Insurance & Costs of having and raising a child

[arthur]

There are some term insurance policies that offers up to 1 million payout at a premium less than $2k annually, assuming you are non smoker, mid thirties and in good health.

NTUC has one iTerm policy.
No, i am not getting any referral fees for posting the link up.
http://www.income.com.sg/insurance/iTerm/index.asp

Likewise for Prudential and Great Eastern having similar policies, do ask around.
Hope this helps.

[thefarside]

i recalled yrs ago, i met up with a v senior insurance agent who suggested me to buy a death n total disability of 10x my annual income even if i din want to top up my life plans.
that will ensure payouut of some 5m shd the untoward occur. the premium wld be 2kpm if i din remember wrongly.
my thought then:
1 time payout does not mean much if my family doesn't know wat to do with thr 5m. they might still need to engage a financial advisor.
also, this 2kpm premium is gone with thr wind if nothing happens.
2kpm or 24kpa, i could havr better use for it.

till today, my life insurance is a mere 80 or 100k. i dun know if this sounds like a joke.

Mr paullow is a multimillionaire and his financial position is far from being a joke. But just in case someone looks at this and thinks it is ok to do this... I would like to ask whoever considering insurance to look at

1) your obligations; children, spouse, parental
2) current (not future) resources available
3) potential scenarios; cancer, stroke leading to immobility, both parents die etc
4) resources needed to deal with those scenarios
5) tools available for mitigate them financially; term insurance (with laddering for cost mgt), disability income, hospitalisation plans

You will not be able to cater for all possibilities. Some agents will haunt you with words like - "sometimes even with CI you can make it depending on how much "bullets" you have". I suppose one just have to live with this uncertainty within the resources he has available.

[safetyfirst]

There are some term insurance policies that offers up to 1 million payout at a premium less than $2k annually, assuming you are non smoker, mid thirties and in good health.

NTUC has one iTerm policy.
No, i am not getting any referral fees for posting the link up.
http://www.income.com.sg/insurance/iTerm/index.asp

Likewise for Prudential and Great Eastern having similar policies, do ask around.
Hope this helps.

For guys who have served NS, can also check out the Aviva SAF group insurance.. i would think it is one of the cheaper ones in singapore.

[psolhawk]

I have compared for NTUC's iTerm (even the cheapest iTerm for a million bucks coverage that requires medical checkup) and SAF Aviva's plan. SAF Group term trashes that, before accounting for any cash rebates in good years. For your info.

[NTL]

i recalled yrs ago, i met up with a v senior insurance agent who suggested me to buy a death n total disability of 10x my annual income even if i din want to top up my life plans.
that will ensure payouut of some 5m shd the untoward occur. the premium wld be 2kpm if i din remember wrongly.
my thought then:
1 time payout does not mean much if my family doesn't know wat to do with thr 5m. they might still need to engage a financial advisor.
also, this 2kpm premium is gone with thr wind if nothing happens.
2kpm or 24kpa, i could havr better use for it.

till today, my life insurance is a mere 80 or 100k. i dun know if this sounds like a joke.

sifu, u r not alone. my death coverage also less than 100k todate. in fact, i am thinking of discontinuing these nonsense policies.

There are something that I always asking. Do someone really need insurance if he/she has no use of it at all? Will a single without any dependents need death benefit? Will someone who already have enough money to last for another 100yrs need death insurance? Why use 10x income, and not 10x expense? Shouldn't the required insured amount = No of years of expensses to cover minus existing investible (cash) assets?

[pianist]

use 10x and u will be living under their illusioned reality...

[d.o.g.]

There are something that I always asking. Do someone really need insurance if he/she has no use of it at all? Will a single without any dependents need death benefit? Will someone who already have enough money to last for another 100yrs need death insurance? Why use 10x income, and not 10x expense? Shouldn't the required insured amount = No of years of expensses to cover minus existing investible (cash) assets?

It's simple mathematics. Since income > expenses (for sensible people), the agents will sell a larger policy at 10x income than 10x expenses, therefore they will earn a larger commission. Studies have shown that people are often "anchored" to the first number they encounter, EVEN WHEN THE NUMBER IS TOTALLY IRRELEVANT, so when they are told 10x income instead of 10x expenses, they start with a larger number in mind. Even when they know the starting number is wrong or irrelevant, after adjusting, they will still end up with a bigger number. So with anchoring, the agents get to sell a larger policy and earn a bigger commission. It's simple manipulation and tremendously effective, which is why it is standard procedure for all salesmen, or at least all successful salesmen.

And of course, all salesmen want to sell you something you want (or think you want), not something you need. Since wants > needs they will make a lot more money selling you things you want instead of merely things that you need.

[FatBoi]

i recalled yrs ago, i met up with a v senior insurance agent who suggested me to buy a death n total disability of 10x my annual income even if i din want to top up my life plans.
that will ensure payouut of some 5m shd the untoward occur. the premium wld be 2kpm if i din remember wrongly.
my thought then:
1 time payout does not mean much if my family doesn't know wat to do with thr 5m. they might still need to engage a financial advisor.
also, this 2kpm premium is gone with thr wind if nothing happens.
2kpm or 24kpa, i could havr better use for it.

till today, my life insurance is a mere 80 or 100k. i dun know if this sounds like a joke.

sifu, u r not alone. my death coverage also less than 100k todate. in fact, i am thinking of discontinuing these nonsense policies.

