Getting started with insurance

Iseeyou888

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But if im not wrong life insurance is very expensive right? Thats why alot of people now having term insurance but whats the recommended age to convert to life insurance as term insurance gets more costly when the age increases?

Hi I hope it's not too late! :s13: Expensive or not, it all depends on the affordability of your own budget. Also, your objective in your future. Some people get a term plan because they believe in BTIR, some purely because they want coverage and they cannot afford.

Others purchase a life plan because they feel that they need to get some cash back and not let the premiums go to waste.

There's no recommended age, it depends on your financial situation and the commitments that you have. For example, if you recently got promoted and have newborn babies, you can think of converting now.

Hope it helps! :)
 

belledonne765

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I am not a Financial Advisor, just giving my views based on my own experience.

Hospitalisation & Surgery plan most impt. Buy a plan from AIA, NTUC Income or others using CPF medisave.
On top of that, buy a rider to cover deductible & co-payment, not a must, but good to have (premium payable by cash only not CPF).

Then buy term life to cover death/TPD. Sum insured, you decide, but pls don't believe in the 'draw-down' concept used by many Financial Advisors else you will end up insuring yourself for $2m. Think what kind of income generating assets your loved ones could buy when you are gone(touchwood).

Add on with coverage for critical illnesses if you can.

Annuity - CPF life is a good plan. Lots of info on cpf website.

Endownment, Life policies, retirement planning etc -> treat them as saving plans if you don't do your own investment. Returns of 3% possible.
 

Bigoya

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How do you calculate the yield of an endowment plan?

The yield is usually stated in your BI, not on the table itself but among the words which people don't read.

To calculate it yourself, you need to use Excel and it can be complicated for starters. I'd however still recommend individuals to calculate it themselves to compare between similar plans from different companies for consistency sake.
 
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akwl88

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I am not a Financial Advisor, just giving my views based on my own experience.

Hospitalisation & Surgery plan most impt. Buy a plan from AIA, NTUC Income or others using CPF medisave.
On top of that, buy a rider to cover deductible & co-payment, not a must, but good to have (premium payable by cash only not CPF).

Then buy term life to cover death/TPD. Sum insured, you decide, but pls don't believe in the 'draw-down' concept used by many Financial Advisors else you will end up insuring yourself for $2m. Think what kind of income generating assets your loved ones could buy when you are gone(touchwood).

Add on with coverage for critical illnesses if you can.

Annuity - CPF life is a good plan. Lots of info on cpf website.

Endownment, Life policies, retirement planning etc -> treat them as saving plans if you don't do your own investment. Returns of 3% possible.

Emphasis on the word possible. paying insurers to invest your money, shld expect more than mkt returns. the longer the lock-up period, the higher the returns shld be.
 

Bigoya

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Emphasis on the word possible. paying insurers to invest your money, shld expect more than mkt returns. the longer the lock-up period, the higher the returns shld be.

"Endownment, Life policies, retirement planning etc -> treat them as saving plans if you don't do your own investment. Returns of 3% possible."

Note that whether u want to treat them as savings plans or u understand they are, by nature, savings plan, the fact is that, indeed these are savings plan, not investment plan.

Compare savings plan to savings account (or even FD account), the returns are already higher at around 3%. While the projected returns differ if the endowment plan provides flexibility of withdrawal or if tenure is say. 5 or 10 years, any savings plan structured in a way that gives you less than 2% returns, you are better off putting the money in bank. However if returns project between 3% to 4%, please consider taking it up.

In a way, you are also paying banks to invest your money (they charges you by giving you only 0.05% returns while they keep all the profits?). For full flexibility of withdrawal you get 0.05% interest. For 2 year lock up you get between 1% - 2%. Savings with insurance company for 10 years or longer, you get 3% - 4%. Whether or not this is fair, still subjected to individual views.
 

akwl88

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"Endownment, Life policies, retirement planning etc -> treat them as saving plans if you don't do your own investment. Returns of 3% possible."

Note that whether u want to treat them as savings plans or u understand they are, by nature, savings plan, the fact is that, indeed these are savings plan, not investment plan.

Compare savings plan to savings account (or even FD account), the returns are already higher at around 3%. While the projected returns differ if the endowment plan provides flexibility of withdrawal or if tenure is say. 5 or 10 years, any savings plan structured in a way that gives you less than 2% returns, you are better off putting the money in bank. However if returns project between 3% to 4%, please consider taking it up.

