Someone asked me to explain about the impact of non-disclosure of pre-existing condition on medical insurance.
Under the contract, the insurance company has the right to reject a claim due to the non-disclosure of a pre-existing condition. They are likey to reject the claim, even if the non-disclosure was unintended, namely the policyholder was not aware about it.
What is pre-existing is also a matter of judgement. Most medical conditions can be traced to be pre-existing. For example, if the patient has a high cholesterol and does not disclose it, the insurance company may reject a claim that is related to this condition.
As a person grows older, most illnesses are likely to have some pre-existing connection. It is quite unfair for the insurance company to reject a claim on flimsy grounds. From my experience, many insurance companies in Singapore are quick quick to find a reason to reject a claim.
Hence, it is very important that you choose an insurance company that you can trust, and take act fairly in the interest of their policyholders. Unfortunately, many insurance companies are too driven by their profits and are willing to sacrifice the trust of their policyholders.
Consumer protection in Singapore is weak. Consumers are not willing to fight for their right in a court of law, as the legal cost is high.
Sunday, July 20, 2008
Poor cash value
I find the practice of life insurance companies in giving low cash values to be most unfair to policyholders.
Here is an example. The policyholder took an endowment policy 15 years ago, and paid an annual premium of $5,925. After 15 years, the cash value of $86,299 represents a yield of 0% on the premiums that have been invested.
The insurance company projected a maturity value of $166,622. This would give a yield of about 5% per annum for 18 years.
If the insurance company had indeed earned a net yield of 5% for the past 15 years, the "asset share" should have been $127,000. The payout of $86,299 represents a penalty of $40,000 from the "asset share".
How can the insurance company justify this large penalty on a customer who has entrusted the CPF savings for 15 years?
The policyholder, who has now retired, is forced to find the premium to pay for the next three years, to avoid this huge penalty.
I advise the policyholder to lodge a complaint with the Monetary Authority of Singaore on the poor cash value that is being offered by this life insurance company.
I advice the public to avoid all life insurance products that offer low cash value and project a large terminal bonus on maturity. If you are not able to pay the premium to the maturity date, a large part of your savings will be confiscated. Even if you continue to the maturity date, you can never be sure that the terminal bonus will be paid.
I hope that the Monetary Authority of Singapore will take action to enforce payment of cash value that is close to the "asset share" - a practie which has been adopted in Malaysia. Do not let the ordinary people be deprived of a fair return on their savings.
Here is an example. The policyholder took an endowment policy 15 years ago, and paid an annual premium of $5,925. After 15 years, the cash value of $86,299 represents a yield of 0% on the premiums that have been invested.
The insurance company projected a maturity value of $166,622. This would give a yield of about 5% per annum for 18 years.
If the insurance company had indeed earned a net yield of 5% for the past 15 years, the "asset share" should have been $127,000. The payout of $86,299 represents a penalty of $40,000 from the "asset share".
How can the insurance company justify this large penalty on a customer who has entrusted the CPF savings for 15 years?
The policyholder, who has now retired, is forced to find the premium to pay for the next three years, to avoid this huge penalty.
I advise the policyholder to lodge a complaint with the Monetary Authority of Singaore on the poor cash value that is being offered by this life insurance company.
I advice the public to avoid all life insurance products that offer low cash value and project a large terminal bonus on maturity. If you are not able to pay the premium to the maturity date, a large part of your savings will be confiscated. Even if you continue to the maturity date, you can never be sure that the terminal bonus will be paid.
I hope that the Monetary Authority of Singapore will take action to enforce payment of cash value that is close to the "asset share" - a practie which has been adopted in Malaysia. Do not let the ordinary people be deprived of a fair return on their savings.
Many policyholders give up their whole life policies
COMMENT POSTED IN MY BLOG
Whole life product advocates and especially insurance agents argue that a whole life policy is useful during old age, a time when one is most likely to contract dread illnesses.
Apart from other economic reasons, I want to show that whole life policies are hardly kept beyond age 65. Why is it not kept beyond this age, the obvious reason is many don't believe that it is necessary and many believe in self insurance, a wise idea because liquidity at a time like this is more flexible and better choice.
