Statistics have shown that your average Singapore is severely underinsured.  Most of us think that as long as we have insurance, we are covered. That is a myth. This analogy can be likened to an individual doing marketing. To cook a wholesome meal, all of us understand that we will be a balanced amount of greens, meats, fruits etc. If you had gone to a supermarket and purchased $100 worth of junk food – does that constitute to your balanced meal? The same can be said for your insurance. Just because you are paying a certain amount of money per month, and that you have purchased a few policies (junk food is also food), does that mean that you are adequately covered for all that you need?

First of all, you need to know that each of us have 5 major areas that we need to be insured against:

1)      Death

2)      Disability

3)      Major Illness

4)      Accidents

5)      Hospitalisation

Now that you can identify the five aspects, you need to know what type of insurance is out there in the market.

I will breakdown life insurance into two main types: Investment related and Non-investment related.

Under the investment related type, it is commonly known as an investment linked plan (ILP) which allows consumers to have the best of both worlds: Insurance and Investment. In my opinion, this plan is a double edged sword in that while it can be very useful in allowing for death, disability, major illness and accidental death coverage for a low premium and allows for cash value to be accumulated; it also erodes away your investment values as you grow older due to the increment in mortality charges. Unless you decide to reduce your sum assured coverage, your cash value will incrementally decrease.

Many advisers prefer selling this plan by selling the concept of allocating a higher premium for your ILP to accumulate cash value and at the same time maintaining high coverage, without advising on the increased mortality charge as an individual ages.  Moreover, purchasing a BASIC ILP plan shouldn’t cost an individual more than $150 / month (for an individual aged 20 – 30). The reason why ILP premiums can differ by so much depends on the coverage as well as add-on extras that an adviser may bundle into a plan. It is just like heading to a fast food joint and ordering the basic meal without an upgrade. Always verify that what you are paying for is what you need. Some of the frills can be done away with and may be better purchased as an external plan (not bundled with your ILP). Sadly, some extras may be added on simply because an adviser is looking for extra commission and not in line with your purposes. Be careful about paying for extras which you may not need.

As for non-investment type of plans, you can further break it down into two main types: Those with cash value and those without cash value.

Term insurance is what is commonly known as a policy without cash value. Similar to the concept of a parking coupon – If you use it and the parking ticket lady comes by, that works well for you since you are covered against a summon. However, if you use it, but the parking ticket lady doesn’t come by, that means that your money cannot be recovered and is a sunk cost even though nothing eventful happened. Term plans are mainly for coverage against major illness and accidents. The advantages of such plans are it provides substantially lowered cost for a same amount of coverage, however should you remain healthy without accidents, you are also unable to recover your cost of premium. Perceptions of term insurance differs from person to person. An individual who would rather accumulate cash values from their investments would consider the extra premium paid for cash-accumulating plans to be a sunk opportunity cost and prefer term plans. Others who view term plan as a waste of money should nothing happen would rather purchase a cash-accumulating plan. 

Under cash value type of life insurance, there are two types: Traditional whole life and Limited pay life insurance.  As the plan name ‘Traditional whole life’ suggests, this type of plan requires you to keep paying till age 85 and if you decide to surrender it when you are old, you will be able to get back a lump sum of money back.  This plan was quite popular back then 10-20yrs ago and from most of the portfolio I have seen, most of them would have one or two such policies. The drawback of such a plan is that you need to keep paying till old and the moment you surrender money for own use; no more coverage will be there. As a result, one left with nothing when they move on.

As for the limited pay insurance, it’s becoming more and more popular due to the feature of the plan. It allows customers to pay for a shorter period of time and be able to enjoy whole life coverage.  However it seems like not many advisers seem to be recommending such products to customers and in my opinion, there are two main reasons: It can be quite expensive for older adults and commission is much lower as compared to ILP or Traditional whole life plans.  However I felt that being an adviser, he/she should make limited pay plan as part of their insurance portfolio. Can you imagine as we grow old and not working, how are we expecting to continue to service the plans? Therefore by having a small sum assured of limited pay plan, it will be good enough to cover at least the final expenses when one moves on.

At the point of time, you should have an overview of what life insurance is all about and now it’s time to ask yourself what type of plans suits you the most.  If you like to find out more about it, do feel  free to drop me an email or give me a buzz. I be happy to be of service to you.

Note: These opinions are purely my own conclusion and it does not represent any companies. These advices should be taken with a pinch of salt. You still need to discuss with your family advisers on whatever decision you made.