In a way, you are also paying banks to invest your money (they charges you by giving you only 0.05% returns while they keep all the profits?). For full flexibility of withdrawal you get 0.05% interest. For 2 year lock up you get between 1% - 2%. Savings with insurance company for 10 years or longer, you get 3% - 4%. Whether or not this is fair, still subjected to individual views.

the key word is "project"

banks returns and capital are guranteed with instant liquidity for savings acct

for fd, the capital and interests are also guranteed

there is an element of "non-guaranteed" portion in life/endowment policies. comparing the initial total returns vs the current total returns, how many policies boost higher current total returns?

an eg is AIA Prime Life policy - here is evidence, no csb:

http://www.turtleinvestor.net/surrendering-my-aia-prime-life-policy/

the crux is the guranteed issue. if insurers are able to guaranteed payouts of higher % than banks or SSB, i am sure their policies will be selling like hot cakes.

keep it simple - consumers know how much guranteed they will be getting every year or after maturity vs how much total they "invested" in the form of premiums
 

Bigoya

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the key word is "project"

banks returns and capital are guranteed with instant liquidity for savings acct

for fd, the capital and interests are also guranteed

there is an element of "non-guaranteed" portion in life/endowment policies. comparing the initial total returns vs the current total returns, how many policies boost higher current total returns?

an eg is AIA Prime Life policy - here is evidence, no csb:

http://www.turtleinvestor.net/surrendering-my-aia-prime-life-policy/

the crux is the guranteed issue. if insurers are able to guaranteed payouts of higher % than banks or SSB, i am sure their policies will be selling like hot cakes.

keep it simple - consumers know how much guranteed they will be getting every year or after maturity vs how much total they "invested" in the form of premiums

Tokyo marine's par plan has boasted never cut in bonus for like 63 yrs? But that alone shouldn't mean that future projected returns should be a guaranteed amount.

There are indeed endowment plans with guaranteed >2% returns, but why are they not selling like hot cakes? Because salesmen dont sell them since commissions are also guaranteed to be low.

Look around, there are things that exist which you could have overlooked and started stereotyping.
 

akwl88

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Tokyo marine's par plan has boasted never cut in bonus for like 63 yrs? But that alone shouldn't mean that future projected returns should be a guaranteed amount.

There are indeed endowment plans with guaranteed >2% returns, but why are they not selling like hot cakes? Because salesmen dont sell them since commissions are also guaranteed to be low.

Look around, there are things that exist which you could have overlooked and started stereotyping.

guaranteed >2% but lock up money for how long? :(

somemore not guaranteed yearly :(
 

dkgamer

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the key word is "project"

banks returns and capital are guranteed with instant liquidity for savings acct

for fd, the capital and interests are also guranteed

there is an element of "non-guaranteed" portion in life/endowment policies. comparing the initial total returns vs the current total returns, how many policies boost higher current total returns?

an eg is AIA Prime Life policy - here is evidence, no csb:

http://www.turtleinvestor.net/surrendering-my-aia-prime-life-policy/

the crux is the guranteed issue. if insurers are able to guaranteed payouts of higher % than banks or SSB, i am sure their policies will be selling like hot cakes.

keep it simple - consumers know how much guranteed they will be getting every year or after maturity vs how much total they "invested" in the form of premiums

They cannot unless they lump all the new premiums into another investment management. Promises made by insurer 15 years ago due to mature have to be honored. So unless they seperate the funds, their hands are tied
 

Bigoya

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guaranteed >2% but lock up money for how long? :(

somemore not guaranteed yearly :(

Do I not get what you mean by not guarenteed yearly, or do you not get what I mean instead?

Guaranteed n% of interest, regardless what "n" is, is the rate of return annually, i.e. n% p.a.
It is not guarantee n% interest after 20 years. Note the difference.

whether to lock the money up or not should not be decided solely by the duration. It can be 10 years, 15 years or even more than 20 years, but as long as you don't over commit for the intended duration, and you have your emergency fund in the bank that gives you immediate liquidity, you are perfectly fine to just leave that portion of cash sitting locked.

Compared to putting 100% of available cash in the bank account, you get say, 1.95% more every year by putting the excess in such endowment.
 

Starbelle

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I guess I belong to those type that I don't know what to buy and if it is worth while to buy, after hearing so much and so much choices to choose from
 

Perisher

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Do I not get what you mean by not guarenteed yearly, or do you not get what I mean instead?

