Insurance & Costs of having and raising a child

[mrEngineer]

My reading of it is that the ANNUAL payout is limited to $100k. Best to check with the agent/broker. If the TOTAL payout is limited to $100k then of course the policy is a waste of money.

Yep. I called Aviva to check that it is annual payout limited to $100k. So the monthly salary limit would be approximately = $16k (100k/12 X 2 <for the 50% limit>) and you get a monthly allowance of $8k. I do not forsee myself earning that amount in next 5-10 years time. lol.

Anyway, according to Aviva, it is possible to continue the policy if you relinquish Singapore citizenship. As long you inform them beforehand and continue to pay the dues.

Anyway a quick comparison on the pricing tells that GE paysecure is much better with earlier payout at 90 days

[yeokiwi]

My reading of it is that the ANNUAL payout is limited to $100k. Best to check with the agent/broker. If the TOTAL payout is limited to $100k then of course the policy is a waste of money.

Yep. I called Aviva to check that it is annual payout limited to $100k. So the monthly salary limit would be approximately = $16k (100k/12 X 2 <for the 50% limit>) and you get a monthly allowance of $8k. I do not forsee myself earning that amount in next 5-10 years time. lol.

Anyway, according to Aviva, it is possible to continue the policy if you relinquish Singapore citizenship. As long you inform them beforehand and continue to pay the dues.

Anyway a quick comparison on the pricing tells that GE paysecure is much better with earlier payout at 90 days

Thanks for the correction. Ya, I missed out the word "annual"

There is this exclusion in the SAF disabiliity insurance that is particularly disturbing..
"Participating in sports or competitive racing of any kind other than on foot"

So, any incident that arises out of non-foot sport will not be covered?
Cycling, dragonboat, canoe, go kart are all excluded?

I think this clause is also in the aviva disability insurance too.

[d.o.g.]

So, any incident that arises out of non-foot sport will not be covered?
Cycling, dragonboat, canoe, go kart are all excluded?

That would appear to be the case. I wonder about swimming too. That's why I pointed out that one's exercise/recreation options will be severely curtailed if one wishes to retain cover.

I think this clause is also in the aviva disability insurance too.

Aviva is the insurance provider for the SAF policy. So it's no surprise the same exclusions apply.

Years ago it was because of such exclusions with Aviva that I went with Great Eastern. At that time their policy did not have such exclusions but cost twice as much IIRC. I paid up because I did not want my recreation to be so restricted.

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Financial Planner's view , My daughter's current policy is a whole life one, and covers death, TPD and CI for S$250,000. It is payable for 20 years after which no more premiums are required; and will cover her FOR LIFE. Her logic is that the CI coverage is very high for a child so young, and at age 20 she cannot buy a cheap term policy with such a high CI coverage (which is true since I asked her to check this for myself , a term policy covering $200,000 CI is fairly expensive). Also, as the policy covers her till death (even her natural death), it is an asset which can be passed on to her dependents and the next generation. So assuming she dies at age 80, there will be 80 years of compounding which can be very significant.

For the umpteenth time, if you want an ASSET for your daughter, INVEST the money. If you want PROTECTION then buy TERM INSURANCE.

If you want the insurer to provide both protection and investment it will cost you more and give you less, simply because your upfront commission cost is higher and your annual expense ratio is higher.

You can achieve the SAME (probably better) results as the insurer by buying term and investing the rest, simply because you are paying a much smaller insurance commission to the agent (save $$$) and no management fees to the insurer (save even more $$$). The 1.5% per year cost advantage over "80 years of compounding" is overwhelming. Run the numbers and see for yourself.

The current annual premium for my daughter for $250,000 coverage for death, TPD and CI is about $2,100 per annum, payable for 20 years still she hits 21. After that, the policy is FOC and the amount will compound all the way till her death (natural or not). My financial planner has confirmed that buying a TERM policy for 20 years costs about $540 per annum with coverage of $200,000 death, TPD and CI. But when she takes up TERM insurance when she hits 21 with the same coverage, premiums will be $1,620 per annum for her and will be for life (assuming she covers for life). Also, the claim amount will be a flat amount of $200,000 without bonuses should I choose TERM for her when she is 0-21 years, and when she chooses TERM after 21 years.

