Why I regret spending too much on Insurance

[rottingapple]

Rottingapple, do you have any dependents? (Any individuals who could not realistically sustain themselves financially without your help?)

I have 2 parents, Dad 68y.o but health is ok to do simple part time, Mum has medical condition not fit for work.

 

[BBCWatcher]

I have 2 parents....

That wasn’t the question.

I presume they’ll be sad if you leave this early plane before they do, but what’s their financial situation?

 

[rottingapple]

That wasn’t the question.

I presume they’ll be sad if you leave this early plane before they do, but what’s their financial situation?

Oh. My Mum has a bit of savings, less than 100k. My Dad has no savings. I have 100k savings, if i die earlier than expected my savings will go to my Mum.

Hdb fully paid up. No loan.

 

[Maeda_Toshiie]

Oh. My Mum has a bit of savings, less than 100k. My Dad has no savings. I have 100k savings, if i die earlier than expected my savings will go to my Mum.

Hdb fully paid up. No loan.

Simply: are they dependent on you for daily living? If you disappear from this planet right now, can they survive without any insurance payout upon your demise?

1. Pru hospitalisation + rider $40/mth
2. Pru accident term 100k $14/mth
3. Pru late CI & death term 500k (250k for CI) $125/mth
4. Pru death term 500k $23/mth
5. Great eastern early CI 150k $108/mth
6. ntuc wholelife $60/mth

2 is optional if you can afford it.
3 is probably worth dropping.
4 is probably overkill at 500k coverage, but it is not too expensive.
5 is probably worth dropping.
6 -> what is it for?



Seriously, you need that much coverage???

 

[rottingapple]

Simply: are they dependent on you for daily living? If you disappear from this planet right now, can they survive without any insurance payout upon your demise?




2 is optional if you can afford it.
3 is probably worth dropping.
4 is probably overkill at 500k coverage, but it is not too expensive.
5 is probably worth dropping.
6 -> what is it for?



Seriously, you need that much coverage???

Oh, they cant survive without my insurance payout.

Ntuc wholelife should be an endowment. The good thing is that the surrender value is higher than the amount i put in. Will payout cash bonus that has rolling these years plus the sum assured.

I bought a lot of these insurance last time thinking i might want to leave some money for my brothers as well. But one million term coverage now i feel is probably too much. Thank you for your input.

 

[Maeda_Toshiie]

Oh, they cant survive without my insurance payout.

Ntuc wholelife should be an endowment. The good thing is that the surrender value is higher than the amount i put in. Will payout cash bonus that has rolling these years plus the sum assured.

I bought a lot of these insurance last time thinking i might want to leave some money for my brothers as well. But one million term coverage now i feel is probably too much. Thank you for your input.

Remember this: your job is not to enrich other people if you meet an untimely death. You have three aims:

1. Ensure that your dependents can be left with sufficient money to take care of their projected needs. You have to draw a line between extravagance and meeting some wants in life. This is where term insurance comes in, whether it is for your parents, your (future) partner, and your (future) children.

2. Ensure that your needs are taken care of in the event that you don't die and need possibly long term care. This is where hospitalization comes in. Some advocate disability payouts and similar policies. YMMV.

3. Put money aside and invest for your retirement. This is where investment schemes sold by insurance companies and banks are not recommended.


These of course comes after having set aside emergency cash. Given your savings, I'd assume you have that taken care of.

 

[rottingapple]

Remember this: your job is not to enrich other people if you meet an untimely death. You have three aims:

1. Ensure that your dependents can be left with sufficient money to take care of their projected needs. You have to draw a line between extravagance and meeting some wants in life. This is where term insurance comes in, whether it is for your parents, your (future) partner, and your (future) children.

2. Ensure that your needs are taken care of in the event that you don't die and need possibly long term care. This is where hospitalization comes in. Some advocate disability payouts and similar policies. YMMV.

3. Put money aside and invest for your retirement. This is where investment schemes sold by insurance companies and banks are not recommended.


These of course comes after having set aside emergency cash. Given your savings, I'd assume you have that taken care of.

I am not good in finances, so i will not do investments, will park my money in fixed deposits and citibank maxigain that yield 2%. I am almost convinced to buy another endowment last week, luckily i didnt buy. Now i decided to concentrate on getting one DII and drop the ECI, CI, and maybe the accident policy, cut down the term death to 500k.

Thank you everyone for the inputs, esp BBCwatcher and Maeda, your advices in other insurance threads are useful.

 

[Perisher]

I am not good in finances, so i will not do investments, will park my money in fixed deposits and citibank maxigain that yield 2%. I am almost convinced to buy another endowment last week, luckily i didnt buy. Now i decided to concentrate on getting one DII and drop the ECI, CI, and maybe the accident policy, cut down the term death to 500k.

