of policy payout that will then free up the corporation's encumbered liability.

Find a qualified Financial Adviser. Preferably one not wearing a dark suite.

[MMarlow]

Life insurance is as you understand it, a predetermined amount is paid out in the event of your death, covering you either for a specific number of years (Term Insurance) or for the whole of your life (the more expensive Whole Life Insurance). It does not have any element of investment so offers no return except in the case of your death (if that is within the term of the policy in the case of Term Insurance).

Policies offering a potential investment return are Life Assurance policies in which part of your (more expensive) premiums are used to (hopefully) provide an enhanced value to the policy (sum assured) paid out either on your death or at the end of the pre-determined term of the policy. This additional value depends entirely on the efficiency of the investment element and will never be guaranteed. Any indication of annual returns, such as the 8% quoted to you, is always based on past performance of the investment managers and past performance is no guarantee of future returns. There is always a risk that the investment element will not produce any returns at all and that any payout will be limited to the original sum assured.

If the person selling the policy to you does not, or cannot, explain that to you, you should not be giving them your money (from which they will earn a substantial commission). As a previous poster said, if you want to take out any kind of life policies and you do not understand how they work you need to be taking advice from one or more established, English speaking, advisors who are not tied to any particular insurance company and compare what they offer you.

[natway09]

Check it out well, it may be worthwhile, also may be endowment style meaning can can get back after certain period of time principle

& interest. Many banks will give you a loan here for business on the whole of life segment cover.

Just be careful

[Misty]

The OP has good reason to be very skeptical about the claim of 8% return per year. OP, first get a copy of the policy, and then do the math behind the numbers.

In case you don't read Thai for an example of the math, try googling "Life Insurance Savings Schemes for Expats in Thailand" - you should come up with at least one article that will walk you through the calculation behind these types of life insurance policies. You'll probably find that unless you're in the position to take a sizeable Thai tax deduction every year for a long period of time, you wouldn't get anything near an 8% return (more like 2.5%). You'd also have to keep making sizeable contributions each year plus keep your money locked up in Thai baht for a long period - maybe 15 years. Really not a good deal.

If your Thai friend disputes the math, ask them to run the equations for you and explain them to you. It's possible that will end the discussion.

[F4UCorsair]

Never, ever take advice from the person selling the product.

If you feel that you may like to invest, have her document the whole deal and have it gone over with a fine tooth comb by more than one person/adviser who is knowledgeable about the product.

Also remember that past returns are not indicative of what you can expect in the future!!

[JacChang]

Not entirely correct. Insurance has evolved a lot these few years. Most people think of insurance as a safety net if something happens. But insurance products are now linked with investments and so on.

Myself, I have bought a 7yr investment linked insurance product. While it does pay me if something happens, that is not my priority. Let's say I invest 1,000,000 THB, for my specific product, I paid lump sum payment since my cash was ready anyways. By the end of the 7th year, I would get my principal back if I didn't claim for any insurance at all. Also during these 7 years, I would be eligible to get monthly/yearly/maturity interest. It is completely your choice, I chose interest at maturity as the interest would be compounded, and I would get more than if I chose monthly interest.

With that all said, the interest is higher than 2-3yr deposits, but lower than stock dividends.

The risk? 100% loss if the insurance company goes bankrupt and gone. Get a large profitable insurance company? If bank deposits were 5% risk, insurance would be about 10% risk. It is still considered one of the safest investment risk levels.

Usually the interest are tax free, and you get incentives as well.

It's one of the products I use myself, to fill in the hole between "safe money deposits" and "risky stock investments". It gives you more % than your deposits while having a slightly more risk only. And the timeframe is long, equivalent to bonds.

So it's an alternative to consider. I haven't heard of Samsung insurance though, and I would stay away from other insurance companies, most are making a loss. Only siam commercial bank has a decent cash flow balance and profiting business. You can check at settrade SCBLIF.

Edited: I would like to add.

From my experience, most sales are not trained well enough on how the insurance actually works. They only know to sell a product, heck, they can even go sell mangoes without any more training. The point is, the interest she told you, is actually the "Indicative Interest Rate", which is usually way off. I'm not sure if you are good at math, but I'll try to explain it like this.

The current interest rate now is 2%. The insurance will usually pay you "current interest rate 2%" + "their interest rate premium 1%". So you get a total of 3%. However if the interest rate drops to 1%, you will only get 2% on that year for your insurance interests. Likewise if interest goes back to 3%, you will get 4%.

But for your information, generally their stated interest rate that you will get is ballooned. You should minus about 30% to get your actual interest. Multiply the interest by 0.7

Ask her to print out the insurance form for you. It will look like an excel sheet, with your age as the starting point, and consequent years listed out, and what you will get for each year. Take the total interest received from each year, divided by the number of years duration. You will get the number of interest you get per year. Then take that number divided by your initial principal. There, you have your true percentage.

Edited June 20, 2014 by JacChang

[SheungWan]

Do not touch life insurance as an investment product with a bargepole.

if you want to take out insurance do so, but purely as insurance.

Keep investment and insurance as completely separate commitments.

The catch is that cash surrender values are hopeless and commission front-ended

[hugh2121]

I was offered the same deal by Krung Sri Bank. After getting the paperwork fully translated I felt it was a con due to unclear headlines.

First year pay in 50,000. End of first year get 8% of 50,000

Second year pay in 50,000. End of second year get 8% of 50,000

Third year pay in 20,000. End of third year get 8% of 50,000

Fourth year pay in 50,000. End of fourth year get 8% of 50,000

Fifth year pay in 50,000. End of fifth year get 8% of 50,000

After fifth year stop paying in and stop getting interest.

End of year ELEVEN get back just over 200,000.(Don't remember exact figure)

Total profit was about 30,000 after 11 years on a total paid in of 250,000.

Ordinary fixed deposit account beats it but does not provide life assurance.