FISCA Talk - Invest for the Long Term

This talk attracted many participants last month. It will now be repeated.


Invest for the long term SMU - School of Business (Seminar Room 3.1 - Level 3) 
Date: 25 September 2010, Saturday 03:00 PM 

This event is available to all FiSCA members at a special members price of $20. The public can participate at a price of $30 per person. We encourage the public to join as FiSCA members as the annual fee for members is only $36.

An outline of the talk:

• Principles of long term investing, compounding and dollar cost averaging
• Earn a better yield by investing in equities
• Reduce risk by investing for the long term in a low cost, diversified fund
• How to access information from the SGX website
• How to get information about ETFs, REITS and  blue chip shares (with high dividend yield)
• How to open an account with a stockbroker (using a remisier or an online account)
• Expenses of investing

There will be practical exercises and a question & answer session. Register at www.fisca.sg

Non-disclosure of existing medical condition

A consumer took a private Shield policy. His claim for medical treatment was rejected due to "non-disclosure" of medical condition. However, he did honestly declare all that he knew. There were conditions that were not explained to him by the doctor, but was not used to reject the medical claim. One condition was diabetes mellitus.

When he went for a health checkup in the polyclinic, he was not told that his diabetes had reached a serious stage that require medical treatment. In fact, he was not placed on medication. His non-disclosure of this condition was used to reject a subsequent claim for a condition that is not related to his condition. I am now helping the consumer to gather evidence that he was not concealing any information.

But it is quite stressful for him to be saddled with a hospital bill of $7,000 that was not paid. If this was not covered, he would have gone for treatment in B2 ward and pay a much lower bill. Sometimes, the existence of an expensive medical insurance policy creates more problem to the consumer.

Survey: Shuttle service to integrated resorts

Do you support the sudden decision of the Casino Regulatory Authority to stop the shuttle service? Take part in the survey in www.easyapps.sg/sgep/latest.aspx

Case Study - Medishield for the elderly

Look at this case study of how Medishield can save 80% of the premium that is charged by a private Shield insurance. The elderly person needs to pay only $534 a year, instead of $3,000. Go to www.tankinlian.com/latest.aspx.

Twisting of existing life insurance policies

Dear Mr Tan, 

I read your blog (http://tankinlian.blogspot.com/2010/02/switching-to-limited-payment-whole-life.html) with much interest. Two days ago, an insurance agent was trying to convince me to take on a new limited (20 yrs) whole life insurance for $200k coverage, and to terminate my existing 2 life policies (which are the normal type payable till 60 yrs old) which covers me for about $150k in total. 

I listened to the agent's explanation how the new policy is more economically beneficial. In summary, the total premium i have to pay under this new policy is $25k less, yet the coverage is $50k more than what I have for my 2 existing policies added up together. Also the guaranteed surrender value of the new policy at e.g. age of 65 yrs is $20k more than my 2 existing policies added up, which means this new policy break even much earlier than my existing policies. Prima facie, the economic analysis seems to make alot of sense to switch to this new policy. 

However, to terminate my 2 existing policies, i will lose $6k in total because both are less than 5 years. It is a dilemma now, whether to take the short term hit losing $6k vs the longer term benefit which are in tens of thousands. 

I hence spoke to a friend who was an ex insurance agent for an independent advice. This is what he told me:

1) When I terminate policies, some items will lose coverage for a period eg cancer which kicks in only a few months after a new policy is bought. So I will have an 'exposure' period.

2) Insurance products are always improving, so I am never gonna be getting the best

3) Returns from insurance policies are just nominal, so the returns doesnt matter that much. I should focus my attention on seeking returns from investments, rather than 'optimising' the returns from my insurance policy.

I hope to seek your expert advice on this topic, whether switching to the new product is indeed beneficial for me. 

REPLY

You can send the benefit illustration for the three policies to me. 

Generally, it is bad idea to terminate an existing policy to take up a new policy, as you will be incurring the upfront cost (1 to 2 years of your premium) all over again. When an agent advise you to take up a new policy to replace an existing policy, the agent is "twisting" the policy. This is almost always at the expense of the consumer. Some agents can make a good living by adopting this type of predatory practice. It is easy to mislead the consumer by pointing out some half truths. It is considered to be illegal in some countries, but not the case in Singapore, due to our lax regulations. 

tesr

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Holes in medical coverage

Read this article.

My view
Consumers in Singapore may face the same type of difficulty when the insurance company suspects that they have not declared pre-existing illness.