Again, your daughter does not need term insurance "for life". As I have pointed out, she has zero economic value so you should not even buy insurance on her life to begin with.

If you want to buy term CI, the policy should expire when she hits age 65 because by that time her investments should have reached the point that she can self-insure the incidental expenses. The big hospital bills will be covered by a H&S policy. A term policy that goes to age 99 or that covers "for life" is generally a waste of money.

Get a quote for a term CI when she is age 21, expiring when she is age 65. The annual premium should be much lower than $1,620. Also consider buying a guaranteed renewable term CI policy. Although the premium rises in later years, in later years her income will also have risen so she can afford the higher premium. Early on, her income is low but the premium is cheap. This way her costs will better match her income.

[mrEngineer]

For H&S medishield plans, moh has a fantastic summary (quite up to date) in this website. But you need to find out individuallly whether they are guaranteed renewable.
http://www.moh.gov.sg/mohcorp/hcfinancing.aspx?id=11222

Seems like the best plan is from GE. Cheapest and yet guaranteed renewable (I am referring to private hospital plans).

d.o.g., do you think it is wise to get the totalshield or shield extra plans where u have pay out cash but cover the entire deductibles and co-insurance?

[Musicwhiz]

Thanks d.o.g. for your reply. The reason I seem to be asking the seemingly same question ad nauseum is because this is as much a financial decision as well as an emotional decision for me (as it involves my daughter). Hence, of course I want to make sure it is the best and optimal decision under present circumstances.

I've instructed my planner to terminate the life policy once it expires, and switch fully to term at $540 per annum. With the $1,500+ saved per annum, I can invest this money for her and build up a good asset for her to compound when she is much older. I am in the process of getting a quote from the planner on a TERM policy starting age 21 and terminating age 65, but I believe it should be much cheaper than the $1,620 per annum which I previously quoted.

I think with this off my mind, I can relax for the remainder of 2010 and really look forward to a happier 2011, with all mmy family's insurance plans being reviewed and structured properly.

I guess my planner will be against me cancelling the LIFE policy as it will interfere with the commissions she gets. Hence, in this sense, she cannot be 100% objective in helping me to reduce costs and yet get the best coverage......(incidentally, my planner is an insurance broker and not an agent).

[brattzz]

i'm just starting the discussion with my finanical planner... i have 3 WL policies and 1 ILP..
And i only have like $150K coverage?? 1 CI, no disability income.. and i'm paying close to $10K annual premiums,
where if i convert all to term, i should be paying $2.5K annual.

I pay 4 times more than term, i get covered less than 1/2!!

If i terminate all these policies, i will incurred lost of $25K. (And further S$5K expenses to buy terms)

My insurance agent is a nephew of my dad's insurance agent. (who is of close relationship with dad).

I want to say i was mis-lead and want my preimums back. But i don't want to hurt the relationship.

I'll update how it turns out.

The INSURANCE 's "peace of mind" is turning out to be a HUGE mistake...and i felt soo stupid.

This is a classic case of "ASKING THE BARBER IF I NEED A HAIRCUT?!" :O Arrggghhhhhhh...!!!

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My Email to Agent:

My focus for Insurance is as follows,
1) Death & TPD
2) CI (30)
3) Hospital & Surgical
4) Personal Accident
5) Income replacement

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Let me breakdown my coverage now,

26 yrs Flexilife with CB
1) $100K sum assured = $2589
2) $100K CI rider = $809
3) P&A 1+2 = $180
4) Supremehealth = $217
5) Disability Income = Not covered.
Total Premiums Annual = $3798
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This is what i think my coverage should be,

Mixed policies from ALL players,
1) $100K sum assured TERM 30 yrs + 2) $100K sum assured CI TERM = $1122, Avivia Ideal Living
2) Boost Sum Assured $200K TERM 30 yrs = $200
3) H&S = Any plans under $200 or lower
4) P&A = Any plans under $200 or lower
5) Disability Income = $900, if GE Paysecure or Aviva Ideal Income, 2 players.
Total Premiums Annual = $2622.. round off $2700.

The difference is $1176!!! 30% less!!

100K sum assured = premiums differences of 30% WL & Term.

