Saturday, March 01, 2008

Earn a higher return from an investment fund

Dear Mr. Tan,

I am in my early 40s. Currently, I have a Living policy with an insured amount of $100,000. The insurance agent has recommended another policy for $100,000. It is a savings plan that also covers critical illness. Should I take up 20 or 25 year plan?

I usually advice people to buy Term insurance and invest in a low cost, diversified investment fund.

Read these FAQs:

Choices in investments

Hi Mr. Tan,

Greetings. I am thankful for your blog entries. Thank you for taking the effort to share with us your expertise.

I am looking at investing for retirement. I have been looking at funds targeted at emerging markets such as Russia, India. I have also been told that the dollar-cost averaging helps to level out risks in the long term. Is then a monthly 'savings' into an emerging markets fund a sound investment for retirement? If yes, what are some funds that you would highly recommend? If not, what are the alternatives you would recommend I look into?

I am also looking into investment in more conservative avenues. I heard over television an expert recommending the money market funds as an ideal investment tool for the immediate future, as the markets are quite vulnerable. Are there any particular money market funds that are recommended for the more conservative investor?

A bank has introduced a new structured deposit (Crude Oil Structured Deposit). My first impression of the fund is that it looks pretty promising. Are there any fine print that I may have overlooked? Thank you very much for sharing your expertise and your time.


My suggestion is set out in this FAQ:

I suggest investing in a low cost, diversified investment fund for the long term, in Singapore or a established market. I do not recommend investing in an emerging market fund, because it is more speculative.

You should also avoid structured products. Read this FAQ:

Low cost investment funds in Sweden

My friend in Sweden told me that there are low cost investment funds available in Sweden. The expense ratio is between 0.5 and 0.75% per annum. It offers a better return than other funds that have a expense ratio of 2% to 3%.

He was surprised that the low cost funds are not yet available in Singapore. He believed that this will come soon.

25 year family income and term insurance

When I was 30 years old, I bought a 25 year term insurance policy to cover a sum assured of $100,000 and to provide a monthly income of $2,000 to my family in the event of premature death during the term. I paid a premium of about $1,000 a year.

25 years have passed, and the policy has now expired. During this time, I was assured that, if anything had happened to me, my family would have a lump sum and monthly income to meet their financial needs. I have other life insruance policies, which provided additional coverage.

Term insurance was rather expensive in those early days. Today, the premuim rate for the same cover is much lower. It does not matter to me that I did not get any return for this term insurance policy, as I was able to accumulate and invest my savings in other ways.

Alternative to fixed deposit

Dear Mr. Tan,

My wife and I are in our early 30s. We know very little about insurance and investment. We wish to thank you for giving us advice and information in your blog.

We bought life insurance about 10 years ago and pay a premium of about $150 each for 25 years. Presently both our saving in bank is about $X.

Can you kindly advise us on how to invest our saving as interest rate on fixed deposit is low. We do not wish to take risk and have never invested in stock.

A few days ago, I visited NTUC income @ AMK hub but can't really decide on Flexi-Link policy, Growth Plan, Revosave or Ideal plan. In fact, we are getting more confused.

I hope that this FAQ will help you to make a decision:

As you are investing for the next 30 years, it is better to invest in a low cost, diversified investment fund. You will be averaging out the good and bad years, and also diversifying your risk over a large number of shares. The risk is small, and you can get a good return.

I suggest investing in the STI exchange traded fund. You can buy through your stockbroker.

20 year Family Income Policy

If you are 30 years old (male) and you wish to provide $3,000 a month payable to your family in the event of premature death, the annual premium payable is:

20 year Family Income policy: $484
30 year Family Income policy: $1,068

The family income is payable for the remainder of the term. You can reduce your cost by 50%, when you select a 20 year policy, instead of a 30 year policy.

You can take the insurance to provide a higher benefit by paying a proportionately higher premium.

In my view, a 20 year policy is probably suitable for most people.

