All around the world, insurance agents have thrived on the ignorance of consumers. They used the risk of premature death to get consumers to part with a large part of their savings to be invested to get a poor yield. The consumers are not aware that they can buy term insurance to cover the premature death for 7% of their savings and invest the 93% to get an attractive long term yield. Buy putting their savings with the insurance company, they stand to lose 40% of their savings.
The difference of 33% make the insurance agent a top income earner and give a lot of profit to the life insurance company - but make the ignorant consumer that much poorer.
The insurance agents are trained to tell all types of stories to get consumers to part with their savings in a low yield policy, such as insuring the child, protection against critical illness and health. The consumers are not aware that they are paying far too much for the insurance, and that they can buy the insurance at much lower cost, if they buy a pure term or critical illness rider (covering a short term). Most consumers need insurance fo 25 years only, as their accumulated savings will be more than sufficient to provide for their financial needs, without insurance.
By insuring for the whole of life, the consumer becomes poor for life. My remarks apply to whole life or investment linked policies that take away 40% of the accumulated savings over a 25 year period. It does not apply to a life insurance policy that takes away 20%, which is a fair rate to give away for the insurance cover and the investment service. If you can find an insurance policy that takes away 20% after 25 years, it is all right to buy that insurance policy.
My new book, "Get Value on your Life Insurance" shows how much is taken away from you - based on the popular life insurance policies sold in the market today. Most of them vary from 35% to 50%, which is far too high. If you have bought a life insurance policy, you will probably find it mentioned in a case study in this book. The book will be available on 15 Febuary 2011 (tentative).
Read my book on financial planning for guidance on how you can buy term insurance and invest the savings on your won - if you cannot find a life insurance policy that takes away less than 20% over 25 years.
Tan Kin Lian
Saturday, January 22, 2011
Low yield on Endowment policy
A consumer is unhappy about the low yield on a 20 year endowment policy that has matured. The insurance company did not revised the bonus rates during 2010, although the financial market has recovered. He asked for my views. Here is my reply:
Dear
I believe that this yield of 2.96% on your policy is probably what is paid for similar policies offered by several other companies during the same period. It may be slightly on the low side, but is not significantly lower. The only exception is NTUC Income that offers a yield that is probably between 4% to 5% for the same period.
You are unhappy that there has not been a revision of bonus rate for the past year. I am not aware if other companies have increased their bonus rate for the same period. I suspect that most of them still keep to the same bonus rate.
It will be difficult for you to get the insurance company to increase its bonus rate or for an external party, such as CASE, to make them do so.
Tan Kin Lian
Dear
I believe that this yield of 2.96% on your policy is probably what is paid for similar policies offered by several other companies during the same period. It may be slightly on the low side, but is not significantly lower. The only exception is NTUC Income that offers a yield that is probably between 4% to 5% for the same period.
You are unhappy that there has not been a revision of bonus rate for the past year. I am not aware if other companies have increased their bonus rate for the same period. I suspect that most of them still keep to the same bonus rate.
It will be difficult for you to get the insurance company to increase its bonus rate or for an external party, such as CASE, to make them do so.
Tan Kin Lian
Practical Guide on Financial Planning - discount
This book is available at a discount of 33%
http://projects.easyapps.sg/iShop/public/common/File.aspx?file=43
http://projects.easyapps.sg/iShop/public/common/File.aspx?file=43
Demystifying child insurance plans
http://in.reuters.com/article/idINIndia-54272820110120
This article, posted in Reuters, explain why child insurance policies are not good for the child or the parent, but is good mainly for the distributor (i.e. the agent who earns a big commission).
A better way to save for the child's future is explained in my book, Practical Guide on Financial Planning. The parent should save in a low cost investment fund, i.e. an indexed fund or exchange traded fund.
This article, posted in Reuters, explain why child insurance policies are not good for the child or the parent, but is good mainly for the distributor (i.e. the agent who earns a big commission).
A better way to save for the child's future is explained in my book, Practical Guide on Financial Planning. The parent should save in a low cost investment fund, i.e. an indexed fund or exchange traded fund.
Easysearch Portal
I have developed many useful applications. They can be found in this portal, www.easysearch.sg. When you have some free time, do try these applications. You can also see many of the mobile applications that I have developed from www.tankinlian.com. Click on the link for the mobile and web applications on the front page.
Guidance on your Financial Planning
Some readers asked me to recommend a financial planner to guide them on their financial planning. I know a financial planner who charges a fee of $200 per hour for that advice. Most consumers find that to be too expensive.
There is another way that you can get the guidance for $50. You can carry out the preliminary work by generating your personal financial plan using this tool and consult one of the experts listed in this FAQ.
