There was a large increase in membership of FISCA during the past two weeks (about 30 new members). This was probably due to my letter, published in the Straits Times on term insurance, whole life insurance and investment linked policies, and to the interest in the FISCA's analysis on the DBS preference shares, which was posted in the FISCA website (for member's only).
You can join FISCA (www.fisca.sg) and attend the educational talks at a discounted price for members. FISCA now offers 4 separate talks. Wow!
Friday, November 19, 2010
Garrett Goh's original letter
Garrett Goh has sent me his original letter (see below) that was sent to the Straits Times. The Straits Times editor published an edited version.
TO: Straits Times (for publication on ST Forums)
I refer to the ongoing discussion on insurance products (Lim Pueh Joo, "Investment-linked policy works best for me", Straits Times, Nov 19), specifically to address the “advantages” of investment-linked policies (ILP).
Mdm Lim is technically correct in that once the term insurance period ends, renewal premiums will be costly if a person develops a medical condition. However, she has failed to understand that purchasers of term insurance are not looking to renew their policy at the end of their term. Buying term insurance is only half of the strategy. One should not forget about the other part, where advocates of term insurance will save and invest the difference between the premiums of a comparable ILP policy and term policy. As written in my earlier letter, for an insurance coverage of $500,000 for a mid-20s male, this sum is about $8000/yr. Assuming that this difference of $8000/yr is invested in low-cost investment instruments and grows at a moderate 5% per annum for the next 40 years (till retirement age), the accumulated "cash value" will be $1,000,000. Consumers who buy term insurance and invest the difference will very likely be able to accumulate their own "cash value" by the time the term policy expires, and this self-accumulated "cash value" will be at least equivalent if not greater than the insurance coverage purchased. Having a personal "cash value" is also more advantageous, because one can claim one's own money without restrictions like adhering to the strict definitions of 30 critical illness.
I am pleased that Mdm Lim has found her ILP returns to be good. However, I would advise her to make an appropriate comparison before jumping to conclusions. It is well known that ILP introduce many additional fees that increase their effective expense ratio. Low cost investment products have an expense ratio of about 0.50%, which is much lower than the ILP expense ratio that may be around 2.0% or higher. The high ILP expense ratio will be detrimental to her financial health in the long term. Using the above hypothetical scenario (which assumes a gross 5% returns per annum), if a consumer were to save and invest the $8000/yr difference for the next 40 years, the ILP investor would accumulate a cash value of about $600,000 versus the DIY investor's cash value of about $850,000. Personally, I find the idea of giving the insurance company a quarter million dollars a total rip off. ILPs only appear to be a win-win situation because consumers are not well educated about the cheaper alternatives out there.
Garrett Goh
TO: Straits Times (for publication on ST Forums)
I refer to the ongoing discussion on insurance products (Lim Pueh Joo, "Investment-linked policy works best for me", Straits Times, Nov 19), specifically to address the “advantages” of investment-linked policies (ILP).
Mdm Lim is technically correct in that once the term insurance period ends, renewal premiums will be costly if a person develops a medical condition. However, she has failed to understand that purchasers of term insurance are not looking to renew their policy at the end of their term. Buying term insurance is only half of the strategy. One should not forget about the other part, where advocates of term insurance will save and invest the difference between the premiums of a comparable ILP policy and term policy. As written in my earlier letter, for an insurance coverage of $500,000 for a mid-20s male, this sum is about $8000/yr. Assuming that this difference of $8000/yr is invested in low-cost investment instruments and grows at a moderate 5% per annum for the next 40 years (till retirement age), the accumulated "cash value" will be $1,000,000. Consumers who buy term insurance and invest the difference will very likely be able to accumulate their own "cash value" by the time the term policy expires, and this self-accumulated "cash value" will be at least equivalent if not greater than the insurance coverage purchased. Having a personal "cash value" is also more advantageous, because one can claim one's own money without restrictions like adhering to the strict definitions of 30 critical illness.
I am pleased that Mdm Lim has found her ILP returns to be good. However, I would advise her to make an appropriate comparison before jumping to conclusions. It is well known that ILP introduce many additional fees that increase their effective expense ratio. Low cost investment products have an expense ratio of about 0.50%, which is much lower than the ILP expense ratio that may be around 2.0% or higher. The high ILP expense ratio will be detrimental to her financial health in the long term. Using the above hypothetical scenario (which assumes a gross 5% returns per annum), if a consumer were to save and invest the $8000/yr difference for the next 40 years, the ILP investor would accumulate a cash value of about $600,000 versus the DIY investor's cash value of about $850,000. Personally, I find the idea of giving the insurance company a quarter million dollars a total rip off. ILPs only appear to be a win-win situation because consumers are not well educated about the cheaper alternatives out there.
Garrett Goh
Garrett Goh: Strategy behind buying term insurance
Published in Straits Times Online Forum
I REFER to the ongoing discussion on insurance products (Madam Lim Pueh Joo, "Investment-linked policy works best for me"; yesterday), specifically to address the "advantages" of investment-linked policies (ILP).
Madam Lim is technically correct in that once the term insurance period ends, renewal premiums will be costly if a person develops a medical condition.