Firstly, i like to start of by stating what are the types of expenses that you could possibly incurred when you decide to get married:

1) Proposal Ring                 Est Cost: $2000-5000

2) Wedding Band                Est Cost: $500-3000

3) Wedding Event              Est Cost: $20000-50000

4) Bridal Package               Est Cost: $2000-5000

5) Wu Dian Jin(Dowry)    Est Cost: $1000-3000
Well these are the costs that i have personally spent on and honestly how much you want to spend depends on what you want for your wedding day. Some people like to have extravagant wedding style while some likes to splurge on bridal packages spending up to $8000 on photos that they will eventually tuck inside their store room. I have to admit that wedding can be costly but it doesn’t means you need to burn a big hole. What is important is life after marriage and not so much on that day itself. Honestly how many people really remember what happened on your wedding day after 2yr?

After you have roughly estimated the cost of wedding, the next big item that you should be worrying is your down payment for HDB and cost of renovation. Again it brings us back to how much it will cost. Based on own experience, the down payment for HDB will be 20% of the value of house which is roughly $280-380k for a 4 room BTO. This amount can be paid partially via your CPF which makes it easier for most people. However before you commit to the most beautiful house, do take time to do your own calculation and making sure both parties CPF has enough to support the loan. I have many friends who went ahead to commit a higher value BTO knowing that both parties cannot stop working till they pay off their loan. I seriously can’t understand WHY! But as the saying different folks, different stroke. Hence i can only wish them all the best.

As for renovation cost, couple can always opt for renovation loan if they really don’t have enough but i will again try to encourage couple to take minimum loan and start saving after you are sure of the partner =) An average cost of renovation for BTO can range from $10,00 to $50,000 and it all depends on what are your requirements. Take time to shop around for the best deals but please take note that higher the price, the better is the quality. Nothing is guaranteed when it comes to renovation. Everything can have problems hence we can only bring damage to the minimum rather than avoiding it.

Just based on what i have shared, the amount of money that a couple should be saving up is about $25,000! Do note that i am basing everything on the lowest range and it means it’s just going to be a super simple wedding and simple home to stay in. Back to the magic number, an individual will have to save $520 per month for 2 years or $347 per month for 3 years. Therefore  right from the start of working stage, i will recommend my male client especially to save that minimum amount to cater for their big day.

I need to highlight again that the above estimation are all my two cent worth and it shall not represent anything or anyone. I’m really hoping that i am able to use this channel to educate more young adults the important of planning.

 This marks my first post of 2012 and i will do my best again to continue to blog like how i used to do it last time. Though there are more things to do these days but it should not be an excuse for me to skip blogging. New year new resolution and blogging forms one of my resolution! I must do it!

Cheers!

Well in my opinion, problems are there to enable human being to improve and be more efficient and hardships are there to mould a person character. No problem is unsolvable and all problems come with a solution. Therefore knowing this theory will tell us that when you face a problem, so long you stay focus to deal with the root cause, you will find a solution to it.

However the problem with many of us these days is that we tend to give up easily and choose an easy route out. THEY ESCAPE! But do you think by escaping can solve anything? NOPE! It doesnt solve anything and in fact it might just make matters worse.

These people have slight character fault. They can’t take hardship in life and when it comes right on their face, they simply turn away and move to elsewhere to find comfort. In the bible, God has made things very difficult for Jobs and no matter what happens to Jobs, he still did not give up and keep believing that God has bigger plan for him. He has the faith.

It actually applies in our life too. When we have a hard time, we just need to have more faith in ourselves and believe that we can overcome it. If you take a look at the successful people around you, i can assure you that everyone of them had gone through hardship before and it was through those times that they emerged stronger and better. They have grown because of the hardship.

In simple term, if one were to escape from hardship, he/she has not grown. To be able to take care of a family, there are many sacrifices to be made and at most times, you are required to do things that you dont like. Its also a small form of hardship. So guess what happened after you have learnt to do the things you dont like, you simply become better at it right and you might start to love it right?

Just my two cent worth to share before i end my night.

Well to me, this issue is not new. Human beings are designed to hear things that they are interested in and as a result, they will buy what they are keen on. So therefore as a financial doctor to them, one has to find the ‘hot’ button in them and spur their needs out. In fact, i have this 10 reasons for people to buy insurance and i truly stand by it.

Top 10 reasons why insurance is a MUST-BUY products

1) It provides your family member IMMEDIATE financial relief.

2) It generates real assets for you to pay off the debts/bills while leaving your saving for your loved ones.

3) If you stay put throughout the plan, you will be the biggest winner

4) In the event of disability, its able to provide you with one lump sum of money for a person to adjust to new lifestyle

5) If you dont buy when you are healthy and young, it will just get more and more expensive and worse still, you cant even buy.

6) Unless you can guarantee that you wont die or suffer from illness, you must buy insurance

7) One thing that is guaranteed in life, that is DEATH.