By educating yourself with this financial plan, you can avoid wasting a few thousand dollars buying a bad insurance policy offered to you by an agent. This message is most important for young people who have just started work, as you will be targeted by many insurance agents.
There is another way that you can get the guidance for $50. You can carry out the preliminary work by generating your personal financial plan using this tool and consult one of the experts listed in this FAQ.
By educating yourself with this financial plan, you can avoid wasting a few thousand dollars buying a bad insurance policy offered to you by an agent. This message is most important for young people who have just started work, as you will be targeted by many insurance agents.
Social and political issues
SGEP now has a good summary of the social and political issues affecting Singapore. It is taken from the blogs, local and international media. Do visit it daily to keep abreast. There is a further summary in an editorial which is written every few days - with special effort put in by the co-editor C H Yak.
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3. creating and enhancing brand awareness through Facebook pages, YouTube videos, Twitter account creation, social bookmarking and many other options
4. training you or nominated staff how to maintain your site with content, photos, videos if you wish
5. after sales service and handholding until you get to a point where you are comfortable maintaining your own site.
Web design Dublin is uniquely positioned to understand the needs of small business owners having been involved in small business since 1986.
Gift for Lunar New Year
Here is a suggestion of a gift for Lunar New Year.
You can buy the bundle of 5 books, enjoy a 40% discount, and give them to your friends and children during the Lunar New Year. The books can be ordered here:
http://projects.easyapps.sg/iShop/public/common/File.aspx?file=57
If you are in a hurry, come to my office and collect the books directly. Address can be found here: www.tankinlian.com/contact.aspx. (Come to Ang Mo Kio office, not Midview City)
ANOTHER ATTRACTIVE OFFER
You can come to my office and buy another book, and get a free copy. Valid up to 1 February 2010. (Not applicable to Tommy Wong's book). Suitable for giving away as gifts during the Lunar New Year.
You can buy the bundle of 5 books, enjoy a 40% discount, and give them to your friends and children during the Lunar New Year. The books can be ordered here:
http://projects.easyapps.sg/iShop/public/common/File.aspx?file=57
If you are in a hurry, come to my office and collect the books directly. Address can be found here: www.tankinlian.com/contact.aspx. (Come to Ang Mo Kio office, not Midview City)
ANOTHER ATTRACTIVE OFFER
You can come to my office and buy another book, and get a free copy. Valid up to 1 February 2010. (Not applicable to Tommy Wong's book). Suitable for giving away as gifts during the Lunar New Year.
Can a Malaysian resident be insured under Private Shield?
Dear Mr. Tan,
I worked in Singapore for more than 20 years as a permanent resident. After my retirement, I returned to Malaysia as the cost of living is lower. I have been insured under Enhanced Incomeshield from NTUC Income for many years and has continued to pay the annual premium after I retired. I wish to keep this insurance for the rest of my life, as I intend to use the medical facilities in Singapore in the future.
There is a chance that my permanent residency in Singapore will not be extended. If this happens, can I continue to be insured under Enhanced Incomeshield? Is there a condition that it is only available to people living in Singapore?
REPLY
If you pay the premium and it is accepted, you have the right to make a claim under the policy. There is no restriction on residency. The only restriction that I am aware of is that the hospital treatment must be in Singapore (and this appears to be your intention anyway). I understand that under some circumstances, you may be able to claim for hospitalistion outside Singapore, but I am not clear about what the situation is.
It is best that you read the policy condition with a fine comb and let me know if you find any wording that may be cast doubt on the extent of the cover. If you find the wording, you can send them to me for my interpretation.
I will also try to get information from other sources and will let you know if there are some problems that I am now not aware of.
I worked in Singapore for more than 20 years as a permanent resident. After my retirement, I returned to Malaysia as the cost of living is lower. I have been insured under Enhanced Incomeshield from NTUC Income for many years and has continued to pay the annual premium after I retired. I wish to keep this insurance for the rest of my life, as I intend to use the medical facilities in Singapore in the future.
There is a chance that my permanent residency in Singapore will not be extended. If this happens, can I continue to be insured under Enhanced Incomeshield? Is there a condition that it is only available to people living in Singapore?
REPLY
If you pay the premium and it is accepted, you have the right to make a claim under the policy. There is no restriction on residency. The only restriction that I am aware of is that the hospital treatment must be in Singapore (and this appears to be your intention anyway). I understand that under some circumstances, you may be able to claim for hospitalistion outside Singapore, but I am not clear about what the situation is.
It is best that you read the policy condition with a fine comb and let me know if you find any wording that may be cast doubt on the extent of the cover. If you find the wording, you can send them to me for my interpretation.
I will also try to get information from other sources and will let you know if there are some problems that I am now not aware of.
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