Saving insurance, worth to get?

harky

Great Supremacy Member
Deluxe Member
Joined
Jan 20, 2002
Messages
57,617
Reaction score
2,312
like use it as a saving? force saving haha.
 

anfielder

Master Member
Joined
Sep 16, 2005
Messages
4,554
Reaction score
1
Savings plans are a terrible deal. Why would you want to lock your money up for long periods of time for low returns, and making a significant loss if you were to take it out early for any reason?

Buy a cheap term insurance, and use instruments like POSB invest saver or ocbc bcip instead.
 

BBCWatcher

Arch-Supremacy Member
Joined
Jun 15, 2010
Messages
20,119
Reaction score
3,014
Back up a bit here: what is “saving insurance”? Insurance for your savings, such as (for example) bank account deposit insurance?

If you mean some sort of savings or investment plan that an insurance company sells as a standalone product, or as a bundled feature to make a relatively simple insurance product more complex, then I agree with the other posters. You should be deeply skeptical about savings and investment products, in whatever form, that insurance companies are peddling. It is extremely rare that they are good values.

If you mean some sort of insurance that protects your savings, that’s great. In Singapore there is bank account deposit insurance. It isn’t a lot, but it protects up to S$50,000 per account holder. So many people who have more than S$50,000 in bank deposits try to split up their deposits across banks in order to keep most or all of their bank funds insured. There is also some insurance in Singapore that protects against the default of an insurance company. Again, this insurance is limited, but it’s well worth respecting. Foreign banks and financial institutions also sometimes have excellent quality, government insurance protections. My favorite example is in the U.S. state of Massachusetts. In Massachusetts there are roughly 60 savings banks that offer double insured U.S. dollar bank accounts. The first US$250,000 is U.S. federal government insured (although it’s fairly easy to raise that limit significantly with only a little bit of effort). For any deposit amounts above the FDIC limit, the state’s Deposit Insurance Fund (DIF) takes over, and DIF has no limit. Hypothetically you could have $50 million sitting in one of these bank accounts, and the Commonwealth of Massachusetts insures it, backed by the full faith and credit (and taxing power) of that state. Of course it’s remotely possible that that particular state government could have financial problems that could threaten DIF protections, but that’s true of any government entity. You always have to consider the credit characteristics of the guarantor.

If you’re investing in highly liquid, high volume exchanges such as the U.S. markets (New York Stock Exchange, etc.), then you have tremendous opportunity to insure your positions, effectively. That’s called “hedging.” The simplest example is what’s called a “stop loss” order. Let’s suppose you own shares of Apple’s common stock, but you absolutely will not tolerate a paper loss of more than 10% on that stock. Well, you can place a “good till cancelled” order that tells your broker to sell Apple if the price falls to $XX, where XX is your minimum. This is not necessarily a good idea as a trading strategy, but you can do it. Another, probably better option — pun intended — is to buy an option. If you trade options, then you can “win” if some unlucky event happens. That’s not free — you have to pay for the option(s) — but it’s just like insurance premiums. For example, let’s suppose that Apple stock is trading at $160. In the options market you can buy something slightly fancy called a straddle or strangle. (Straddles and strangles are very slightly different, but let’s just treat them the same here for purposes of this discussion.) It requires buying two related options, and brokers will often let you buy the two options as a single transaction. So let’s suppose you want to be paid if Apple falls below $150 and paid if Apple rises above $170. OK, you can do that. You buy the options — there’s a cost for that — and then if Apple’s stock falls a lot or rises a lot, you win. So this approach lets you bet on Apple, even without owning any shares of Apple. You can effectively protect yourself against Apple stock falling a lot or rising a lot.

The options and futures markets work pretty well (or very well) for highly liquid, transparent, high volume investments. That includes most currencies (currency hedging is very popular), the biggest volume individual company shares (Apple is a good example), major market indices (such as the S&P 500 index, so you can insure against/bet on whole stock market movements), certain commodities (such as oil and gold), and a few other vehicles. The financial world is pretty clever and offers lots of options.

In Singapore, OptionsXpress markets itself expressly for this sort of trading — hence their name — although you can also use them as a conventional broker. Interactive Brokers, another popular online broker that some investors in Singapore use, also offers full access to options and futures markets to make these bets. You have to know what you’re doing, though. You can use options and futures in a very conservative, insurance-oriented way. Or you can use them in ways that are similar to gambling at a casino. Or something in between, or some combination. They are tools, and they can be used and abused.

OK, finally, I don’t recommend the options and futures markets for most people. This is very sophisticated stuff, too sophisticated for most. Instead (or in addition, either way), I recommend at least reasonable, global portfolio diversification, and long-term investing with dollar cost averaging, as powerful techniques to reduce risk.
 

