What basic insurance to get

[boredboiboi]

what are the reasons why insurance that combine investment is generally not recommended?

I was recommended the AIA pro lifeprotector for ECI+CI coverage and the agent is touting on how great it is and to trust him on this


A portion of the insurance premium goes into investment to accumulate more wealth + you could stop paying premium in dire circumstance and still get covered etc... --> so essentially im getting "free coverage" with more money back (even greater than total premiums paid over the term)



BUT of course, he failed to mention/emphasize the investment gain is not guaranteed

Cost of insurance gets higher as u age as well. It is best to split investment and protection. With that premium, you can explore so much more.

 

[Newthen]

Agree with boredboiboi. The reason agent sell u ILP with protection is because commission is the highest. Pure investment plan and term plan is a better option and I agreed as I do the same thing and surrender the old plan of investment with protection as it eats a lot into my premium.

 

[JJJ010101]

Highly recommend this rank of priority for insurance for working adults,

1) Hospitalization (topup using cash if possible)
2) Disability income insurance (actually very affordable) *

If you manage all your own investments,
3a) Term Life (if you have dependents)
3b) Critical illness (Early stage if possible)

If you manage minimal investments/savings,
3) Whole life with Early-CI rider (if have dependents)

Slot in a personal accident somewhere if you're in a high risk profession

*For disability income, 90 days waiting period usually gives the best value, as compared to 60 and 180 days. If uncertain, just get quotation for all 3 waiting periods.

Note that I'm NOT a financial adviser.. Just a typical Singaporean who has already done some thoughts for my own insurance..

 

[xtwis7]

It shows how low the awareness is for DII when the first reply that most give is “it must be very expensive”

They gladly pay through their noses for huge CI plans but are unwilling to consider a few hundreds to a thousand normally.

Good on you to have thoroughly thought through since it looks like you’ve got a good plan ahead.

Highly recommend this rank of priority for insurance for working adults,

1) Hospitalization (topup using cash if possible)
2) Disability income insurance (actually very affordable) *

If you manage all your own investments,
3a) Term Life (if you have dependents)
3b) Critical illness (Early stage if possible)

If you manage minimal investments/savings,
3) Whole life with Early-CI rider (if have dependents)

Slot in a personal accident somewhere if you're in a high risk profession

*For disability income, 90 days waiting period usually gives the best value, as compared to 60 and 180 days. If uncertain, just get quotation for all 3 waiting periods.

Note that I'm NOT a financial adviser.. Just a typical Singaporean who has already done some thoughts for my own insurance..

 

[JJJ010101]

It shows how low the awareness is for DII when the first reply that most give is “it must be very expensive”

They gladly pay through their noses for huge CI plans but are unwilling to consider a few hundreds to a thousand normally.

Good on you to have thoroughly thought through since it looks like you’ve got a good plan ahead.

Yes, agree, just too much emphasis on products with huge premiums. I mean, CI has their place but some people put too much weightage on them.

My DII for illustration,

Great Eastern PayAssure:
90 days waiting period
Until Age 55
$3000 monthly payout
Premium is less than $30 monthly

 

[BBCWatcher]

Highly recommend this rank of priority for insurance for working adults,
1) Hospitalization (topup using cash if possible)
2) Disability income insurance (actually very affordable) *

A couple points here:

Singaporean citizens and PRs have MediShield Life, and for citizens MSL works pretty well, actually. (For PRs, not so well.) However, I think there's a reasonable argument that a public hospital B1 ward Integrated Shield plan can be classified as a genuine insurance need, especially for PRs. (And for PRs that'd be either NTUC Income's or Aviva's B1 ward plan since the other B1 ward plans apply nasty proration factors.)

I would not rank these two insurance products in this order. I'd put them on equal footing in importance.

For all of these insurance products, really, we're assuming that the individual or household cannot self-insure. Jeff Bezos, for example, doesn't need any of these products.

If you manage all your own investments,
3a) Term Life (if you have dependents)
3b) Critical illness (Early stage if possible)
If you manage minimal investments/savings,
3) Whole life with Early-CI rider (if have dependents)

Of course rather than whole life it's certainly possible to go learn a little about diligent saving and simple, low cost, prudent, well diversified investing, then do that.

I would add that there are some people who seem to be constitutionally incapable of the diligent saving part (especially), and the psychological power of an insurance company premium invoice is one of the few things that forces them to save enough, even if it is a high cost way to save and invest. Mortgages and home equity accumulation are similar for some people. OK then, that's unfortunate, but so be it.

