Tan Kin Lian's Blog: Managing Personal Risks

Sunday, August 24, 2008

Managing Personal Risks

Insurance agents tell customers about the risk of death and gets them to save a lot of money in life insurance policies.

To manage your personal risks, you need to consider the following:

> you need to take care of the risk of "premature death", i.e. death that occurs during your working life (until your children are grown up)
> there is no need for life insurance beyond 65 (as everyone will die one day anyway)
> you need to have sufficient savings for your retirement
> your medical expenses can be covered by Medishield , so critical illness insurance is not necessary.

Too much savings is being spent on whole life and critical illness insurance today, due to advice by insurance agents. The chance of death or a critical illness occurring during the working life is less than 5% or 10%. But, it takes away too much savings and leave behind too little savings being invested for retirement (which is the risk faced by more than 90% of the population.

Many people today have inadequate savings for their retirement, due to bad management of their personal finances. They put too much money in life insurance policies that take away high expenses and give a poor yield on their savings.

To manage your personal finances better, read these FAQs:

http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/choice.html

Remember. The insurance agent will give you many other reasons to buy a whole life or critical illness insurance. They must market the product, as they are paid commission on the sales. You can ask the agent how much commission is paid to them. It is stated in the Benefit Illustration. The commission comes from your premium. It does not come from the generosity of the life insurance company.

4 comments:

I Love Teh Tarik! said...: Help!

I just want to know..
I've dumped all my CPF money (around 40K) into AIA investment..less than 1 year later, I saw that I've lost 10K.

What should I do? I do not wish to take out the money, but do I continue to let it rot there?

My agent claimed that he will shift my money around (from funds to funds), so that it will make money.. but until now, I've been losing alot of money :S; August 24, 2008 10:14 AM
zhummmeng said...: teh tarik,
your agent should have reviewed your portfolio either to reconstruct or maintain to check if the risk/return profile is still acceptable with you instead of switching around in the hope of 'making ' money. He or she might be thinking that they are fortune teller. Yes reconstruction requires switching but not for other reason. Give your portfolio a chance to show its true colour instead of switching until nothing.Too many switchings without reasons only lead to shrinkage and losses especially in a time like this and worse you may be switching to the "same or similar funds" without you knowing it.
He is trying his or her luck with your money.He or she looks desperate and may get out of control. Obviously he or she doesn't know about investment.
To heed Suze Orman's advice, fire him or her and get a new adviser with the right qualification. Please don't jump from the frying pan to the fire by using an insurance salesman. (salesmen can come disguised as consultant, executive consultant ,life planner and all sorts of titles).
Be careful.; August 24, 2008 4:17 PM
Crafty Craken said...: You have neglected a major risk. The risk of disability. The probability of being disabled for more than 90 days before you reach age 65 is great than the risk of dying before age 65.

Your ability to earn income is your greatest asset, and it should be insured.

If you are disabled and not earning income, you may need to live off your savings, than you will not have sufficient savings for retirement.; August 25, 2008 9:34 AM
banglacow said...: dear Mr tan

I refer to this post of yours and the statement that you've made that life insurance is not needed after 65

what exactly would you mean by that?

Would you then be the huge advocate for term which is temporary?

This would lead to my second question

During your helm as CEO of NTUC Income, were the same thought processes implemented?

I thank you for your time

Regards
Gerrard; August 27, 2008 1:08 PM