Jupiter2017

Senior Member
Joined
Sep 2, 2017
Messages
1,479
Reaction score
0
As topic..
(1)I assume you are referring to those Insurance products where you pay a fixed monthly amount for eg. first 5 years, and then you get a lump sum back at the end of eg. 10th year. Such yield is low, and there is also no guarantee for the final lump sum. Read t&c carefully and do some calculations yourself and compare to option (2) bank a/c below.

(2)If you want more flexibility with your cash, you will be better off depositing your monthly sum into a bank a/c that have Bonus interest promotion eg. BOC SmartSaver a/c, Maybank SaveUp a/c, UOB One a/c, etc (2% -3.5% interest + enjoy some credit card rebates, etc – some tracking required)

(3)Start a RSP (Regular Savings Plan) with a bank, investing in a well selected Unit Trust or ETF. This has potential of providing higher returns if you do it right. Market risks involved here and some monitoring required.

(4)Learn, and invest in Shares/REITs yourself. Market risks involved here and some monitoring required.

5)If you have a longer term view, the best is to top up your CPF annually to the maximum allowed limit (Special a/c- age 55 below, CPFLife/Retirement a/c – age 55&above). You may be glad of this when you reach old age. 4% risk-free.

If you have sufficient funds, do (2) & (3) & (4) for short term to medium term.
 

terryhoho

Senior Member
Joined
Apr 23, 2006
Messages
1,541
Reaction score
0
0 worth.
better to put in FD than insurance savings..seriously better in Fixed Deposit.
 

harky

Great Supremacy Member
Deluxe Member
Joined
Jan 20, 2002
Messages
57,617
Reaction score
2,312
haha some sort of 1 & 2.

Just force saving a little.. Fixed Deposit had min amount to deposit.

will take a look @ the a/c

(1)I assume you are referring to those Insurance products where you pay a fixed monthly amount for eg. first 5 years, and then you get a lump sum back at the end of eg. 10th year. Such yield is low, and there is also no guarantee for the final lump sum. Read t&c carefully and do some calculations yourself and compare to option (2) bank a/c below.

(2)If you want more flexibility with your cash, you will be better off depositing your monthly sum into a bank a/c that have Bonus interest promotion eg. BOC SmartSaver a/c, Maybank SaveUp a/c, UOB One a/c, etc (2% -3.5% interest + enjoy some credit card rebates, etc – some tracking required)

(3)Start a RSP (Regular Savings Plan) with a bank, investing in a well selected Unit Trust or ETF. This has potential of providing higher returns if you do it right. Market risks involved here and some monitoring required.

(4)Learn, and invest in Shares/REITs yourself. Market risks involved here and some monitoring required.

5)If you have a longer term view, the best is to top up your CPF annually to the maximum allowed limit (Special a/c- age 55 below, CPFLife/Retirement a/c – age 55&above). You may be glad of this when you reach old age. 4% risk-free.

If you have sufficient funds, do (2) & (3) & (4) for short term to medium term.
 

skthk21

Senior Member
Joined
Jan 24, 2008
Messages
558
Reaction score
11
hmm but 1 of my friend always tells me he has got a few plans.
That he will get like $100K next time when older.
Brags about it, got a few plans so will get few Hundred thousands.
Are these saving plan?
 

deepblueli

Senior Member
Joined
Jan 19, 2004
Messages
591
Reaction score
7
I agree that it depends on yield.

I have recently studied the endowment plan in the market. Most have very low guaranteed maturity value, some even have a loss for its guaranteed benefit, only if you add non-guarantee portion then only can make a profit.

I find this endowment plan may worth a look:
http://forums.hardwarezone.com.sg/money-mind-210/maxadvance-payout-plan-ocbc-5712612.html

If you accumulate the cashback, the IRR is between 1.4% (with 0 non-guaranteed bonus) and 3.1% (after adding non-guaranteed bonus with 4.75% projected return)

It seems a good substitute for FD.
 

henrylbh

Arch-Supremacy Member
Joined
Mar 9, 2004
Messages
15,777
Reaction score
702
Might as well go for SSB with no penalty for backing off any time.
 

deepblueli

Senior Member
Joined
Jan 19, 2004
Messages
591
Reaction score
7
Might as well go for SSB with no penalty for backing off any time.

Ya ssb is a better choice if you don't trust the projected return in the policy.

Endowment plan does have one disadvantage which is you will make a loss if you surrender before maturity. If you hold till maturity, there is a possibility that you can earn more than 3% in average per year for the amount you put in.
 
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Community Guidelines and Standards, Terms of Service and Member T&Cs for more information.
Top