If you think you can really plan your life well then why isnt buying insurance part of your plan?

9) Insurance payout is not meant for yourself at times. Its for those who depends alot on you.

10) Unless you have one lump sum of money set aside for death expenses or major illness expenses, if not i dont see what’s wrong with covering these risks  in advance via monthly installement

Well as you are reading these, please dont judge me and say that because of my occupation i said all of the above. Even if i am not in this trade, i am sure that your parents or friends who have went through certain difficult stage of their life would be telling you the same thing. For my job, i am just putting it into certain perspective for you to understand.

The above reasons may or may not appeal to you but it doesn’t matter because different folks different stroke. Hence that is as much as i can do to share but the final decision still lies on you =)

I believed this topic has been quite popular among those people who has ever experienced or have friends/relatives who had contracted major illness before. The most popular question that people asked would be whether can they claim from insurance?

Well the question is easy to answer by just asking two questions: Have you bought a major illness plan and what stage of the major illness is the person in now? Very often people would have thought that they have bought one or two illness plan because their agent told them their saving plan got inlcuded. So often than not, these are the people who will end up with very low coverge because the nature of saving plan is not meant for coverage and its not for whole life. So even if major illness rider was added, its also for short term (20 or 25yr) Agent simply just add the major illness to make the plan looks attractive. Personally an average person coverage for major illness can range between $150k to $400k and whether they will get more really dependable on their income and how importance is major illness coverage worth to them.

Of course all agent will tell you that fact finding is very important and you should follow as accordingly to what you need but however to be realistic, we all have unlimited wants and limited resources. Until we can find more resources to fill up our needs, all things have a limit. So to me although a fact find is important but it is not the most important thing. The important issue is whether client has a comprehensive coverage first. Then from there, bit by bit i will increase their coverage accordingly to their affordibility.

Back to the second question that i would ask: What stage of the critical illness are you in? This is very important because for anyone who last purchased an illness plan was 2 years ago, i can quite certain to inform them that they are not covered if they ever diagnosed with early stage critical illness. For all the old trad or ILP, all the critical illness coverage definition must be in critical stage which means its stage 3 or 4 of cancer for example.

There was one newspaper article few years back that featured a woman who was diagnosed with early stage major illness but wasnt able to claim because her plan was meant for critical major illness coverage. Because of such issue, all insurance companies have came up a plan that specially catered for early stage illness and i STRONGLY urged everyone to upgrade a little bit to enhance your overall coverage. Typically such a plan would paid out 50% upon early stage and the maximum coverage can range from $100k to $150k. Imagine with $50k or $75k to treat your illness, you can go through all the treatments without worrying about the cost.

Therefore after reading this article, i urged you to dig out your policies and check with your adviser to ask if you can upgrade your illness coverage. Dont let them lead you to buy anything else. If you are not sure, you can always email me: peterlim_agent@yahoo.com.sg to ask and i will be happy to assist.

Take care and God bless you! Cheers =)

It has been a superb long time since i last blogged and i really missed the old days where i regularly sat down to share my views with you guys =) Anyway to make things short and sweet, i shall highlight the main points of what has happened to me for the past 3 months.

- Went to few places in US for a two week holiday as part of incentive trips
- 2 week of reservist right after i touched down from airport -_-
- Ventured into renovation business with my ID
- Took up a bridal package with Venus and had just finished phototaking with them last friday!
- Took up a trainer job with MoneyTree to teach financial literacy to primary and secondary students
- Bought a $1800 mattress from OM (Im gonna make sure i sleep at least for 10 years)

Haha..it seem like i never really go out to meet clients -__- Yes indeed i have been resting awhile and i think its time to get back my business! Lately my company has launched many products that i feel that it’s gonna be so awesome because all these products can fill up the gaps that currently people are facing. Wonderful!

Anyway i told myself that i must start my blogging session from Nov onwards and i will make sure that i blog at least once per week and it must be something useful that my readers can take back. Anyway i like to take this chance to shout out ‘Thank you’ to those who has been following up my blog and encouraged me to blog more. Without your support, i wouldnt have the motivation to continue this site. 

Have a wonderful week ahead folks! Cheers

It’s been almost 2 months since my last posts and i am deeply sorry about it. Many of my friends have asked me what happened and my reply was ‘No time’

But today i receieved an email which motivated me to want to blog more. I got an email from CPF board to invite me to write articles for their upcoming ‘Are you ready’ Campaign and i really feel very honoured to be on their invited list. They are going to launch this initiative in 9 Oct 2011 and the purpose aims to educate singaporeans on how to make key financial decisions in their lives.

So therefore the next few weeks, i am going to write a couple of articles so that they can use for the campaign and hopefully through this event, more people can be educated financially.