Buying insurance on a limited budget

If you are a male at 30 years and have a limited budget of $600 a year for life insurance and you wish to provide for your family in the event of premature death during the next 30 years, you have the following options:

a) Level term, covers $182,000
b) Decreasing term, covers $486,000 reducing gradually over 30 year
c) Family income of $1,685 payable monthly for remainder of 30 years (initial cover is $606,000)

Option (a) provides the same amount in the event of premature death. Option (b) and (c) provides a higher amount in the event of death during the earlier years, and a lower amount in the later years.

You also have the option to buy a whole life policy and get a sum assured of $30,000. This covers you for the whole of life and accumulates a cash value (i.e. some savings).

Which option do you prefer?

Surrender a life policy

Dear Sir,
Your Blog is much useful to many people. Unfortunately I have not come across before taking many of my insurance plan. Most of them were taken without having prior knowledge about it.

I have Company X Endowment policy under my wife's name taken 3 years back. I need to surrender it. Is it possible to do it now? If so, how much I may be getting in return?

I do not need this plan as I am now in out of Singapore. My current employer is covering insurance for whole family in this country. I was in Singapore for the past 7 years.

I hope that this FAQ can answer your question:

You should ask Company X to quote you the cash value now, and in 5 years time, so that you can make the correct decision.

Friday, February 29, 2008

Big losses in AIG


American International Group Inc., the largest insurer by assets, said Joseph Cassano will step down from running the financial products unit after $11.1 billion in losses on guarantees sold to fixed-income investors.

Cassano's retirement is effective March 31, Chief Executive Officer Martin Sullivan said today in a conference call. He will serve as a consultant through the year, Sullivan said.

AIG reported the biggest quarterly loss in its 89-year history yesterday after writing down the value of so-called credit-default swaps. The New York-based company said for the first time in yesterday's statement that realized losses on the portfolio "could be material'' to quarterly earnings. The fourth-quarter net loss was $5.29 billion.

NOTE: AIG is the parent company of AIA (American International Assurance) in Singapore.

Shuttle service to MRT station

I took a taxi to visit KK Hospital. The fare was $18. I learned later, that KK Hospital operates a shuttle to transport their employees and patients to the two nearby MRT stations.

Rather than have an organisation run a separate shuttle service, it will be more efficient to have feeder services that serve many public and commercial buildings within 2 kms of each MRT station.

I hope that Land Transport Authority will allow small bus operators to operate these feeder services. If these services are well publicised, more people will take the train instead of relying on expensive taxis.

Theft of cash cards from cars

I read in the newspaper of the high rate of theft of cash cards from cars.

About two years back, I discussed with some senior people in LTA to allow car owners to opt to pay ERP charges through a monthly bill. This is similar to paying for telephone charges based on actual usage. It should be easy for the ERP gantry gates to identify the vehicles that have incurred ERP charges and bill the owners on a monthly bill.

This has the following advantages:
1. Reduce the time taken by the owner to top up the cash cards
2. Reduce the risk of theft of cash cards.

At that time, the LTA officials explained to me on why the concept was not feasible. (I do not agree with their view). As they were not keen to explore an alternative. I decided not to pursue the matter. With the high rate of theft of cash cards, perhaps LTA will now review this matter?

Family Income Policy

A family income policy pays a monthly income for the remainder of the term, in the event of premature death of the policyholder.

For example, a male at age 30 can take a 30 year policy to provide a family income of $3,000 a month for an annual premium payable of $1,068 (based on my benchmark).

If death occurs at the start, the policy pays $3,000 a month for the 30 years, or a total of $1,080,000 (i.e. more than $1 million). If death occurs at end of 10 years, the income benefit is payable for 20 years (total of $720,000). If death occurs at the end of 20 years, the benefit if payable for 10 years (total of $360,000). If premature death does not occur, the policy expires at the end of 30 years, without any cash value.

The policy can be taken to provide a lower monthly benefit at a proportionately reduced premium. For example, the premium payable for a monthly benefit of $1,500 is $534.

