Saturday, October 06, 2007

How to decide on the Eldershield offer

Dear Mr Tan

I am 40 years old. I received a brochure from an insurer about Eldershield plan. I have the following 3 options:

1. No Eldershield, ie. poor value, low probability to claim. Better to keep premium in Medisave to grow @ 5%pa ?
2. Eldershield @ $400/mth, max 72 mths. Pay $217.76/yr to age 65.
3. Vplus 400 plan @ $400/mth, max 120 mths. Pay $45/yr increasing up to $1826 at age 100.

I am confused and will appreciate your expert advice. What should I do?


I suggest that you ask insurance company to give you the following answers for each of their plan (i.e. basic and value plan):

1. What is the total premium that you are likely to pay for the plan?
2. What is the interest that can be earned on the premium for the next 40 years, using the interest rate on Medisave account (e.g. 5%)
3. What is the likelihood of making an Elderhield claim during your lifetime?
4. What is the expected total benefit, (taking into account that most claimants may not live to receive the full 6 years of payment)
5. What is the amount of distribution cost and other charges taken away from your premiums to pay the agent or the insurance company?

If they are able to provide the answers, and they are clear to you, you will be able to make a better judgement. I hope that this general advice is helpful to you.

Lesson: Ask the right question. Be sure that you understand before you buy. Do not buy, if you do not undertstand what is the cost and the benefit.

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