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Why I regret spending too much on Insurance

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Old 29-12-2017, 09:52 AM   #1
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Why I regret spending too much on Insurance

I was watching a fb live feed on insurance and investment recently. There was an analogy by one of the speakers which struck me hard

He said :
Buying Insurance is just like buying a fire extinguisher for your home. It is a required protection. However, at times, we get so overly caught up with the features of this fire extinguisher rather than the original intent of getting it (which is to put out a fire) . The sales man will tell u that if u buy a more expensive fire extinguisher, it will have additional functions (such as LED lights, smoke alarm etc.).

So there you go shopping for fire extinguishers and upgrading ur fire extinguishers as new models start appearing... Spend a fortune on it.

During your house warming, will you open your store room and say to ur guest 'Look at all the wonderful fire extinguishers I bought'... I don't think so rite. Instead what u would want is to renovate your house nicely for your guest to enjoy.

Similarly with insurance, we should be looking at the essential protection that we need to put out the fire.

After hearing this, it dawned upon me, why spend so much on insurance when u can use this additional savings to grow your retirement funds /save? As long as the fire extinguisher serves its main purpose, it doesn't make sense to pay so much more for it.

And to those who feels that term plan is a waste of money as there is no cash returns.... Think about it in this way. When you buy a fire extinguisher for $10.... Will u go to the shop after the fire extinguisher life span is over and say 'hey I did not use this extinguisher.... For this I expect to trade it in for $30'

To my friends who have just started planning for their protection needs, it's a food for thought.
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Last edited by blurpandasg2014; 29-12-2017 at 12:11 PM..
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Old 29-12-2017, 10:01 AM   #2
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Buy term insurance to minimize insurance spending
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Old 29-12-2017, 10:03 AM   #3
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Buy term insurance to minimize insurance spending
Yup agree with u. Don't overbuy (just buy what u require). Buy it for as long as u think u need it... For most ppl it will be 65/70 in the case of CI cover
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Old 29-12-2017, 10:31 AM   #4
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For most ppl it will be 65/70 in the case of CI cover
OK, but CI (and ECI) are the "LED lights" in this analogy. Focus on defending against real, catastrophic, calamitous risks. For the vast majority of working people that's your health (Integrated Shield public hospital B1 "as charged" is fine), your income potential (Disability Income Insurance), and, if and only if you have dependents who wouldn't be able to cope on their own with your untimely demise, your life (simple term life insurance). Later on it's longevity risk, the risk of outliving your savings (CPF LIFE).

Is anything else essential, in terms of insurance products? I don't think so. Maybe supplemented ElderShield if you're chugging along and, at age 40, not amassing enough savings to defend against possible long-term care needs, such as nursing care to help you bathe. Travel medical insurance (I like Bupa Basic currently) if you venture outside Singapore. But the "Big 3" (hospitalization, DII, and term life if you have a dependent) is an excellent core set.
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Old 29-12-2017, 11:10 AM   #5
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I took a look at DII after BBC kept recommending it.... But hor.. moi read e summary ish feel abit unsure still.

For example rike e summary i gt a quotation from an agent:
The Life Assured is totally unable by reason of sickness or injury to perform the material duties of his or her own occupation.

Hw they define my own occupation? If im a admin clerk. Sit at table do admin work one. Thn riddat even if moi 2 legs gone I aso can be at table do admin work. Thn wont be eligible for claim riao?
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Old 29-12-2017, 11:21 AM   #6
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I took a look at DII after BBC kept recommending it.... But hor.. moi read e summary ish feel abit unsure still.

For example rike e summary i gt a quotation from an agent:
The Life Assured is totally unable by reason of sickness or injury to perform the material duties of his or her own occupation.

Hw they define my own occupation? If im a admin clerk. Sit at table do admin work one. Thn riddat even if moi 2 legs gone I aso can be at table do admin work. Thn wont be eligible for claim riao?
If and only if your company keep you even after 2 legs are gone and at pay higher than the level set in DII.
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Old 29-12-2017, 11:38 AM   #7
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i spending 4.8% of monthly income on insurance.
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Old 29-12-2017, 11:48 AM   #8
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Wish someone told me about this and how insurance cheats money from ILP years ago.
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Old 29-12-2017, 11:52 AM   #9
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Wish someone told me about this and how insurance cheats money from ILP years ago.
They don't "cheat". They just paint the best case scenarios and people don't understand how fees can sap away so much money. Sellers aren't required to perform fiduciary duty and buyers don't have the financial knowledge to question.
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Old 29-12-2017, 12:05 PM   #10
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Wish someone told me about this and how insurance cheats money from ILP years ago.
Same here. One of my first policies was an ilp which I cut loss... Den I bought life plan. Not saying that life plan is no good but shld I have known better ways to invest, I could have used the money to grow my nest egg and buy term
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Old 29-12-2017, 12:09 PM   #11
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If and only if your company keep you even after 2 legs are gone and at pay higher than the level set in DII.
That's not quite right. DII sold in Singapore includes coverage for both partial and full pay loss due to disability.

I believe the way it works is as follows. Let's suppose you're paid $5,000/month pre-disability, and you have a $3,500/month DII policy (70%, the maximum allowed). You become disabled, you go back to work, but your work is impacted due to the disability. Thus your employer will only pay you $3,000/month because of your diminished capacity to perform the work tasks they expect. So you've lost $2,000/month. Your coverage is for $3,500/month (more than the income loss), so DII should top you back up, all the way to $5,000/month in this example.