*For disability income, 90 days waiting period usually gives the best value, as compared to 60 and 180 days. If uncertain, just get quotation for all 3 waiting periods.

I'm not sure what you mean by "best value." The premium will definitely be higher for a 90 day waiting period versus 180 days, with otherwise equal policy terms. I'd much, much rather have a term to age 65 DII with 180 days than a term to age 60 (or 55) with 90 days. Everyone should maintain an adequate emergency reserve insofar as possible, and 6+ months is entirely reasonable. And you stand a better chance of having and maintaining an adequate emergency reserve when you're saving some money on insurance premiums while still getting essential coverage.

 

[xtwis7]

A couple points here:

I'm not sure what you mean by "best value." The premium will definitely be higher for a 90 day waiting period versus 180 days, with otherwise equal policy terms. I'd much, much rather have a term to age 65 DII with 180 days than a term to age 60 (or 55) with 90 days. Everyone should maintain an adequate emergency reserve insofar as possible, and 6+ months is entirely reasonable. And you stand a better chance of having and maintaining an adequate emergency reserve when you're saving some money on insurance premiums while still getting essential coverage.

Yes, a 90-day waiting period is still slightly more expensive than the 180-day one but when you look at the difference, the "value" of the 90-day one is quite obvious since the premium difference might be as little as $30-50 per year.

I would usually recommend cover till 65 years old with a 90-day waiting period. The age is definitely more important than the waiting period.

 

[JJJ010101]

Thanks both for your comments

As xtwis7 pointed out correctly, the "best value" I was referring to the difference in premiums

I also had a hard time deciding the waiting period back then, but went with 90 days mostly out of fear - I do have an emergency reserve, but I think some uncertainties such as my coming kid and house caused me to worry.

As for age 55, it's definitely a risk I'm taking as I aim to part-time/semi retire around that age. Well if I don't make it...please pray for me. Hahaha.

 

[BBCWatcher]

Yes, a 90-day waiting period is still slightly more expensive than the 180-day one but when you look at the difference, the "value" of the 90-day one is quite obvious since the premium difference might be as little as $30-50 per year.

I don't think that's "obvious" at all. You can easily go overboard with "oh, it's only a few dollars more" stuff.

I would usually recommend cover till 65 years old with a 90-day waiting period. The age is definitely more important than the waiting period.

Agreed with respect to the term to age 65. I'll make a few more comments on that point below....

As for age 55, it's definitely a risk I'm taking as I aim to part-time/semi retire around that age. Well if I don't make it...please pray for me.

The reason I lean in favor of a term to age 65 is that it's that much tougher to save for retirement when you're collecting DII benefits. So even if you plan to retire at age 55 (and even if that's a realistic plan), the ability to afford to do so works better when your DII payout stream runs past age 55.

However, if you've managed to pile up a lot of CPF savings -- maybe a generous grandparent, aunt or uncle deposited the whole Full Retirement Sum in your CPF Special Account when you were born? And topped up your MediSave Account, too? -- then maybe converging on age 55 makes sense, when that big pile of CPF dollars becomes available and, if big enough, can bridge to age 65 and CPF LIFE.

Also keep in mind that DII payout streams are generally fixed nominal payouts, meaning their real value erodes over time due to inflation. Aviva sells a 3%/year escalating DII payout plan, but the 3%/year escalation is only applied once payouts start, not from the sum assured. So running the DII term out to age 65 (or at least age 60) could help conserve other savings/assets that'll have to do progressively more "inflation gap filling" in the out years, at least with the non-escalating payouts.

You can also combine/"layer" DII plans if you wish, for example $3,000/month escalating to age 65 from Aviva and $2,000/month non-escalating to age 60 from Great Eastern. As long as $5,000/month represents 75% or less of your gross employment income, that should be fine. (Aviva's MINDEF/MHA group DII policy is different in this respect, limited to 50% replacement. So that particular group rider doesn't combine as well.) [Why $3,000/month for Aviva? Well, they require a $3,000/month minimum to qualify for their premium reduction "promotion" (which never seems to go away).] The idea with this combination is that you'd get some more favorable policy terms from Great Eastern and (perhaps) reduce the term to align with children growing up and leaving the nest, requiring less household income to support a particular lifestyle. Anyway, the basic point is that you can fine tune the coverage in various ways.

 

[JJJ010101]

BBCWatcher, thanks for the idea of combining DII. I think I will take this into planning in the next few years, after I get some pay increment..

If I may ask for opinions, how do you think the coming careshield life will place itself in our insurance planning?

 

[tcwehcs]

Which company has the lowest premium for DII?

