Saturday, December 5, 2009
Over-investing in mortgages
This article explains why banks over-invest in mortgages and cause the global financial crisis.
Denying insurance claims
Mortgage insurers are now following the practice of health insurers in denying claims. Read this article.
Bus owner practices risk management
I know of a private bus owner who evaluates the following options to insure his bus:
a) Third party only
b) Third party fire and theft
c) Comprehensive.
His old bus has a current market value of $40,000 and the difference in premium needed to cover fire and theft is $200. This works out to a rate of 0.5%. He decided to pay this premium, as he could not afford to take a total loss through theft or fire.
He decided not to buy the comprehensive cover as the difference in premium is too high. He decided to retain the risk and to pay for repairs to his bus on his own. In most cases, this can be funded by the savings in the premium.
This is an example of applying the principles of risk management. Insure the large losses with low frequency, and retain the small losses with high frequency.
I advise consumers to get the relevant facts and decide on the best risk management strategy, instead of relying blindly on the advice of the agent (who has a conflict of interest) or other people (e.g TKL) to decide for them.
a) Third party only
b) Third party fire and theft
c) Comprehensive.
His old bus has a current market value of $40,000 and the difference in premium needed to cover fire and theft is $200. This works out to a rate of 0.5%. He decided to pay this premium, as he could not afford to take a total loss through theft or fire.
He decided not to buy the comprehensive cover as the difference in premium is too high. He decided to retain the risk and to pay for repairs to his bus on his own. In most cases, this can be funded by the savings in the premium.
This is an example of applying the principles of risk management. Insure the large losses with low frequency, and retain the small losses with high frequency.
I advise consumers to get the relevant facts and decide on the best risk management strategy, instead of relying blindly on the advice of the agent (who has a conflict of interest) or other people (e.g TKL) to decide for them.
Claim payable under a hospital bill
When you submit a claim under a hospital bill, the insurance company will apply the following deductions on the amount that you have spent for medical treatment:
a) Pre-existing illness. You are usually not covered for medical conditions that exist before you purchase the insurance, including congential conditions.
b) Exclusion. Certain medical conditions are specifically excluded, e.g. HIV, self-inflicted injuries.
c) Sub-limit. You are allowed to claim up to a liit for each item, such as daily room and board, hospital expenses and surgery. Any expense above the sub-limit will not be claimable
d) Pro-ration. If you are insured for a lower class of ward, and you are treated in a higher class of ward, a pro-rated formula may apply. Only this pro-rated portion of the expenses will be counted.
e) Deductible. This is the amount that you have to bear first, before you can make a claim for the excess of the eligible bill.
f) Co-insurance. You have to pay a percentage of the eligible bill in excess of the deductible.
When you submit your hospital bill, the insurance company will apply the sub-limits, exclusions and pro-ration to get the eligible amount. It will then apply the deductible and co-insurance to determine the final amount that is payable.
Before you incur a large bill, it is advisable to get an estimate of the hospital bill from your doctor and to check with your insurance company on what proportion of the bill is payable under the insurance policy.
Tan Kin Lian
a) Pre-existing illness. You are usually not covered for medical conditions that exist before you purchase the insurance, including congential conditions.
b) Exclusion. Certain medical conditions are specifically excluded, e.g. HIV, self-inflicted injuries.
c) Sub-limit. You are allowed to claim up to a liit for each item, such as daily room and board, hospital expenses and surgery. Any expense above the sub-limit will not be claimable
d) Pro-ration. If you are insured for a lower class of ward, and you are treated in a higher class of ward, a pro-rated formula may apply. Only this pro-rated portion of the expenses will be counted.
e) Deductible. This is the amount that you have to bear first, before you can make a claim for the excess of the eligible bill.
f) Co-insurance. You have to pay a percentage of the eligible bill in excess of the deductible.
When you submit your hospital bill, the insurance company will apply the sub-limits, exclusions and pro-ration to get the eligible amount. It will then apply the deductible and co-insurance to determine the final amount that is payable.
Before you incur a large bill, it is advisable to get an estimate of the hospital bill from your doctor and to check with your insurance company on what proportion of the bill is payable under the insurance policy.
Tan Kin Lian
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