Financial Planning - Practical Steps

You can get a complimentary copy of my book, Financial Planning - Practical Steps (draft 3a) by entering this form. Please print the book, read it and send your comments to kinlian@gmail.com.

The printed version of this book will be sold for $7.90. It will be given free to members of FISCA at the new member briefing to be held each month. The author will also give a 1 hour talk of the key points in this book to the members. Join FISCA now.

The practical tips in this book can help you to choose the right products and save you a few thousand dollars in charges.

LATEST. There is overwhelming demand for this complimentary draft. I will keep it open until midnight today. For those who like the book, please consider making a donation to FISCA or join as a member. Give us your support.

Planning the new bus network in Singapore

There is a report about the new bus routes to be introduced in Singapore. What is going to happen? Find out here.

Offer window period for uninsured to join Medishield

Printed in Straits Times Forum Page, 14 September 2009

Editor
Forum Page
Straits Times

When Medishield was introduced more than two decades ago, the Government decided to cover CPF contributors only and give the right for members to opt-out of the scheme. Some members opted out as they were already covered by their employer or for other reasons. Many other people were not covered under Medishield as they do not have a CPF account at that time, for example, they were not working or self-employed.

Today, there are many people who are not covered by Medishield. They are allowed to join Medishield but are subject to underwriting. If they are not in good health, they may be rejected or have exclusions imposed on them.

As many years have passed since Medishield was first launched, it is time to review the need for underwriting requirement for Medishield. I suggest the following measures:

a) Have a window period to allow those not insured to join Medishield on special terms. They are not subject to underwriting but will have existing illnesses excluded or partially covered for a period of two years. These illnesses will be fully covered after the two year period. The excluded illnesses will be of a serious nature and will be defined clearly.

b) Identify the non-insured people, approach them and have an easy way for them to join Medishield. The people to be approached are those with a Medisave account, who is not covered under a Medishield plan.

c) Make it compulsory and automatic for all new-born babies to be covered under Medishield.

It is important to have every resident covered under Medishield, so that they will not be bankrupted by the high cost of major medical expenses. As Medishield is a national scheme, it can be made easily available to all eligible people, without the need for the meticulous underwriting measures that are adopted by commercial insurers. The risk of adverse selection and moral hazard is already reduced by the imposition of a deductible that has to be paid first by the insured.

We have read about the debate in USA about reforming their health care system and the need to offer coverage to more than 30 million uninsured people.

We have a similar problem in Singapore, although on a smaller scale. We have to act early and offer coverage to our own uninsured people.

Tan Kin Lian

Financial Planning (3) - What risks to insure against?

Insurance is available to cover the following risk:

a) risk of premature death
b) medical expenses
c) disability

You need to insure against premature death during the time when your children are still young. This insurance will provide a regular income to your family until all your children have grown up and have started to work.

You should buy term insurance, as just provide pure coverage (not combined with savings), and the cost is quite low.

You should have insurance to cover you up to age 60, or for a period of 25 years (if shorter). The cost of insurance increases according to the period of insurance, i.e. you pay more if you want to insure for a longer period. You should avoid paying a higher premium than is necessary.

You should insure for an adequate sum. It can be 10 years of your earnings or to provide 50% of your earnings each month for the remainder of the period of insurance.

For example, if you earn $40,000 a year, you can buy insurance to pay $400,0000 on premature death or to pay $2,000 a month for the remainder of the period of insurance. If you insure for 25 years and death occurs after 15 years, the monthly income is payable for the remaining 10 years.

You can buy an insurance policy to cover your medical expenses. In choosing the suitable policy, you should consider the coverage and the cost. The insurance that offers the best value for money is the basic Medishield offered by the Central Provident Fund.

If you buy a private Shield plan, you may get 50% more coverage, but you have to pay a premium that is 100% more costly. If you are well off, you may not mind paying a higher premium. But, if you do not have adequate savings for your future needs, you should avoid wasting the money on expensive, unnecessary insurance.

If you are covered under basic Medishield and you wish to be treated in a private ward, you can pay the uninsured expenses out of your savings. The risk of this happening is likely to be quite low.

Disability insurance will pay you a monthly income during the period that you are disabled due to accident or sickness. You have to consider the cost and benefit of this insurance, and the chance of making a claim. If the insurance is too expensive, relative to the chance of making a claim, you can carry this risk on your own. If you are disabled, you can draw down on your savings and replace the drawdown in the future.

to recap: consider the benefit, the chance of making a claim and the cost. Insurance is costly, so you have to choose an insurance coverage that gives you good value for your premiums.

Tan Kin Lian

Favorite Singaporean Expressions

Here are the contributions of respondents to the survey.

The reflect the negative quality of Singaporeans: apathy, indecisiveness, fear, arrogance.

I am surprised that there are no positive expressions of hope, charity, kindness.

Patient Advocates

Read this article about the role of patient advocates in health care.

The role is similar to what FISCA helps to do on financial matters. Join FISCA now.

Admirable qualities of the American way

America faces many big challenges. They have to rebuild their economy, to reform health care, to regulate the financial sector. They faced a big budget and trade deficit.

I have been followed the debates in Congress over the past months and speeches by President Obama. I also listened to the inaugural speeches of many past Presidents. They gave me the confidence that America will overcome these challenges and be a better nation. Here are my reasons:

a) Honesty. The leaders of America are honest people. They recognize the problems and face them squarely. They engage in honest debates and have an open mind to explore the options. The people expect their leaders to be honest, sincere and open.

b) Courage. The leaders and the people have the courage to face their challenges and are determined to overcome them. They are driven by what is right, good for the country and needs to be done. They do not shirk their responsibility.

c) Fairness. They believe strongly in fairness and justice. Their solutions will be for the benefit of the people at large, and not just a few.

d) Public service. The leaders earn a modest salary, which is a fraction of what they can earn in the private sector. Their salaries are benchmark against the national average, not against the top salaries in the private sector. But they are proud to be in public service to serve the people and the nation. This is a stronger motivation than monetary rewards.

e) Positive. They are a positive people. They show confidence and hope in working for a better future. This is the strength of a people who cherish freedom over tyranny.

I hope that the leaders and people of Singapore can embrace these qualities, so that our nation can also be strong and united.

Tan Kin Lian