What if you get and what if you don't get a disease , the probability seems 50/50 but I bet it is more than 80% chance you don't get. If you do, have an H&S is enough plus what you provided for in cash as self insurance will adequately address this problem.
Maintaining a whole life policy at this age is expensive and a waste of money and self insurance is a better option.
Therefore the case for a whole life policy is weak and you are better off if you have a term insurance plus investment with better return. The chances of having a better life and retirement are best via "buy term and invest the rest".
I want to show you statistics from MAS website to corroborate my argument and my findings. If you look at the life insurance persistency from 2001 to 2007 you see a pattern. You see high decline immediately in first 2 years and henceforth persistency declines at a rate of about 4%. This pattern is seen in all the last 5 years.
If I extrapolate the rate of decline to next 20 to 30 years I can see that only about about 10% or less of life policies will in force.
Assuming a 30 year old man buys a policy, by the time he is 60 or 65, he would have terminated or surrendered his policy. This phenomenon is supported by another statistics, the surrender statistics and it has been a whopping high of about 65% compared to maturity of about 35%. In other words a lot of people surrendered their policies earlier.
What do these figures tell you? Very few kept their policies beyond 65 years old. Why buy whole life insurance if you don't keep till old age? Let me tell you, it is burdensome; cash return too low.
I have done another research earlier and posted somewhere on death claim. I found no claim beyond the magical age 65, not that no one died or no one got dread disease but no one or very few kept whole life insurance beyond this age.
Death claim median age is 45 and average claimed amount is only a miserable $45K and the highest of $200k was from a term insurance.
Conclusion: insurance is most needed during time when your responsibility is the highest and you should have enough to address the needs at that point in time. Term is the best instrument, cheap and efficient.
Do not believe what the insurance agents tells you about whole life insurance. Their argument is obvious, it is high commission for themselves and life long source of revenue and income for the insurer.
zhummmeng
Whole life product advocates and especially insurance agents argue that a whole life policy is useful during old age, a time when one is most likely to contract dread illnesses.
Apart from other economic reasons, I want to show that whole life policies are hardly kept beyond age 65. Why is it not kept beyond this age, the obvious reason is many don't believe that it is necessary and many believe in self insurance, a wise idea because liquidity at a time like this is more flexible and better choice.
What if you get and what if you don't get a disease , the probability seems 50/50 but I bet it is more than 80% chance you don't get. If you do, have an H&S is enough plus what you provided for in cash as self insurance will adequately address this problem.
Maintaining a whole life policy at this age is expensive and a waste of money and self insurance is a better option.
Therefore the case for a whole life policy is weak and you are better off if you have a term insurance plus investment with better return. The chances of having a better life and retirement are best via "buy term and invest the rest".
I want to show you statistics from MAS website to corroborate my argument and my findings. If you look at the life insurance persistency from 2001 to 2007 you see a pattern. You see high decline immediately in first 2 years and henceforth persistency declines at a rate of about 4%. This pattern is seen in all the last 5 years.
If I extrapolate the rate of decline to next 20 to 30 years I can see that only about about 10% or less of life policies will in force.
Assuming a 30 year old man buys a policy, by the time he is 60 or 65, he would have terminated or surrendered his policy. This phenomenon is supported by another statistics, the surrender statistics and it has been a whopping high of about 65% compared to maturity of about 35%. In other words a lot of people surrendered their policies earlier.
What do these figures tell you? Very few kept their policies beyond 65 years old. Why buy whole life insurance if you don't keep till old age? Let me tell you, it is burdensome; cash return too low.
I have done another research earlier and posted somewhere on death claim. I found no claim beyond the magical age 65, not that no one died or no one got dread disease but no one or very few kept whole life insurance beyond this age.
Death claim median age is 45 and average claimed amount is only a miserable $45K and the highest of $200k was from a term insurance.
Conclusion: insurance is most needed during time when your responsibility is the highest and you should have enough to address the needs at that point in time. Term is the best instrument, cheap and efficient.
Do not believe what the insurance agents tells you about whole life insurance. Their argument is obvious, it is high commission for themselves and life long source of revenue and income for the insurer.
zhummmeng
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