There are something that I always asking. Do someone really need insurance if he/she has no use of it at all? Will a single without any dependents need death benefit? Will someone who already have enough money to last for another 100yrs need death insurance? Why use 10x income, and not 10x expense? Shouldn't the required insured amount = No of years of expensses to cover minus existing investible (cash) assets?

First two questions probably don't need to think so much since I) in all circumstances, we won't need something we have no use for, II) assuming no intended beneficiary (may not be dependant), den again no need death insurance. Third question, if one has many many dependants n they maintain a certain level of lifestyle, what can last a person 100 years might not be enough to pass on. I agree with u on using expenses as a gauge than income, but appreciate for some ppl, the amts might be near to each other (no savings)

[d.o.g.]

On the red portion I highlighted in your appreciated response, my friend was showed data of endowment related policies and the clients are receiving more than the non-guaranteed percentage showed in their policy. So they seems to be making a return on their investment? And when this kind of information is showed it is hard to refute that you are making losses? Yes, it can be said that past performance is not indicative of future performance. But this argument is reflective of self-investment or funds investing.

The historical rate of return is meaningless unless you take into account the prevailing conditions during that period, the asset allocation during that period, and the associated costs. You then have to make adjustments for today's conditions and the outlook going forward.

One obvious difference today versus 10 years ago is interest rates. Whole life and endowment plans usually contain a large allocation to bonds. 10 years ago, interest rates were a lot higher. And for 10 years interest rates came down, which means there were large capital gains on the bonds.

Do you believe that interest rates will continue to fall? Because if you don't, then you must believe that they will either stay low or increase. If they stay low there will be no capital gains and the bonds will deliver their current 1-2% annual rate of return. If rates increase, these same bonds will post large capital losses. Any whole life plan or endowment bought today will suffer heavy capital losses on its bond portfolio in a rising interest rate environment.

Another difference is real estate. Whole life and endowment plans usually contain a modest allocation to real estate. Real estate prices went up a lot in the last 10 years. Do you believe, given the current unhappiness and the various cooling measures, that the government will allow the same rate of increase in future?

It is common to extrapolate the recent past into the distant future. It is also wrong. It is not enough to understand that something has done well or done badly in the past. It is also important to understand WHY if we wish to replicate the success or avoid the failure.

Again, if your friends do not wish to put in the time and effort (and maybe some money) to educate themselves, they have only themselves to blame if, in 20 years' time, they wonder why their whole life plans and endowments have only returned the low rate guaranteed by the insurers, instead of the above-guaranteed rates that they were shown by their agent 20 years ago. Or maybe they will just shrug their shoulders and say "at least we got the guaranteed amount". That's fine, but they will have paid an enormous "ignorance tax" and ended up much, much poorer than their peers who bothered to educate themselves and avoided such mistakes.

Are we boiling down to one point? Which is the fees and charges involved are too high for investment conducted through insurance company than a fund manager of your choice?

This is a separate issue from the above. Yes, the fees and charges are too high, which is why I believe that buying term and investing the rest is a much better choice for most people. As I have pointed out before, you can roughly achieve the same asset allocation as the insurer without too much trouble, which means that you can get roughly the same performance over time. If you are a smart investor you will actually do far better, which amplifies your edge. But just getting the same pre-fee return as the insurer already puts you ahead, because your fees are so much lower when you "buy term and invest the rest".

And through conversing so far, I am starting to think that the guaranteed clause is used too loosely? LIA, MAS will only guarantee the principal when a insurance company fails. Other than that, the investments related policies are subjected to the underlying performance of the funds involved? Am I right?

If the insurer sells a guaranteed product, the guarantee is subject to the insurer's ability to pay. If the insurer fails, obviously the guarantee is void. Many people look at the word "guaranteed" and think "bao jiak" (a sure win, they cannot lose). But a more appropriate response is: Guaranteed by whom? Can the guarantor afford to pay? Will they actually pay? What happens if they don't pay?

Too much work? Well, sure - outsource it. Just understand the enormous fees you are paying when you refuse to think.

There is a saying that "A person who does not read is no better than a person who CANNOT read". The same probably applies to thinking.

Thinking is the hardest work there is, which is probably the reason why so few engage in it - Henry Ford

[safetyfirst]

Many people are "attracted" by the guarantee feature. However, as self-investors, we can also create our own guarantee portfolio.

Say we start with 100k. Allocate 80k to 10 year govt bonds that yield 2.5%. Remaining 20k to anything you like, options, warrants, commodities, reits, equities, etc.

After 10 years, your 80k in bonds will return 100k including the (2.5% x 10) interest. Therefore your principal of 100k is guaranteed. The remaining 20k that you have allocated to anything will then be your net profits.

Many of the structured products sold by financial institutions are packaged this way...