Sunday, December 16, 2012

Importance of buying insurance when you are healthy

As 2012 is coming to an end, I am reviewing my financial health status. I got married last year and this year my baby girl was born. Therefore, one of the outcome of my review is to purchase the Aviva SAF Group Term Life Policy. I think it is one of the most value for money term policies in Singapore. For as little as S$4.21, applicants can be insured up to a maximum coverage of $1000,000. Of course, only NSFs, NSmen and personnel working for MINDEF are eligible for this policy.

The need to have adequate insurance cover really hit me hard twenty years ago when I was in secondary school. My dad, who was the sole breadwinner, suffered from stroke then and was unable to work. My family lost our sole income and to make things worse, my dad did not purchase any insurance covers. As a result, we went through a period of financial hardship. On hindsight, if my father had bought any life insurance policies when he was healthy, our family situation would definitely be better.

It is important that you insured yourself for the correct amount of protection. In addition, it is important that you buy the correct policies. I know it might sound hollow to you as I am not a financial advisor, but then again, my guiding principles on buying insurance policies is solely for protection. I see no point in buying whole-life, investment-linked  or endowment policies. These policies cost so much premiums but provide very limited coverage. Henceforth, I would only purchase term policies which provide large coverage for little premiums. When I was young (19 years old), I was sold expensive whole-life insurance policies and I only realized my mistake a few years ago. By then, the damage has already been done and I am unable to terminate my policies as I will incur heavy losses.

Lastly, it is very important that you have Medisheid and try to upgrade to provide shields if possible. In Singapore, there is a saying that you can afford to die but you cannot afford to be ill and disable. Through my life experience, I found this saying to be very true.

Do you have any experiences to share on insurance? If so, please do share.

Magically yours

7 comments:

  1. Yes agreed, the purpose of Insurance is coverage with the minimum premium. We have always been sold on whole-life policies because the Agent benefit most from selling such policies. One need to pay premium till death for such policy and large part of the bonus will be deducted away for early termination. Just imagine paying premium after retirement, it become a burden if you can't afford it.

    Most Insurance companies inflate expected returns through their agents but the return by their fund managers are at best mediocre. Go for coverage instead of those investment linked policies.

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  2. i heard aviva kinda difficult to claim.. any comments on that

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    1. I haven't bought any Aviva policies yet. But I have bad experiences trying to claim from NTUC income.

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  3. There are several different types of life insurance policies to choose from, but in the end, they can all help. Even if you live on your own, and the only expense to think about is that of your funeral, it is still important to have life insurance so that the ones you care about are not paying out of pocket.

    http://termlifeinsuranceinc.com/the-importance-of-buying-life-insurance/

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  4. I was sold a ILP almost two years back when I just started working. I did not realize how much money was deducted in my 'fund unit account' and the bid-ask spread is ridiculous. I just decided to surrender this policy last week and submitted application to a temporary term insurance since I will rethink my coverage need and time horizon next year. Do you have an estimation about how much coverage is appropriate? like in terms of # of annual salary?

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  5. The purpose of buying insurance is to protect your earning ability. So the amount of coverage varies for every individual because of our different commitments. Generally speaking, if you have dependants (children or elderly parents) to support, I would encourage you to buy term policy that covers 10 times of your annual salary. Of course, the premiums should be an amount within your means and an amount you are comfortable with.

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  6. “In addition, it is important that you buy the correct policies.” I understand why you put emphasis on this line. I know a few people who have numerous policies, bringing their total premium to an amount equal to a person's monthly wage. When shopping around for insurance, it's important to discern what policies to avail by looking at what each one covers. There's no need for multiple policies that cover the same things.

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