If you guys have any other topics or areas that you are interested to know more, you can email me or drop me a msg at the chatbox. i will listen to you and share with you my knowledge to my best ability =)

Stay tuned!

Are you totally prepared for it? Have you as a parent, gotten enough coverage for yourself first? Are you concerned about saving up for your kid’s education plan? Do you have enough saving to endure you through the initial period?

Many parents that i have met experiened one thing or another as mentioned above and most of the time, i need to sit down to spend quality time with them to do some re-adjustment of their portfolio. One of the few mistakes that i realised adults made was that they committed too much into saving for their retirement during their age when they have not enough gotten themselves insured enough.

In Singapore we were taught that we should SAVE. Therefore many insurance sales-person out there will try to make sure of this point to sell to many fresh graduates the idea of saving when young. Yes, it is true that we should be saving BUT not with any insurance company per se. They need to save up for their emergency fund first then get themselves insured and when everything are settled then they look into saving for retirement.

Think about this: one young man went to buy a 25yr saving plan when he just started working as fresh grad and he committed $200 because he is able to save $1000 per month. His salary was $1800 during then. A few years have passed and he realised that he needed protection so he approached his consultant to buy a life insurance. He was asked to buy a life insurance that costs $150. So at this point of time, he would be committing $350 out of his $1800 salary and this works out to 19% of his income! Slowly he got married and have two lovely kids. Then suddenly he passed away due to a car accident! His wife called up his agent and asked how much he was covered. Guess what! The agent said ‘Auntie, i’m sorry he did not have accident plan with us and his total coverage only $130,000″

Imagine you are the wife, how would you feel? $130,000 only! Goodness, how long can you survive for only this small amount of money with your two kids?

In the above example, if he was sold a term plan of $150k for $30/mth and a participating life plan of $150 covering $100k for death and accident, his wife will be receiving $400k in total and he was only paying $180/mth using only 10% of his salary!

Let me tell you the honest truth: This is what is happening out there to many people who commits a saving plan first and realised they may not have enough money to buy life insurance when they really need it. Their agent may not also sell them term policies or accident plan because it is firstly hard for consumer to buy the idea of life insurance and secondly commission are low for them plus the overall production the consultant brings in will be considered low.

 Therefore the next time people approach you for saving plan, tell them stop being a sales consultant, be a financial planner and i will buy from you.

Types of factors that need to be taken into consideration:
1) Will you be able to achieve 6-8% returns on your own?
2) Are you disciplined enough to keep invested for long term?
3) Are you able to handle the art (emotional) side when you are buying term?
4) How old are you when you are choosing to buy life insurance?
5) Are you willing to pump your money into a plan that yields no return for you if nothing happens?

I am sure that at this point of time many people would have disagreed with some of the pointers that i mentioned above but like i said, it’s purely my own opinion and i am not asking anyone to follow.

Buying ILP will simply solve many problems of a person who doesnt know how to invest but yet would like to do some form of small investments via insurance. But one thing for sure is that the age that you are buying the plan really plays an important part simply because of the mortality charges that you may be incurring. For someone who is 40 years and above, ILP is not suitable and he is better off buying a term insurance for itself. But for someone who is in the early 20s, ILP may not be a bad choice for them compared to term because of the long term approach that we are looking at. I have just done a comparison of a $100k coverage for death, disability and critical illness for ILP and term. What i found out was that in the long run, say 40 years, the different amount payable for the two plans are not really alot ($15k). However if at the point of time the person were to take out some money for his old age, he/she will still have either $37k (5% return) or $169k(9% return) from his/her ILP as compared to nothing from her term insurance.

Therefore looking at the example, one would prefer to get a ILP instead of term. However please take note that such cases differs from cases to cases so please don’t take it personally and think that it will suit you the most.

Another point that i want to emphasize is that for a person to buy term and invest the rest, they need to really master the science and art of investment. They need not only need to know how to pick the right funds but also to handle their emotionals during crisis. One mistake can cost them quite a bomb. We as a logical person, will also have problems convincing ourselves to buy a plan that may cost a $100/mth and there will be no cash value after 40 years. Example: Do you think a person will ever keep renting a house for his rest of whole life? I can tell you that after sometime, this person will still want to buy a house that can still contain some value after he grows old.

As for myself, i have a mixture of limited pay life insurance, term and ILP.  The purpose of having these policies is so that i can still be insured against death, disability and major illness even if i outlive myself and not working next time because i have already fully paid for my limited life insurance. When i grow old and not working anymore, i plan to cancel out my term and surrender my ILP for my retirement needs.

Therefore the morale of this article is to tell you that people’s needs are different and please do engage a committed and honest consultant to do a fact-finding with you and discover your strength and weakness and be able to plan out a bright future for you!