Insurance & Costs of having and raising a child

[d.o.g.]

To add on, I originally had the impression that for a good DI insurance, the policy will pay a percentage, often 75%, of the difference between one's new wage and the old one, where one's new wage will keep changing. However, my take-away from my advisor is that I will need to attribute an amount I wish to cover, and this will be constant even as I age or get increments. i.e. Premiums payable for $1k income coverage is lower than $10k income coverage.

The insurer has no idea what you are going to earn in future. So in order for it to charge you a fixed premium it has to assume you have a fixed income i.e. no increments, bonus etc. If you want the coverage to change with your wages, your insurance premium will also change constantly.

If you earn $2.4k today and you wish to protect it, the insurer might charge you $30 a month to protect 75% of $2.4k i.e. your maximum payout would be $1.8k. In future your pay might be $3.6k but your $30 premium only covers 75% of $2.4k. If you want to insure the extra $1.2k you need to adjust the policy or get a new one. I do not know of any insurer today which adjusts the protection automatically, though I think Aviva has a 3% escalation.

Whether the policy makes sense for you will depend on whether your own assets will suffice to pay for your lifelong treatment and care if you are disabled. The younger you are, the more sense this makes. I personally thought the policy I bought years ago was a fair deal. In fact it was probably a good deal since the insurer no longer offers it!

At that time I paid about 1.5% of my wages as premium. I figured I could easily save the 1.5% difference and not feel the pinch, and yet if I needed it it would become a very valuable asset to help my loved ones take care of me. I do not know what the premiums are like now.

[Bibi]

I do not know of any insurer today which adjusts the protection automatically, though I think Aviva has a 3% escalation.

If i am not wrong the 3% escalation benefit will kick in only if the benefits payout starts.

[Blackjack]

At that time I paid about 1.5% of my wages as premium. I figured I could easily save the 1.5% difference and not feel the pinch, and yet if I needed it it would become a very valuable asset to help my loved ones take care of me. I do not know what the premiums are like now.

Thanks for your kind explanation d.o.g.

The current premiums range from 0.9% to 1.7% for 3 months deferment, depending on whether coverage is till 55, 60 or 65. For escalation clause to be included, it would increase to 1% to 2%, so I guess its pretty similar still to the premiums back then.

[Poowawa]

Disclaimer: I am not an "expert" in insurance. At best I am an informed consumer.

My $0.02:

You have zero dependents i.e. financially nobody is worse off if you die. Therefore from the purely economic standpoint there is no need to buy any insurance on your life, whether term or whole life.

Since you have 3 whole life and 2 endowment policies you in fact have most of the money going into investments and very little going into actual insurance coverage.

Think about WHY you have the policies. If you want life insurance (even though it appears that you don't need it), buy term. If you want investment, invest by yourself into index funds or stocks. Right now your insurance policies are the worst of both worlds: low coverage and low returns.

Hi d.o.g, thanks for your comments. I wanted the policies mainly because I wanted protection in case I fall really sick and incur hefty hospitalization bills thereafter becoming a burden to the people around me. My mentality is if I go so be it as I don't have dependents but if I continue to incur medical bills, then I become a liability. Other than buying insurance with critical illness riders, there does not seem to be any way of ensuring that my needs are met.

Or are there other alternatives I am not aware of?

[brattzz]

Ok, here's my plans, any comments welcome!

1) H&S
- GE's SupremeHealth P Plus - Pte Hospital - $217.44 annual

2) Term Life / TPD - Sum assured 600K - $921.60 annual
- Avivia/SAF Term Live till 65 yrs old (can be renewed up to 70 yrs old at different/higher rates)

3) 30 CI - Sum assured $300K - $360 (rider to SAF Term Life)
- Avivia/SAF Term till 45 yrs old (premiums increase from age 46 onwards) OR,

3.1) HSBC 30 CI - Sum assured $100K - Level Term till 99 yrs old, awaiting quote from HSBC.

4) Disability Income / Income Protection
- Awaiting quotes from GE paysecure / Avivia Ideal Income.. will update.

5) Personal Accident - Sun assured $300K - $150 annual.
- Avivia/SAF P&A

[jeremyow]

Disclaimer: I am not an "expert" in insurance. At best I am an informed consumer.

My $0.02:

You have zero dependents i.e. financially nobody is worse off if you die. Therefore from the purely economic standpoint there is no need to buy any insurance on your life, whether term or whole life.

