Getting started with insurance

[Okenba]

Okay. Thanks both.
So in the case of Life Insurance, if one develops a health problem later, the term life policy may refuse to reinsure you once the term runs out, but the whole life policy is obliged to cover you so long as you continue paying the premium.

For a child, this does not sound like a big deal to me. Since it is unlikely that a dependent needs insurance in the first place, I am unlikely to insure my child for a large amount.
Hence, when the time comes that the child does need insurance (ie. Has dependants of his own), whatever I have bought would probably be insufficient. Unless, as boiboi says, the Whole Life policy has allowance to increase coverage at certain milestones without further underwriting.

Would that be a fair statement to make? Basically, if buying whole life for kids, such allowance for future increased coverage seems to be an important aspect to look out for...

 

[boredboiboi]

Okay. Thanks both.
So in the case of Life Insurance, if one develops a health problem later, the term life policy may refuse to reinsure you once the term runs out, but the whole life policy is obliged to cover you so long as you continue paying the premium.

For a child, this does not sound like a big deal to me. Since it is unlikely that a dependent needs insurance in the first place, I am unlikely to insure my child for a large amount.
Hence, when the time comes that the child does need insurance (ie. Has dependants of his own), whatever I have bought would probably be insufficient. Unless, as boiboi says, the Whole Life policy has allowance to increase coverage at certain milestones without further underwriting.

Would that be a fair statement to make? Basically, if buying whole life for kids, such allowance for future increased coverage seems to be an important aspect to look out for...

It only allow to increase up to 100% of the base. Thus if u buy small, u only can increase that amount. And a children wholelife plan is way cheaper compare to an adult. But its also up to individual financial capability.

For children i would look at more into eci than death/tpd.

 

[soneat]

Okay. Thanks both.
So in the case of Life Insurance, if one develops a health problem later, the term life policy may refuse to reinsure you once the term runs out, but the whole life policy is obliged to cover you so long as you continue paying the premium.

For a child, this does not sound like a big deal to me. Since it is unlikely that a dependent needs insurance in the first place, I am unlikely to insure my child for a large amount.
Hence, when the time comes that the child does need insurance (ie. Has dependants of his own), whatever I have bought would probably be insufficient. Unless, as boiboi says, the Whole Life policy has allowance to increase coverage at certain milestones without further underwriting.

Would that be a fair statement to make? Basically, if buying whole life for kids, such allowance for future increased coverage seems to be an important aspect to look out for...

Personally, I believe children need their own CI/early CI as well. Yes, the children themselves don't have dependant but if and once they have medical issues, who suffers? The parent need to suffer both the financial and emotional pain.

Not all whole life insurance have clauses that allow you to buy additional coverage without medical underwriting for future events and even if they do, the amount is usually less than the basic sum assured of the existing life policy

 

[Okenba]

Okay. But does CI and eCI need to bother too much about this insurability issue?

My own thinking is that if they kena a case where they have health issue, presumably the eCI or CI will pay out before the term policy lapses?

 

[boredboiboi]

Okay. But does CI and eCI need to bother too much about this insurability issue?

My own thinking is that if they kena a case where they have health issue, presumably the eCI or CI will pay out before the term policy lapses?

As mentioned insurability is buy when healthy.

Yes will payout if hit the definitions. But if got health issue such as depression or any other issue that is not eci or ci. No payout and unlikely to buy in and increase eci/ci coverage.

 

[soneat]

Okay. But does CI and eCI need to bother too much about this insurability issue?

My own thinking is that if they kena a case where they have health issue, presumably the eCI or CI will pay out before the term policy lapses?

Generally, insurability is the insurer's willingness to insure a person based on his age, health and financial (for large sum assured) status.

I don't really understand your question.

Death, tpd, CI, eCI, H&S etc are possible events to be insured against

Whole life, term life are basically the tenure of the insurance contract. Within term life, the sum assured can be level or decreasing and the tenure may or may not be renewable.

 

[Okenba]

I am trying to figure out if it is worth it getting whole life for kids or just go for term life with eCI and CI.

My gut is that whole life is not worth it but I'm just trying to work things out from this insurability angle. Assume kids are fine and no family history.

 

[soneat]

I am trying to figure out if it is worth it getting whole life for kids or just go for term life with eCI and CI.

My gut is that whole life is not worth it but I'm just trying to work things out from this insurability angle. Assume kids are fine and no family history.

I see. If u can BTITR comfortably and confidently over long run, then term is probably more efficient. Whole life is not as efficient/optimised but it is a very simple / convenient solution.

Term is like Free & Easy holiday.
Whole life is like Package tour.

Do pump the numbers into your spreadsheet and see what suits you.

 

[boredboiboi]

I am trying to figure out if it is worth it getting whole life for kids or just go for term life with eCI and CI.

My gut is that whole life is not worth it but I'm just trying to work things out from this insurability angle. Assume kids are fine and no family history.

For your reference that i quoted here previously.

For age next birthday 1 female
100k death/tpd, 30k eci with 5 times multiplier(500k death/tpd, 150k eci) - $1359.13/year for 25 years.

 

[Okenba]

Thanks both. And thanks boiboi for the quote.

So it seems like the insurability part is a bit of a red herring. My agent tends to throw that out when I talk about term instead of whole life.

The term life that I have in mind also offers CI and eCI. Roughly, I would pay about a quarter of the price for three times the coverage...

 

[boredboiboi]

Thanks both. And thanks boiboi for the quote.

So it seems like the insurability part is a bit of a red herring. My agent tends to throw that out when I talk about term instead of whole life.

The term life that I have in mind also offers CI and eCI. Roughly, I would pay about a quarter of the price for three times the coverage...

$300-400/year for 1.5mill death/tpd and $450k eci? U sure?

