Dear Mr Tan,
I really enjoyed your blog. You are very knowlegeable not only in terms of insurance but also investments. Contrary to what other people say, I think you are one of those expert investors.
I would like to ask your opinion about the i-term insurance. I attempted to buy one but was distracted/dissuaded by the NTUC advisers.
The reason given was there was a difference in the definition of terminal illness as described in the I-term insurance and critical illness in other insurance products.
The insurance payout is for terminal/"sure death" illness in I-term insurance. But the definition for "critical illness" is less "serious illness".
Is this true?
REPLY:
The critical illness policy provides a wider definition. If you contract a critical illness, the sum assured is payable immediately. The premium for critical illness is more than 10 times of i-term (and 20 times of decreasing term).
My personal preference is:
* buy decreasing term insurance to provide the death and permanent disability insurance (restricted cover).
* invest the difference in a low cost, well diversified investment fund.
* buy a medical insurnace plan (like Medishield) to cover the cost of treatment of critical illness. If this is insufficient, it can be supplemented by my savings (which will be quite large after 10 or 20 years)
* (optional) - buy critical illness cover for $50,000.
I hope that this tip is helpful to you. Read this FAQ to get a comparison of premium rates.
I-term and decreasing term are meant to take care of dependants' income replacement. They are ideal because they are cheap and because you need large coverage to address this concern. Don't buy participating whole life because of cash value. You need to pay more for it and often you will do it at expense of coverage and needs.
ReplyDeleteTo address critical illnesses also buy living term till 65 years with option to continue to 80 years.
Insurance agents will tell you you need to cover whole life not because it is good for you but the commission is high and good for them. Do you need one for life? Actually you don't need. By 65 we are near to meeting our maker.Imagine the premium or mortality charge after 65 years. It is big bomb. You can save this premium and invest in well diversified fund because it is not necessary you will get dread illness but if it does happen use the fund to take care.This is self insurance. Money for retirement is more important than worry about something which might or might not happen. After all you have an H&S medical plan to take care of that.
The whole point here is buy term and invest the rest just like MR. Tan always says.
When a person is down with Critical Illnesses, he have to take care of his Permanent and Temporary Needs.
ReplyDeletePermanent needs such as
a) Expenses not covered by a Medical Insurance
b) Alternative Medicine which no insurance covers
c) Misc expenses such as maid or extra transportation or even purchase of a dialysis machine, etc
Temporary Needs are more of
a) Replacement for loss of income due to a person inability to work or find a job during times when we are down with illnesses
b) Recommended period ranges from 3 to 5 yrs of your annual income.
Thank you for sharing such great information.
ReplyDeleteIt has help me in finding out more detail about healthcare insurance