please present your financial fails and mistakes here, so the others may learn from it!
I want to present my bad experience with a life insurance, which i now see as one of the worst thins you can do.
Back in 2013, when i was already looking for my money stuff but had no ideas about mustachians, passive investment, and the big picture in general, I went to some independent financial advisor, because some student’s organisation would pay for one (=three separate) sessions.
among a lot of stuff that i regard as good and successfull by today, I was recommended a life insurance “protect plan” from Axa Winterthur in the Pillar 3a Framework. For a yearly premium, i would build up some lump sum capital, including some “Prämienbefreiungs- und Todesfallversicherung”, e.g. in case of work-inability of mine the yearly premium is insured, and on death i would recieve the lump sum.
Key parameters are:
start year: 2013
duration: 39 years
Lump sum: CHF 113’047
yearly premium: CHF 3020, thereof
CHF 2337 capital building
CHF 133 Prämienbefreiung
CHF 550 Todesfallversicherung: on death i recieve slightly less than my summed premiums.
a minimum guaranteed interest rate of 1.2% on the capital stash.
Depending on not-so-clear conditions, the stash can be linked to SPI up to 40% to yield a bonus interest, but not guaranteed. When it does, the lump sum increases above the guaranteed amount.
Now, 4 yearly premiums later I became a mustachian, I go through the numbers and find the following:
1.2% is freakin low for money that is lawfully locked away for the next 35 years.
22% of my yearly expenses go into insurance, not capital. holy!!
currently, the “buy back” option of the whole insurance (therefore cancellation) results in the loss of about CHF 6000, which is half of my so far contribution.
I dont need death insurence, I dont have people that depend on me.
the “Prämienbefreiung”. basically is an insurance over CHF 3000/y for CHF the price of 133/y that applies if i reach a certain percentage of work-inability. then this insurance pays the yearly premium.
so currently i think i will bite the bullet, lose CHF 6000 in cancellation and start doing reasonable stuff with this money soon.
with my excel calculator, i see that yearly CHF 2337 of mustachian investment will result in well above CHF 170’000 in case i use the remaining CHF 680 for insurances.
whats your experience?