Tan Kin Lian's Blog: Make regular savings in a low cost fund

Saturday, February 16, 2008

Make regular savings in a low cost fund

Dear Mr, Tan,
I read your blog everyday as I find there is always something new to learn from the questions posed by your readers. I am interested to buy Term insurance with a critical rider.

My financial advisor has advised me that I should get a whole life policy with critical rider as once my Term policy has expired after 30 years, I could still get a critical illness and by then I would have to bear all the treatments myself. Thus a whole life policy makes sense in this case. He further argued that if I would have accumulated enough savings by then but would I want to use my hard earned money to be spent on treatment or be protected for life.

I prefer to take a Shield plan to cover critical illness, and I could invest the difference in plans to get a higher return. Overall this is more cost effective. Could you advise?

REPLY
The insurance adviser want people to buy a whole life policy, as he or she can earn a much higher commission.

My advice is to buy a 30 year Decreasing Term insurance policy and invest the difference. After 30 years, you will have more than sufficient savings for your retirement, medical and other needs (but you must have the discipline to set aside the regular savings). Read this FAQ:
http://www.tankinlian.com/faq/savings.html

2 comments:

Anonymous said...: Your term expires after 30 years is because you planned it that way and because you don't need it after that.
Remember, PLAN, PLAN, PLAN, this is what you must do. First, plan that you have enough to leave behind for your loved ones when you are not around. And term is best becuase you can have enough at very low cost.Can you do it with whole life? Yes, if you are very rich. But if you are rich you don't need insurance. Don't let insurance salesmen frighten you. Get a good adviser instead of this salesman who told you that.He or she was only thinking of the commission he or she could make from selling you a whole life. Did he or she care whether you would have enough to take care of your loved ones?
Invest for better return of 5-6% instead of miserable 3% hardly enough to hedge against inflation.
Heed Mr. Tan's advice and get the best out of your investment and protection. Always remember to engage a good and HONEST, COMPETENT
adviser instead of the insurance salesmen. Go to www.fpas.org.sg for help for a certified financial planner.; February 16, 2008 10:53 AM
Anonymous said...: After the expiry of your term it is self insurance. Remember that critical illness may or may not happen. If it does, I am sure you have a H&S plan on stand by. That will take care of at least 80% of the treatment cost; for the deductible use your medisave. At this juncture of your life you don't have income and no dependents.Your concern is treatment cost and even if you have a whole life critical illness cover it is usually very small. No matter how small the policy is, the cash value can be useful for retirement.
Did you know that the mortality charge is huge at this age? Did you know that the insurer is happily deducting this amount every year from your cash value? Thanks to you for keeping the policy to this age. The deduction can pay the staff's salary. Why let them when you can use it for your retirement.
You don't need insurance after you stopped working and have no dependents. Your H&S is good enough.You need money to see through your retirement and not to see that the insurance salesman get
his or her commission. Those agents' arguments are obsolete and won't work any more.Don't be fooled by them. They are not concerned for you. Avoid agents who give this kind of crap. In the first place did they do a need analysis? No, right? What concern they have for you?They zeroed in on the product and blared off incessantly the features and benefits of the product.This is the salesman best not seen.; February 17, 2008 12:36 PM