Guaranteed n% of interest, regardless what "n" is, is the rate of return annually, i.e. n% p.a.
It is not guarantee n% interest after 20 years. Note the difference.

whether to lock the money up or not should not be decided solely by the duration. It can be 10 years, 15 years or even more than 20 years, but as long as you don't over commit for the intended duration, and you have your emergency fund in the bank that gives you immediate liquidity, you are perfectly fine to just leave that portion of cash sitting locked.

Compared to putting 100% of available cash in the bank account, you get say, 1.95% more every year by putting the excess in such endowment.

SSB provides more than 2% with flexibility to take out anytime and interest that is guaranteed by the government. Don't see any reason to get savings plan when they are so much less flexible without paying out much more. If it's 3.5% guaranteed then it makes more sense.
 

Bigoya

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I guess I belong to those type that I don't know what to buy and if it is worth while to buy, after hearing so much and so much choices to choose from

You are not alone, but at least you admit on your flaws and there's where the road to knowledge harvesting begins. 👍🏻
 

Bigoya

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SSB provides more than 2% with flexibility to take out anytime and interest that is guaranteed by the government. Don't see any reason to get savings plan when they are so much less flexible without paying out much more. If it's 3.5% guaranteed then it makes more sense.

SSB is fixed int at a little above 2% if you hold on 10 years. Endowment could give you guarenteed ~2% with non-guaranteed that could potentially add up to ~4%.

Goes back to risk and reward.
 

dendii

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There are different calculations.

Most common way is to use your annual income multiply by how long your dependents will rely on you. (Can be your children, parents, spouse). This is for death coverage.

Critical illness wise people generally use 3-5 years as a gauge multiplying your annual income. For example, according to Singapore Cancer Society, 9/10 people with certain cancer survive for at least 5 years.

How well covered should one be in terms of insurance?
 

annabellens

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There are different calculations.

Most common way is to use your annual income multiply by how long your dependents will rely on you. (Can be your children, parents, spouse). This is for death coverage.

Critical illness wise people generally use 3-5 years as a gauge multiplying your annual income. For example, according to Singapore Cancer Society, 9/10 people with certain cancer survive for at least 5 years.

So to say, generally speaking, we should at least have a term or wholelife + CI?
 

dendii

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Generally I will suggest a mix of whole life and term with CI protection.

Whole Life with CI is because of guaranteed protection for whole life (taking into consideration spouse as a dependent)

Term with CI to increase your coverage in a more affordable manner to maximize your coverage.

So to say, generally speaking, we should at least have a term or wholelife + CI?
 

akwl88

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No wonder my 60+ yr old ex-clients are complaining to me that younger insurance agents are innumerate, cannot calculate or have selective deafness.

All along I have stressed total commission, and yet you say it is "utter nonsense" to earn $2000 to $5000+ commission for an insurance product.

Then now you say about finding customers who can pay $2000 to $5000 a month in premiums.

Yen-neh, you don't need to find someone who is willing to pay $5000 a month in order to earn $5000 commission!

I give you an example:
20-year Limited-pay wholelife plan $200K for male customer 29 yr old.

The premium for one of the "cheaper" plan in the market is already $5200+ per year, or $450/mth if pay monthly.

What's the commission? You know, I know, the commission over 5 to 6 years is total $5700+.

Now let me ask you, is $200K sufficient for this guy? Don't know right? Have to do financial needs analysis first and consider his financial situation right?
Let me tell you, no need to analyse so much ... if he can afford to pay $450/mth for insurance, $200K is definitely insufficient coverage for his income level.

Finally what is the projected rate of returns, even for the optimistic projection? Using both financial calculator and Excel to confirm, the 40 years return of the above "better value" wholelife is a grand 3.0% per annum. FYI, the projected inflation going forward will be around 3.5%pa. Therefore if you think wholelife is a good savings vehicle, you are actually standing a very high chance of losing out to even inflation.

So you think par insurance products are good deal and not CON jobs?? Even when provide insufficient coverage and the cash values cannot even barely beat inflation rate?!?

2 Rules Of Thumb here: LIA advises adequate coverage of 10X your annual income especially if you have dependants. Secondly, you should NOT spend more than 5 PERCENT of your take home pay to buy that 10X insurance cover.

How right? Impossible right?!? Let me tell you if you can do the above 2 things for your clients, then you are not CONNING them. And I can tell you that customer can cover for $500K with less than $50 a month. Therefore average Joe can more than adequately cover himself as you put it -- most only can afford "$100-200 per month".

http://tankinlian.blogspot.sg/2010/04/experience-of-insurance-agent.html

the comments section jin juicy

so much insights into agents' "strategies"

lol
 
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