The 70% figure in this example is the minimum income flow you'll get if you're disabled and unable to work. It's not the maximum, if you're disabled and have a partial loss of income. At least, that's how I understand this policy to work. And it makes logical sense, because the insurer really wants you back at work, to help reduce their payouts. If the insurer pays $2,000/month instead of $3,500/month, that's good news. And if/when your employer raises your salary back up to $5,000/month (this example), or closer to $5,000/month, the payouts correspondingly tail off. Also, if you're back at work, you're more likely to stay back at work. This is all good news for the insurer, so they really want to encourage you to get back into the labor force. That's why the partial income loss coverage is a key element in DII.

Last edited by BBCWatcher; 29-12-2017 at 12:11 PM..
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Old 29-12-2017, 12:12 PM   #12
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I spent $1k only on ILP in 1997 to entertain my friend.

Luckily it was just $1k and it was wiped off during the Asia Financial crisis.
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Old 29-12-2017, 12:20 PM   #13
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Last time no Medishield Life so it is important to buy more term or life insurance. With the introduction of the compulsory Medishield Life you can even throw out term insurance coverage out of the window altogether.

If you are working for a company then you are already covered by medical insurance. This part already can save haha. Low level paying jobs will also have this work benefit.

The money saved use it for low risk investments such as defensive blue chip stocks or government bonds. Financial dummies can dump it into Fixed Deposits instead. Should any misfortune struck this sum of money can be utilised as your 'insurance payout'. If no misfortune happens till the day you pass away I believe deep in your heart you will go away peacefully knowing this sum of money is well planned and your next of kin will benefit from it.

Even till the day you pass away you will never get your hands on your Medisave. This sum of money is locked up forever until your next of kin inherit it. My Medisave is my 'insurance'.

If you have dependents then buy adequate life insurance but not overboard.

MediShield Life is a basic health insurance plan, administered by the Central Provident Fund (CPF) Board, which helps to pay for large hospital bills and selected costly outpatient treatments, such as dialysis and chemotherapy for cancer. MediShield Life coverage is sized for subsidised treatment in public hospitals.
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Old 29-12-2017, 12:40 PM   #14
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Assuming you view DII as I do (essential), here are some tips to avoid overspending/over-insuring:

1. Don't choose an elimination period (waiting period) any shorter than 90 days. This is the period of time after you experience a disability before the insurer will start paying benefits. You really should be able to self-insure -- to have adequate emergency reserve funds -- for at least 90 days. If you need to start off with a pre-benefit waiting period of 90 days (or 3 months) and then adjust the policy later on to increase to a 6 month waiting period, that works. (Two of the three DII insurers in Singapore allow you some flexibility in choosing the waiting period.)

2. Start off with a reasonable level of coverage. If your income is low or moderate, try to get the full 70% maximum if you can afford it. If you get a raise, particularly if it's unexpected, or if you change professions, it's good to review your coverage.

3. Be careful that you inform the insurance carrier when you're supposed to. For example, if you might be posted to another country, discuss that possibility with the insurer to make sure that they'll keep you insured -- or that you can find alternative coverage.

4. As you get closer to normal retirement age (age 65 typically), as your household expenses start to fall (kids out of university and starting their own careers, for example), and as you build up your own savings, you should be able to reduce your DII coverage. You might start with a reduction in the maximum monthly payout -- drop from $5,000/month to $4,000/month, for example. Then, as you fully emerge from the "danger zone," you could drop coverage altogether. That might be at age 58, or something along those lines.

5. You might decide to replace some of your DII with ElderShield (and ElderShield supplements) from age 40, although ElderShield has some key differences. Or you might not, again due to the important differences between DII and ElderShield.

6. Make sure you are both truthful and precise in describing your profession and job responsibilities, and look through the list of choices carefully with your DII agent. If you get the profession/job wrong, that could spike your premiums unnecessarily.

7. Sometimes the DII sellers have promotions, and AIA has their "Vitality" program with premium discounts. If you can take advantage of such discounts, great.

8. Make sure you get good quotations from all DII companies. Don't just get one quotation from your buddy's agent's favorite company.
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Old 29-12-2017, 12:52 PM   #15
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Last time no Medishield Life so it is important to buy more term or life insurance. With the introduction of the compulsory Medishield Life you can even throw out term insurance coverage out of the window altogether.
I think you mean hospitalization insurance, i.e. Integrated Shield, which layers on top of MediShield Life. Term life insurance is entirely different than MediShield Life.

This one is a bit tricky, but I think there's a strong argument that an "as charged" Integrated Shield policy at either the B2+ or B1 public hospital ward level can be fairly described as essential. In particular, if you view a guaranteed air conditioned hospital ward as essential, then a public hospital B1 ward "as charged" Integrated Shield plan is essential. (Riders are not.)

For those who don't mind doing without air conditioning, I think NTUC Income's IncomeShield Enhanced C plan with Assist Rider is a reasonable approach. It's inexpensive, and that combination covers a lot more than MediShield Life does -- as long as you stay in public hospital B2+ wards or below. In particular, it adds 90 days of pre-/post-hospitalization outpatient coverage, and that's important medical protection. (I wish it were more days, but 90 is better than 0.) This plan works especially well for women, since KK Hospital has B2+ ward (air conditioned). I don't think any other public hospital advertises a B2+ ward, so it's much more like a lottery elsewhere.

If your employer offers medical insurance then...well, it's "interesting." If you go completely without Integrated Shield, then you might have a risk of future medical conditions effectively excluding you from Integrated Shield, post-employment. My preferred approach is to pick the minimum Integrated Shield plan you could live with post-employment -- probably either IncomeShield Enhanced C plus Assist, or Great Eastern's Supreme Health B Plus without a rider -- and make that your foundational coverage, maintained. If your employer then provides medical benefits above that portable baseline coverage, great! But I'd keep the baseline going (or drop down to that baseline if you're already higher, at least while employed with "top-up" medical benefits).

Last edited by BBCWatcher; 29-12-2017 at 12:58 PM..
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