The advantages of this policy are:

1. It provides a very large benefit at an afforable premium
2. It pays a monthly income, so the family does not have to worry about investing a lump sum payment.
3. The policyholder can invest the savings in a low cost, diversified investment fund to earn a higher return, compared to a whole life policy.

Term insurance replaces loss of earnings

Dear Mr. Tan,

My insurance adviser said that a term insurance policy will expire at the end of the term and after that, I will not have any more life insurance coverage. She said that it is better to take a whole life policy, as it provides coverage for the whole of life. I am undecided. What is your advice?

Most people need life insurance to cover the loss of earnings in the event of premature death. They need the life insurance policy coverage only during their working life. The policy pays a benefit to replace the lost income and take care of the family needs when the children are still young.

When a person retires from work, there is no need for life insurance, as there is no lost earnings to be covered.

If you take up a term insurance policy, you pay a premium of about one-tenth of a whole life policy. This allows you to take a larger sum assured and protect your family more adequately. You need life insurance up to age 65 only.

You will find that a decreasing term insurance to be suitable for your needs. The sum assured starts at a high amount and decreases each year over the term. The premium is less than half of a level term insurance policy. You only need to pay about 5% of the premium for a comparable whole life policy.

Although the sum assured decreases each year, it is adequate for the family as the children have grown one year older, and need to be financially supported for a shorter period. The family would have accumulated one more year of savings with each passing year.

For example, a male at age 30 who takes a whole life policy to cover $300,000 has to pay a monthly premium of $500. This person can take a 20 year term insurance policy covering the same amount for a monthly premim of only $50. For a decreasing term insurance policy, the premium is about $25 a month.

If he takes a 30 year term insurance policy, the premium will be about $100 (for level term) and $50 (for decreasing term). They are much lower than the premium for a whole life policy.

There is another policy, called the family income policy, that pays the benefit as a monthly sum (say $3,000 a month) for the remainder of the term. I shall explain this policy in more detail separately.

Read this FAQ:

Thursday, February 28, 2008

Comparing Anticipation and Revosave


Despite the fact Mr Tan has repeatedly said he delivered products that give good value, he designed the Anticipation plan when there were better value products like Endowment around. Anticipation is Revosave's predecessor. Personally, I find this an irony. I hope Mr Tan do not take offence in me bringing up this blunt fact.

Here are the facts.
1. The Anticipation plan was designed 25 years ago.
2. It pays a lower rate of commission compared to similar plans in the market
3. It offered an attractive return to the policyholder, more than 4% per annum
4. The return on Anticipation is similar to Endowment plan, as the payout is every 3 years.

I am not familiar with the Revosave plan. Some people said that it offers a poor return, which is much lower than the Endowment plan. It is also quite confusing to the customer. I would not have designed such a product, as it goes against my belief on what is good value for the customer.

In today's environment, it is better to invest in a low cost, diversified fund. The saving plan is more flexible. Read this FAQ:

Wednesday, February 27, 2008

Changi Airport

Changi Airport is an excellent example of forward planning - probably among the best in Singapore.

When they build Terminal 1 nearly 20 years ago, there were already plans for terminal 2 and terminal 3.

The gates in terminal were were identified as C and D. When terminal 2 was built 10 years later, the games were identified by E and F. Terminal 3 is recently completed. The gates are identified by A and B. These letters have been reserved for terminal 3 for 20 years.

Through this forward planning, the gates are identified in the right sequence, from A to F.

The signage in the airports are also among the best Singapore. It is easy to get around Changi airport. In contrast, many other large buildings and MRT stations in Singapore in Singapore have poor signages.

MAS Consultation Paper

Mr. Tan,
What is the key proposal that you will send on the MAS consultation paper?