However, purchasers of term insurance are not looking to renew their policies at the end of their terms.
Buying term insurance is only half of the strategy. Advocates of term insurance will save and invest the difference between the premiums of a comparable ILP policy and term policy.
Consumers who buy term insurance and invest the difference will very likely be able to accumulate their own "cash value" by the time the term policy expires.
This self-accumulated "cash value" will be at least equivalent to, if not greater than, the insurance coverage purchased.
Having a personal "cash value" is also more advantageous,because one can claim one's own money without restrictions, such as adhering to the strict definitions of 30 critical illnesses.
It is well known that ILP policies introduce many additional fees that increase their effective expense ratio.
Low-cost investment products have an expense ratio of about 0.5 per cent,
which is much lower than the ILP expense ratio. The latter may be around 2 per cent or higher. ILPs appear to be a win-win situation only because consumers are not well educated about the cheaper alternatives out there.
Garrett Goh
http://www.straitstimes.com/STForum/OnlineStory/STIStory_605149.html
I REFER to the ongoing discussion on insurance products (Madam Lim Pueh Joo, "Investment-linked policy works best for me"; yesterday), specifically to address the "advantages" of investment-linked policies (ILP).
Madam Lim is technically correct in that once the term insurance period ends, renewal premiums will be costly if a person develops a medical condition.
However, purchasers of term insurance are not looking to renew their policies at the end of their terms.
Buying term insurance is only half of the strategy. Advocates of term insurance will save and invest the difference between the premiums of a comparable ILP policy and term policy.
Consumers who buy term insurance and invest the difference will very likely be able to accumulate their own "cash value" by the time the term policy expires.
This self-accumulated "cash value" will be at least equivalent to, if not greater than, the insurance coverage purchased.
Having a personal "cash value" is also more advantageous,because one can claim one's own money without restrictions, such as adhering to the strict definitions of 30 critical illnesses.
It is well known that ILP policies introduce many additional fees that increase their effective expense ratio.
Low-cost investment products have an expense ratio of about 0.5 per cent,
which is much lower than the ILP expense ratio. The latter may be around 2 per cent or higher. ILPs appear to be a win-win situation only because consumers are not well educated about the cheaper alternatives out there.
Garrett Goh
http://www.straitstimes.com/STForum/OnlineStory/STIStory_605149.html
Motor claims - protect consumer who make third party claim
Printed in Straits Times Forum page
We agree with Mr Tam Ah Hock ('Protect consumers'; Nov 10) that the insurer of an illegally modified vehicle that caused the accident should pay the third-party claim.
After paying the claim, the insurer can seek to recover the loss from its policyholder, if the policyholder had breached its conditions. This should be a separate matter between the insurer and its insured and should not affect the third-party claimant.
The insurer is not acting fairly by refusing to consider a claim from the third party on the grounds of a breach of policy condition. It is hard for the third party to sue an uninsured owner, as the owner may not be able to pay.
The current law should be amended to extend compulsory insurance coverage to damage of third-party vehicles.
The insurer should also be required to pay compensation to third parties, regardless of a policy breach by the insured. This will protect third parties but leave the insurer free to seek recovery of the loss from its insured.
At present, most owners buy at least third-party insurance to cover injury and property damage. The change to the law will not cause hardship to consumers.
MR TAN KIN LIAN,
President, Financial Services Consumers Association
http://www.straitstimes.com/STForum/Story/STIStory_605227.html
We agree with Mr Tam Ah Hock ('Protect consumers'; Nov 10) that the insurer of an illegally modified vehicle that caused the accident should pay the third-party claim.
After paying the claim, the insurer can seek to recover the loss from its policyholder, if the policyholder had breached its conditions. This should be a separate matter between the insurer and its insured and should not affect the third-party claimant.
The insurer is not acting fairly by refusing to consider a claim from the third party on the grounds of a breach of policy condition. It is hard for the third party to sue an uninsured owner, as the owner may not be able to pay.
The current law should be amended to extend compulsory insurance coverage to damage of third-party vehicles.
The insurer should also be required to pay compensation to third parties, regardless of a policy breach by the insured. This will protect third parties but leave the insurer free to seek recovery of the loss from its insured.
At present, most owners buy at least third-party insurance to cover injury and property damage. The change to the law will not cause hardship to consumers.
MR TAN KIN LIAN,
President, Financial Services Consumers Association
http://www.straitstimes.com/STForum/Story/STIStory_605227.html
Funniest Pick Up Lines
Here is a collection of my favourite, funniest pick up lines and the pick up lines that have worked for me.
You know the most successful guys with picking up women are the guys who realize that funny pick up lines work..and work like gangbusters.
If you can get a woman to laugh with you, you can get her to do anything and there isn’t a better pick up line for girls than a funny one.
Heres and entertaining and funny site I came across..
Motor insurance premium
The General Insurance Association said that motor insurance premium will increase more slowly next year, after a 19% increase in 2009 and 10% increase in 2010.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1094436/1/.html
They do not seem to know that these increases are much higher than inflation rate.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1094436/1/.html
They do not seem to know that these increases are much higher than inflation rate.
Why Investment Linked Policy make a bad investment
Read this article, by a consumer who realized that he / she has been conned by the agent.
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