Since you have 3 whole life and 2 endowment policies you in fact have most of the money going into investments and very little going into actual insurance coverage.

Think about WHY you have the policies. If you want life insurance (even though it appears that you don't need it), buy term. If you want investment, invest by yourself into index funds or stocks. Right now your insurance policies are the worst of both worlds: low coverage and low returns.

Hi d.o.g, thanks for your comments. I wanted the policies mainly because I wanted protection in case I fall really sick and incur hefty hospitalization bills thereafter becoming a burden to the people around me. My mentality is if I go so be it as I don't have dependents but if I continue to incur medical bills, then I become a liability. Other than buying insurance with critical illness riders, there does not seem to be any way of ensuring that my needs are met.

Or are there other alternatives I am not aware of?

It is always better to do insurance by ourselves than buy from insurance companies. What I mean is that if one has a lot of extra disposable money at hand that we have no need to touch (e.g. $300k and above), we should keep it with us in an investment that is liquid which means we can withdraw the money easily anytime.

Why not insure with insurance companies? A lot of different policies are overcharged, with the insurance agent and insurance companies drawing sales charges, commissions and annual charges. So, part of our premiums go into pockets of these people and companies since we are buying their products and services. Sometimes, if we are not careful, the charges and commissions we pay can actually be quite high in some cases (e.g. whole life policies and ILPs).

So, if one knows how to do investment himself (must be a knowledeable investor), he should use his own money to do own investment which can grow his money at a higher rate than what insurance companies provide. If the investment is liquid, he can withdraw out part of his money from his investment anytime if he needs it for medical needs and so on.

The way insurance works is for people who do not currently have large amount of disposable cash at hand for sudden large medical payments or to leave to dependents when they buy insurance, so they need insurance coverage (e.g. $300k life insurance with critical illness rider) to cover sudden medical payments or to leave a sum of money to their dependents for a period of time while they still work and build up their assets over the same time. For these people, they have no choice but to buy insurance.

Another way to prevent the insurance companies and agents from absorbing too much sales charges, commissions and annual charges from us is to go for term insurance instead of whole life insurance. It is much cheaper to get oneself insured with the same coverage amount. If one is prudent with finances, by the time he retires, he should have a large sum of money invested in cashflow generating assets that is giving him good sustainable cashflows, so he may not need whole life insurance coverage. A term policy may already be enough for people who can build up their cashflow generating assets for life retirement needs (pay for own daily needs and also offers potential to be liquidated to answer larger medical payment needs if required).

I myself have bought insurance already because I do not belong to the rich folk catergory with much disposable money that I can do own investment and insure my ownself. I personally dislike what insurance companies are charging for the policies they sell.

So, if one has much disposable money (e.g. $300k and above) and is a knowledgeable investor, he should invest his own money to get higher returns than what insurance companies are giving on one's premiums paid. Since the idea of insurance is to provide a sum of money to pay for sudden bills such as medical payments or to leave money to one's dependents, one can consider doing own investment into acquiring cashflow generating assets which are liquid (can be liquidated easily when money is needed for personal immediate use) to grow one's disposable money which will be better than leaving one's money to insurance companies which take a chunk of one's money in terms of sales charges, commissions and annual charges.

We need to think differently from what we are always conditioned to think. What is popularly done by the masses may not always be what is wise.

A word of caution that I am not an insurance expert nor finance expert, just offering a different perspective to look at the way we do insurance......

[memphisb]

great minds of VB.

As I am a new parent, I am thinking of getting insurance for my newborn (less then a yr old). What products are suitable? life, savings etc?

[brattzz]

ur newborn? at best a good H&S...

U should insure urself 1st!!! :O
List down your insurance policies, age and dependents (assume wife and 1 child already in)

1) Death / TPD = Coverage how many $K?
2) Hospitalisation & Surgical = Coverage type
3) Disability Income = any?
4) P&A if necessary.

NS man?
http://www.aviva.com.sg/life-and-health/...nsmen.html

[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

Putting a hold on my H&S policy as I realized that I have coverage from my company. As it does not matter when I start, premiums just adjust according to my age and insurance companies only able to reimbursement up to max of the hospital bill, no point for me to purchase H&S insurance now.

It is more applicable for self employed or those working with employers without H&S insurance benefit

[ttiatlen]

Might want to check if your H&S insurance provided by your company is portable? Else you will find yourself without any H&S should you change job, and in the worst case, uninsurable at that point in time?