My key message is:
1. MAS requires the board and senior management to "put consumer interest first".
2. However, these parties are also required by their shareolders to "increase shareholder value", i.e make more profit for shareholders
3. More profit for shareholders mean more charges (and lower returns) to customers
4. As consumers will not pay higher charges, the life insurance company has to hide them, i.e. not transparent
5. It is difficult for the board and senior management to balance this conflict of interests
6. It is not realistic to expect that consumers can be eduated sufficiently to identify good financial products from bad ones.
7. MAS needs a new approach to look at safeguard the interest of consumers

I will be suggesting a new approach.

Inflation in Saudi Arabia

I met someone from Saudi Arabia at a conference in Bahrain. I asked him if the economy in Saudi Arabia is booming due to the revenue from the high oil prices.

He said that the cost of living has increased sharply. Many ordinary people are finding it difficult to cope, as their wages have not gone up to the same extent as the cost of living.

I looks like the problem is the same in most countries, namely, the inflation is too high this year.

Fair treatment of policyholders

Dear Mr. Tan,
Thank you for your explanation about the anticipated endowment policy. Based on your example, the policyholder is worse off, as he has to pay an additional premium and get back only a part of it (after deducting expenses) as the annual cash benefit.

MAS has published guidelines on the fair treatment of policyholders. In your opinion, will the board and senior management get into trouble by selling this type of product, as the policyholder appears to be worse off?

What about the insurance advisers who sell this type of product? Are they in breach of their duty to give good advice?

In my view, it will be difficult for the board, senior management or insurance adviser to explain how this product is better for customers, compared to an ordinary endowment policy.

In the past, insurance companies have the leeway to design products that are pay high commission for agents, make good profit for their shareholders, but give poor value to the policyholders. This may change with the new MAS requirement.

This is just my guess. I do not know how MAS intends to implement the new regulations. We have to wait and see the future developments.


Bahrain has a population of 800,000. It is an island nation, slightly bigger than Singapore in physical size. The capital is Manana. The cost of living is high. Taxi and hotel fares are about 150% to 200% of similar prices in Singapore.

Dubai Airport

I transit through Dubai Airport before morning on the way to and from Bahrain. On both occasions, Dubai Airport is packed. It is more than twice as busy as Changi Airport. Many of the passengers had to sit on the floor, as the chairs are all taken.

Many people use Dubai Airport to transit to other cities in the Middle East. They go to work in the booming Middle East couniires. Thanks to the high oil price and the new found wealth.

Loss of No Claim Discount

Dear Mr. Tan,

Last year, my insurance company settled a third party claim without my consent. They penalised me on my No Claim Discount. I find this to be unfair. How can I take up this matter?

The No Claim Discount is given only if the insurance company did not pay any claim during the past year. If there is a third party claim, the insurance contract specify that the NCD will be lost.

The only way to keep the NCD is for you to pay the claim from the third party. You can ask your insurance company about the amount of the claim, and decide if you wish to bear it.

The insurance company will protect the interest of its policyholder. They will reject the third party claim if their own policyholder is not liable. They will only pay the third party claim if, based on the circumstance of the accident, their policyholder is likely to be at fault. They use standard market protocol to determine the party at fault.

If you feel strongly against the payment, you can ask the mangement to review their claim and see if they have paid the third party claim wrongly. After the review, you have to take their decision as final.

Expertise in claim settlement

Insurance performs two important functions:

a) Pay for cost of claims
b) Handle the settlement of the claims

The insurance company should have expertise on the following:

a) The best source for treating a sickness
b) Quality and cost effectiveness in handling a repair
c) Determining the party who is liable for the accident

A lay person will find it difficult to handle these matters, as they encounter it only rarely. The claims officer handle claims every day and is able to build up an expertise in dealing with these matters efficiently.

If you have to make a claim for motor repair, medical treatment or determine liability, it is better to report immediate to the insurance company and let the claims officer handle this matter for you.

It is also important for the insurance company to have claim officers who are competent in handling these matters, insted of depending only on paperwork.

Tip: Leave the specialised matters to the experts.