If CI or Death or TPD happens after 65 yrs old, the 100K then is very very small in value....

Buy Term for maximum coverage, invest the 30% differences into low cost index funds until i'm 65 yrs old.
1) Before 65 yrs old kanna CI/DEATH/TPD, Term payouts maximum coverage.
2) After 65 yrs old kanna CI/DEATH/TPD, low cost index funds investments pays.. (which is definately more than the sum assured)
Also, GE's also invest our premiums into low cost index funds! GE's charges 2%.
If we do it on our own, the cost is only 0.5%. 1.5% differences over 20 yrs is HUGE!!

Try to think this way..

But before cancelling any policies, have to calculate if the WL / ILP plans have yield for >3% (for inflation, or 5% for investment)
If No, just cancel, buy terms and invest the rest.
If Yes, the policy can be kept.

I have 4 policies from XX, brought in 2005,
ILP / CPFSA / WL / Saving.
Only the saving plan can give 3%. - This i will keep, to beat inflation.

Now, the 2 policies from XX in 2009/2010,
WLs cannot give >3% at all, coverage is too low, premiums are too high , no income protection!

Basically,
For XX's policies, only P&A / Supremehealth Plan (H&S) and the Disability Income is best.
Life insurance, Death / TPD / CI and it's sum assured coverage is best at TERM. Hope that XX comes up with other TERMS.
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[Musicwhiz]

I recommend not viewing terminating an early Whole LIFE policy as a "loss", just because the financial returns are less than the total sum paid. After all, in accounting parlance, you do enjoy a "benefit" of being covered for that period and the fact that you enjoy the coverage (and the peace of mind that comes with it) indicates that it should factor into reducing the monetary loss suffered....

At least, that's what I tell myself if I terminate at a financial loss. It's a sunk cost anyway and moving forward one should try to reduce future incremental costs rather than trying to claw back sunk costs.

Just my 2-cents on this.

[yeokiwi]

Ideal Living is a WL policy. Are you sure you want that?

NTUC iterm or SAF group insurance offer term insurance with CI rider(or many other kinds of riders...).
Cheap and good enough.
For ntuc iterm, 20 years guaranteed renewable 100k term insurance for a 30 years adult is only about $130 per annum.
http://www.income.com.sg/insurance/iTerm/index.asp

[brattzz]

thanks musicwhiz, consider as lesson learnt.

EXPENSIVE SGD$25K LESSON.

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Ideal Living is a WL policy. Are you sure you want that?

NTUC iterm or SAF group insurance offer term insurance with CI rider(or many other kinds of riders...).
Cheap and good enough.
For ntuc iterm, 20 years guaranteed renewable 100k term insurance for a 30 years adult is only about $130 per annum.
http://www.income.com.sg/insurance/iTerm/index.asp

Thanks for the heads-up,
i'm looking thru all the term policies from all players..
will report back on the most suitable plans and their terms & conditions.
Gimme a few days to read thru...

NTUC / AVIVA / SAF Group / GE etc

Yes, i'm a singaporean, so have to maximise all these "local" advantages.

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I guess my planner will be against me cancelling the LIFE policy as it will interfere with the commissions she gets. Hence, in this sense, she cannot be 100% objective in helping me to reduce costs and yet get the best coverage......(incidentally, my planner is an insurance broker and not an agent).

If she is an insurance broker, why didn't she advise you to take TERMs instead? Do you remember any of her proposals?

Be wary!

:O

[mrEngineer]

I have reviewed my policies and here it goes:

Term policies
H&S GE Supremeshield and maybe totalshield for private hospital
Disability GE Paysecure $3000/mth up to 65
Life SAF Aviva Group Term Insurance $200k
CI SAF Aviva Major illness 200k

WL policy
Limited payment GE 20 years $50k with CI

Not terminating my WL policy as left only 8 years payment and would provide coverage after 65 years old for funeral and grievance compensation (at 65 yr old redemption almost 100k).

Will look to expand coverage for disability, life and CI when start family with kids. Also purchase h&s and maybe critical illness for my kids then.

I finally appreciate that my parents have started early a limited payment whole life policy to bridge up any lack of compensation from H&S and as well compensate for life or CI after 65 years old.