Thank you everyone for the inputs, esp BBCwatcher and Maeda, your advices in other insurance threads are useful.

You might wanna consider investment when you understand it better.
It's gonna shave years off working so good to learn.

Bonds for example, are a good investment. SSB for super safe, then retail bonds that are backed by strong companies like FCL or CMT type.
This can easily push your returns per year to 3%+ without being overly risky.
DYODD.

 

[rottingapple]

You might wanna consider investment when you understand it better.
It's gonna shave years off working so good to learn.

Bonds for example, are a good investment. SSB for super safe, then retail bonds that are backed by strong companies like FCL or CMT type.
This can easily push your returns per year to 3%+ without being overly risky.
DYODD.

I tried reading Shiny thing thread but they all started with all the chim terms, haha no clue what they are talking about.

Perisher Thank you for recommending. If i wan to buy bond, is there something called bank bond? If there is, i think they are quite safe. i will look into SSG . I was recommended unit trust lately, returns seems attractive (5%), is it suitable for noobs like me? because there is a fund manager doing the investment for me.

 

[andyhtc]

Some forms of insurance are good. It is either you pay the insurance agents now and you feel disgusted or pay the doctors later when you are at their mercy.

 

[akwl88]

I tried reading Shiny thing thread but they all started with all the chim terms, haha no clue what they are talking about.

Perisher Thank you for recommending. If i wan to buy bond, is there something called bank bond? If there is, i think they are quite safe. i will look into SSG . I was recommended unit trust lately, returns seems attractive (5%), is it suitable for noobs like me? because there is a fund manager doing the investment for me.

Er when other pple are selling products to you, they are gg to earn fees from you.

Do you think they care about how much returns you are getting?

 

[BBCWatcher]

Some preliminary answers from me....

1. Pru hospitalisation + rider $40/mth

That looks like PRUshield Plus with the PRUextra Plus rider, at $44.25/month to be precise, partially Medisave payable. As your income, savings, and age increase you might consider dropping the rider, but for now I think that’s reasonable. I like PRUshield Plus a lot, but one caveat with Prudential is they don’t offer an “as charged” public hospital B1 ward plan. So they don’t have a great drop-down option.

2. Pru accident term 100k $14/mth
3. Pru late CI & death term 500k (250k for CI) $125/mth

These two, and #5, I would look at replacing with DII. Any idea what that would cost at $2,500/month coverage, 90 day (3 month) waiting period (and also 6 months for premium comparison), and age 65 term? Quotes available from Great Eastern, AIA, and Aviva.

Do you have any insurance coverage from your employer, by the way?

4. Pru death term 500k $23/mth

Probably yes, for your parents, for now. You didn’t mention their CPF situations, and I’m particularly curious about where they stand in that respect. I understand so far they have $100K in combined savings and, I assume, they own and occupy their own home (HDB unit?) with a long enough leasehold for their entire lives.

Do you have siblings who are also (or could be) in a position to help them if they need some help?

5. Great eastern early CI 150k $108/mth

See above.

6. ntuc wholelife $60/mth

I assume this one is because you say you don’t understand investing. Well, lack of understanding will be expensive. In fact, you probably understand more than you think.

What do you think you can afford for monthly savings right now? Is it $60/month?

 

[VacheronLim]

Who said anything about term till 99? Term protection is to protect your dependents until they can fend for themselves. Insurance is for protection, not for attempting to get rich off it.

I know of people who see this term till 99 purely as a form of investment, not protection. The policy holder will get his children (who are mostly adults with their own kids) to split the premiums evenly, so when he/she pass on the children will each get a hefty payout (of course they would have done their maths, to know that the payout > premiums paid even if policy holder pass on late, e.g 90yr+)

 

[w1rbelw1nd]

I know of people who see this term till 99 purely as a form of investment, not protection. The policy holder will get his children (who are mostly adults with their own kids) to split the premiums evenly, so when he/she pass on the children will each get a hefty payout (of course they would have done their maths, to know that the payout > premiums paid even if policy holder pass on late, e.g 90yr+)

Thought from another perspective, that is a bet on dying before 99, right?

Also, do those people look at the implied returns of such an "investment"? Having payout > premiums could potentially equate to a very very low return 0f 1-2% (or even negative return for >100 years old).

Anyway, I wouldnt want my kids to plan that I die...