 

[soneat]

$300-400/year for 1.5mill death/tpd and $450k eci? U sure?

I think his agent quoted him a product that does not have multiplier. Also, no info abt how long premium payment for whole life policy. So I think its possible

 

[Okenba]

$300-400/year for 1.5mill death/tpd and $450k eci? U sure?

Ah nonono. I was comparing against the quote my agent gave me. Heheh. Sorry for confusion.

And yes. The one my agent quoted no multiplier. =)

 

[Alpha04]

any comments on disability income insurance vs careshield life supplement?

I'm wondering which would be the preferred and the rationale for choosing one over the other (or both)? since there is some overlap.

 

[soneat]

any comments on disability income insurance vs careshield life supplement?

I'm wondering which would be the preferred and the rationale for choosing one over the other (or both)? since there is some overlap.

Careshield life and its supplement generally covers ADLs and is meant for Long Term Care. Claim is more likely at older age and is independent of job.

Probability of disability income claim is higher but you need to have a job. It is meant for income replacement when you medically cannot do your job after a certain period of disability.

 

[BBCWatcher]

Wanted to ask a question about "insurability".

I understand that some people advocate whole life for kids to 'lock in their insurability'. What does that mean and is it significant?

No, that's not why they're advocating whole life insurance policies for children. They're advocating whole life insurance policies because the sales commissions are bigger than the commissions on term life insurance policies.

Leaving the sales commission realities aside (which work against your interests as a potential insurance consumer), there's an argument that you should buy (some sort of) life insurance even before you actually need it because -- you never know! -- you might be uninsurable later on. There's a small amount of merit in this argument, actually. However, it's mostly bogus in my view, particularly in the Singapore context. In particular, if this child happens to be a male child then when the child starts his National Service he can buy a lot of MINDEF/MHA group term life insurance which is very nearly guaranteed issue.

I think I'd phrase it this way. If you have money burning a hole in your pocket that you don't know what to do with, then maybe buying a simple term life insurance policy for a child is something you could consider. N.B. If you don't have Disability Income Insurance (for example) then you don't have money burning a hole in your pocket yet. DII for you is way, way more important than life insurance for a child.

So if the child develops something down the line, the insurance company is committed to continue to insure the child? Even if they want to increase their coverage?

The insurance company will continue to cover the child, yes, but coverage increases are almost always subject to underwriting -- no to the second part.

Here's another interesting question. Let's suppose hypothetically that a child grows up and is uninsurable. Should that child (now adult) bring a dependent child into the world, for example? There's a reasonable argument that "no" is a good answer to this question. That is, if I'm not a good bet for an insurance company, then maybe/probably I'm not a good bet as a parent either. So if you're going to buy life insurance for a child it's for the narrow scenario when the child grows up, the family doesn't have enough wealth to self-insure (perhaps in part because it spent too much money on insurance premiums?), the child (now adult) is considering whether to get into some sort of support relationship (acquire one or more dependents), and the child is such a bad risk that he/she cannot buy insurance. This combination isn't impossible, but I can think of much better ways to invest in your child that rank well ahead of defending against this scenario. But like I said, if you've already done everything else that's higher priority, then maybe buying simple term life insurance for a child is how you spend the dollars you don't know what to do with.

 

[BBCWatcher]

The parent need to suffer both the financial and emotional pain.

Insurance companies cannot directly do anything to fix or mitigate emotional pains. All they can do is pay valid claims, in cash. "Buy this insurance because you might be very sad" is terrible advice.

Here's when you need insurance:

1. You face a risk; AND

2. If you experience the risk, you cannot reasonably handle it on your own -- it would be a true calamity, a catastrophe (not a mere inconvenience); AND

3. A cash payout would solve or at least substantially mitigate the calamity. And because of #2, in Singapore (a high income/high wealth/high cost of living country) the cash payout has to be "pretty damn big, or bigger."

That's it. All three basic conditions must hold. Otherwise, you don't need that particular insurance. Insurance companies cannot force people to love you, cannot restore life to dead people, cannot repair permanent paralysis, and cannot make widows or widowers forget about the loss of their spouses, as examples. All insurance companies can do is pay cash, if they pay. Cash is often useful, but it cannot buy everything that matters in life.

 

[soneat]

Insurance companies cannot directly do anything to fix or mitigate emotional pains. All they can do is pay valid claims, in cash. "Buy this insurance because you might be very sad" is terrible advice.

Here's when you need insurance:

1. You face a risk; AND

2. If you experience the risk, you cannot reasonably handle it on your own -- it would be a true calamity, a catastrophe (not a mere inconvenience); AND

3. A cash payout would solve or at least substantially mitigate the calamity. And because of #2, in Singapore (a high income/high wealth/high cost of living country) the cash payout has to be "pretty damn big, or bigger."

That's it. All three basic conditions must hold. Otherwise, you don't need that particular insurance. Insurance companies cannot force people to love you, cannot restore life to dead people, cannot repair permanent paralysis, and cannot make widows or widowers forget about the loss of their spouses, as examples. All insurance companies can do is pay cash, if they pay. Cash is often useful, but it cannot buy everything that matters in life.

I did not suggest insurance can address emotional pain.

All I mentioned is when someone (e.g. a child) fall sick, there are challenges and pain in many areas, such as emotional and financial. Insurance *may* help to alleviate the financial challenges.

Insurance is basically to mitigate financial risk against insured events.
That's it. Stick to the facts.

Every individual has a unique situation.

 

[hardwarezoner2]

How much should be the sum assured ?

I read online that it is about half a million (TPD) ?

 

[boredboiboi]

How much should be the sum assured ?

I read online that it is about half a million (TPD) ?

Different people, sum assured will be different