Highly recommend this rank of priority for insurance for working adults,

1) Hospitalization (topup using cash if possible)
2) Disability income insurance (actually very affordable) *

If you manage all your own investments,
3a) Term Life (if you have dependents)
3b) Critical illness (Early stage if possible)

If you manage minimal investments/savings,
3) Whole life with Early-CI rider (if have dependents)

Slot in a personal accident somewhere if you're in a high risk profession

*For disability income, 90 days waiting period usually gives the best value, as compared to 60 and 180 days. If uncertain, just get quotation for all 3 waiting periods.

Note that I'm NOT a financial adviser.. Just a typical Singaporean who has already done some thoughts for my own insurance..

 

[boredboiboi]

Which company has the lowest premium for DII?

Need to quote accordingly then u will know

 

[BBCWatcher]

If I may ask for opinions, how do you think the coming careshield life will place itself in our insurance planning?

I don't think it really affects things too much in terms of insurance decisions. It's really its own separate creature.

Which company has the lowest premium for DII?

Generally Aviva's policies (they have two: their publicly available DII and their MINDEF/MHA group DII rider), but there's a lot of variability in how the carriers treat various job roles. Also, price shouldn't be the only factor you consider.

 

[beefjerky]

I don't think it really affects things too much in terms of insurance decisions. It's really its own separate creature.


Generally Aviva's policies (they have two: their publicly available DII and their MINDEF/MHA group DII rider), but there's a lot of variability in how the carriers treat various job roles. Also, price shouldn't be the only factor you consider.

if one has the option to get the mindef DII, wld it be more worth compared to the publicly available one?

 

[BBCWatcher]

if one has the option to get the mindef DII, wld it be more worth compared to the publicly available one?

Its premiums are likely to be comparatively low, and it offers the longest available term, to age 70. However, it seems to have very little tolerance for bouts of unemployment, and it only allows a maximum of 50% wage replacement which might not be enough, especially for early career individuals with starting pay rates.

“It depends.” Obviously you ought to get a quote and find out more about it if you’re eligible, then compare it to the other three policies, including Aviva’s own.

 

[Jacqueline.]

what are the reasons why insurance that combine investment is generally not recommended?

I was recommended the AIA pro lifeprotector for ECI+CI coverage and the agent is touting on how great it is and to trust him on this


A portion of the insurance premium goes into investment to accumulate more wealth + you could stop paying premium in dire circumstance and still get covered etc... --> so essentially im getting "free coverage" with more money back (even greater than total premiums paid over the term)



BUT of course, he failed to mention/emphasize the investment gain is not guaranteed

BBCW, can share your thought on this? I know of someone close who have signed up for this plan. How do i tell this person to reconsider and forgo this plan

 

[boredboiboi]

BBCW, can share your thought on this? I know of someone close who have signed up for this plan. How do i tell this person to reconsider and forgo this plan

The question now is when was the plan sign up?

 

[tangent314]

BBCW, can share your thought on this? I know of someone close who have signed up for this plan. How do i tell this person to reconsider and forgo this plan

It is true that a whole life plan provides you life insurance while at the same time invests the money for you so that the investment returns can cover for the price of the premium paid. However, insurance company charge you A LOT to invest for you. About 95% of one years worth of premium goes to your agent. Fund managers take a significant annual cut out of the Participating Fund that your money is invested in. And the insurance company doesn't give you all of the returns that are achieved by the participating fund.

Ideally, you should BTIR - Buy Term Invest the Rest. This keeps your premium much much lower, and then you invest the rest, ideally in ETFs which are far cheaper and typically don't perform worse than active managed funds.

 

[KusitoriBuro]

I don't think it really affects things too much in terms of insurance decisions. It's really its own separate creature.


Generally Aviva's policies (they have two: their publicly available DII and their MINDEF/MHA group DII rider), but there's a lot of variability in how the carriers treat various job roles. Also, price shouldn't be the only factor you consider.

i change my GE integrated plan to Raffles Shield Private with rider for my family and I. Main reason being my wife is a staff at Raffles, she could could get it for "free", while my kid and mine are discounted.

like the folks here suggested, next i should be looking at Disability Income Insurance yeah? can i ask if i can pay the premium with cpf?

 

[boredboiboi]

i change my GE integrated plan to Raffles Shield Private with rider for my family and I. Main reason being my wife is a staff at Raffles, she could could get it for "free", while my kid and mine are discounted.

like the folks here suggested, next i should be looking at Disability Income Insurance yeah? can i ask if i can pay the premium with cpf?

Nope. Only by cash