 

[BBCWatcher]

Term life insurance to age 99 is quite odd, I agree. One of the rare occasions when it might make sense is if, say, a 74 year old fathers a child and names the newborn as his life insurance beneficiary (or the custodial surviving parent/guardian of that child). Term life insurance would then cover the first quarter century of that child's life, up until the child's 25th birthday, give or take. However, a 74 year old would usually have some practical difficulties passing medical underwriting, and a 99 year term policy won't be much less expensive than a whole life insurance policy.

Maybe it could be a diminishing term life policy, and then that would be less expensive. Here's how it'd work (hypothetical schedule of benefits):

Initial coverage amount: $500,000
Term: 25 Years
Coverage reduced by $15,000/year for the first 16 completed years
Coverage reduced to $50,000 for the last 3 years

The idea here would be to provide child support that matches a "typical" newborn's first 25 years: "regular" child support expenses, year by year, through secondary school, some years at university, then early career phase. And this sort of diminishing term life insurance policy would cost somewhat less than a level whole life policy.

It's too bad nobody seems to offer that sort of policy, at least not off-the-shelf. Maybe we psychologically don't like the idea of diminishing term life insurance, but it's a better fit for many real world scenarios. It'd better align the insurance policy (and premiums) with the actual insurance needs many families face.

 

[rottingapple]

Some preliminary answers from me....


These two, and #5, I would look at replacing with DII. Any idea what that would cost at $2,500/month coverage, 90 day (3 month) waiting period (and also 6 months for premium comparison), and age 65 term? Quotes available from Great Eastern, AIA, and Aviva.

Do you have any insurance coverage from your employer, by the way?


Do you have siblings who are also (or could be) in a position to help them if they need some help?


What do you think you can afford for monthly savings right now? Is it $60/month?

Yeah i contacted several agent to email me the quotes, hopefully DII will cost below $300 for $2500/mth protection.

I am not sure if i have insurance coverage my employer, i have some medical coverage, i work in govt settings.

My sibling dont earn a lot and has little savings, but he managed to give an allowance of $500/mth. My Mum has no cpf at all, my Dad cpf will only issue out $250 for another 4 years. So i think i can retain that death term of 500k.

As of now i can afford $60/mth savings

Oh yes. The Pru rider will become very expensive when im old, for that i will go find out how much i can drop to a comfortable level.

Thank you BBCwatcher

 

[Maeda_Toshiie]

I tried reading Shiny thing thread but they all started with all the chim terms, haha no clue what they are talking about.

In the age of high speed internet and Google, you can search and read up on "chim" terms, or ask questions.

There is a local gahment sponsored financial literacy program called Institute for Financial Literacy.
https://finlit.sp.edu.sg/programmes/#investing

I suggest you do a read up on the basics of investing first.

It is up to you whether you take control of your finances or not.

Perisher Thank you for recommending. If i wan to buy bond, is there something called bank bond? If there is, i think they are quite safe. i will look into SSG . I was recommended unit trust lately, returns seems attractive (5%), is it suitable for noobs like me? because there is a fund manager doing the investment for me.

Bonds are debt securities. You are "lending" x amount of money (the bond's face value) to someone with the promise that they will pay a fixed percentage of interest (coupon rate) and then repay you the principle amount at the end of a fixed period of time. Variants include perpetual bonds (with no fixed period of time for principle repayment), and zero coupon bonds which do not pay any interest but instead are sold at a discount (essentially the interest is all paid at the end together with the principle).

First of all, he is referring to SSB, Singapore Saving Bonds. It is not a typical bond as in one that you can buy and sell on a market and with a fixed coupon payment. Instead it is a local government issued product specifically designed as a mean for people to earn essentially risk free interest over the course of 10 years without having to do anything (other than setting up a CDP account for free and apply for the bond via the ATM at $2 per pop). Incidentally, you cannot apply for SSB via the bank counters because the banks don't earn anything.

There is something else called SGS, Singapore Government Securities. Those are the typical sovereign debt securities issued by our Gahment, analogous to US Treasury bills/notes/bonds. These can be bought at primary auctions (applied via the ATMs for retail investors) or secondary market (via bank RMs). They are openly traded securities, but our local bond market is highly illiquid. These are not available for trading on SGX. Seriously though, SGS are really meant for institutions, and informed retail investors (AI or not). There are better ways to buy local goverment bonds, especially those who are not familiar with financial instruments.

In addition to SGS, local stat boards issue bonds too, but those are usually sold at $250,000 at primary auctions. Some bank RMs will break them up and sell smaller pieces to retail customers, but this is rare and you end up additional fees that make them not worthwhile. These are not available for trading on SGX.

Corporations also issue bonds (DBS, Capitaland, etc). Most of them are also sold at 250,000 SGD per pop, and rarely available to retail customers in smaller pieces (even then, again with additional fees).

There are a few corporate issued bonds traded on SGX. Unlike most developed countries, our exchanged traded bond market is extremely tiny.

Before buying a bond, you need to understand how the price of bond might change with respect to time, the issuer's status, and market conditions.

----------------------------------------

As for UTs, that 5% is either its past performance or project future performance. First of all, 5% is not really particularly outstanding if it is a pure stock fund. Secondly, returns are NOT guaranteed. Thirdly, there is the possibility of losing your initial investment (the fees don't help).

Oh and don't forget, you have to pay an upfront charge when buying. On top of that, they charge an annual management fee that is always a drag on performance.

Always remember this rule: most unit trusts, after fees, underperform the market.

Always remember this rule: past performance does not imply future performance.

Always remember this rule: reduce the fees, fees, fees. Never pay more than what you must.

Always remember this rule: stay away from high fee unit trusts / mutual funds. Exceptions apply, but you are not at the stage to recognize them.

Further reading:
http://www.moneysense.gov.sg/Understanding-Financial-Products/Investments/Types-of-Investments.aspx

 

[Wood41]

Insurance agents,like property agents & those
‘bankers ‘ who push unit trusts make $$$ when you sign .
Others are not their problems.

 

[Wood41]

 

[BBCWatcher]

Yeah i contacted several agent to email me the quotes, hopefully DII will cost below $300 for $2500/mth protection.

Please let us know! There are only 3 companies that can quote DII (sold in Singapore), so that should be the maximum effort.

I am not sure if i have insurance coverage my employer, i have some medical coverage, i work in govt settings.

That's important to clarify, to make sure you're not redundantly insuring (or at least so you can consider some adjustments).

My sibling dont earn a lot and has little savings, but he managed to give an allowance of $500/mth. My Mum has no cpf at all, my Dad cpf will only issue out $250 for another 4 years. So i think i can retain that death term of 500k.

Yes, but I think you and your sibling ought to look at any reasonable opportunities to bolster your parents' CPF accounts.

Think of it this way. You and your sibling could either be struggling to support your parents, using money you've saved (best case) that's earning about 2% in a Singapore Savings Bond. That's one option. Or you could be helping them with some 4+% earning CPF top-ups, possibly with a bit of tax relief for you, and conceivably with some of that money coming right back to you if they were to die earlier than anybody would hope.

As of now i can afford $60/mth savings

Probably you're overspending on insurance and under-saving, that you're out of balance in that way. It's at least looking like it. I agree with the other posters that you're carrying a might heavy insurance premium load at $3,600/month. And that might be defensible if it's a good, appropriate mix of insurance, but that's not looking right either.

Oh yes. The Pru rider will become very expensive when im old, for that i will go find out how much i can drop to a comfortable level.

I chose PRUshield Plus also, so obviously I like it. But I'm in a very different situation. (Possibly you'll be in my situation in the future, and that would be nice.) I expect I'll be able to afford PRUshield Plus for the whole family "forever," even with (public restructured hospital) medical inflation. So I don't anticipate wanting or needing to drop down a level or two. [But Prudential, if you're listening, I think you need to plug that gap in your Integrated Shield product offerings. I view it as a genuine gap. Dropping down to the "Standard" plan is too big a drop, in my view. How about just providing a published premium discount from, say, age 55 for PRUshield Plus policyholders who agree to cap their coverage at B1 ward -- a simple one-time "dropdown" provision? Popping back up would be subject to medical underwriting, of course. Call it something like the "PRUshield Inflation Fighter Option."]

Anyway, you're age 28, so this isn't a problem yet. But if you view this as a future problem, it's something to fix before you have a preexisting condition. The last time I looked at it I saw Great Eastern as having the best "as charged" B1 public hospital plan, overall, so you could check with them, at least.

This is also another reason why it's worth checking what your employer offers, if anything. There's a reasonable point of view that you hang onto a "base level" Integrated Shield plan -- public hospital B1 ward level, for example -- which is then "topped up" with employer-provided medical insurance. If you go "too high" on the Integrated Shield then you might be a little too redundantly insured, especially if you wouldn't have any problem or issue staying in a 4 bedded air conditioned hospital room at a public hospital with your choice of hospital doctor (B1). Let me take a quick look at premiums here....

Yes, as I figured, virtually no savings on the base plan for a 28 year old, just some on the optional rider. So this is really about the future and any concerns you might have about that, not about the present. And I happen to think Prudential currently has the best public hospital A plan, which is why I'm a customer. (Great Eastern was my runner up, when I looked, and it was very close. But I gave the nod to Pru primarily for their pre-/post-hospitalization coverage range.)