Tuesday, February 26, 2008

Planning for early retirement

Hi Mr. Tan,
I read alot about your advice and would like to seek your advice as follow:

I am xx years old and my wife is xx. we have 2 children. Both my wife and I earn an average of S$xxx,000 a year. We plan to retire at xx years old and take on a less stressful job. Our financial status as follow: (details removed).

Please advise if we retire at xx years old. As I am a simple man, I don't need to have a car and can even down-grade to a smaller HDB flat. I am assuming that I can live up to age 65 years old, thereafter my kids will take on the responsibilities of looking after us. We have plenty of insurance coverage for me and hospitalisation coverage for whole family.

I suggest that you read the following FAQs in by website, and talk to a financial adviser. Be willing to pay a fee for their advice and time.

Endowment policy with regular payout

Hi Mr. Tan,
Insurers in Malaysia have introduced periodical-income endowment policies, which are called anticipated endowments. Currently, most anticipated endowments in the market pay out the guaranteed income annually, after a period of 10 years or so. Some even have shorten the period to every two years. The guarantee income payable ranges from 4% to 8%. eg.PRUcash, Do we have the same kind of insurance policy in Singapore?


Many insurance companies have anticipated endowment policies, which have been sold in Singapore over the past 30 years. The annual payout comes from your premium. After deducting the high charges, the return on the anticipated endowment policy is poor.

Here is a simple example. An endowment policy requires a monthly premium of (say) $500. An anticipated endowment policy that requires a payout of (say) $2,400 may require a monthly premium of (say) $730. An monthly saving of $200 is needed to fund the payout of $2,400. But the additional premium is more than $200 as part of it goes to pay the expenses, including the agent's commission.

An endowment policy gives a poor return due to the high expenses. An anticipated endowment policy is worse. It is better to save the additional premium in a saving account to avoid the unnecessary charges.

Education Plan

Dear Mr. Tan,
I recently bought an education policy for my son. The agent said that it is the best way to save for his future education. What are the advantages of this policy, compared to your recommendation to save in an investment fund?

The advantages of the education policy are:
a) It forces you to make regular savings over the term of the policy
b) In the event of premature death of the parent, the guaranteed sum assured plus bonus is payable (which is higher than the total savings)

The advantages of the investment fund are:
a) The maturity payout is likely to be 10% to 20% higher than the education policy
b) It gives greater flexibility
c) You can insure against premature death through a low cost decreasing term insurance.

In today's environment (comparing the cost and benefits of both options), it is better to save through a low cost investment fund, and buy term insurance to cover premature death.

If you buy an education policy, compare the return from various insurance companies and choose one that gives a higher return, due to lower expenses.

Logic9 (Sudoku)

I have updated the puzzles in my Logic9 website, i.e.

The new website has the following featues:

1. More puzzles at each of 4 levels
2. All the puzzles have a unique solution and can be solved logically
3. You can work at "very easy" level and move up to "difficult" level
4. You can select the same puzzle to practice and build up your capability
5. You can choose other symbols, such as "flowers" to train your right brain.

Try it

Intelligent Lifts

I saw intelligent lifts in a new office building in Bahrain. The user keys in the number of the floor and the display on the panel shows the specific lift that is being despatched to you.

The computer system for the lifts is able to group several people visiting the same floor and direct them to a specific lift. This reduces the number of floors that the lift has to stop.

It is the first time that I have seen a lift operated in this manner.

Hedge against inflation

Hi Mr. Tan,

Inflation in Singapore is building up to 4.5 % to 5.5%. What financial products should I invest in to earn a return over inflation?

I am interested to invest in the stock market. Which stocks should i invest in to have a good and steady dividend yield?

If you are investing for the long term (i.e. 10 years or longer), it is best to invest in a low cost, diversified investment fund. Equities provide the a good hedge against inflation. The return from equities should be more than the rate of inflation.

I suggest that you invest in the STI ETF. Read this FAQ:

Insurance for a baby

Dear Mr. Tan,
I am planing to buy insurance for my baby. There are so many plans in themarket and I am so confused.

My baby is 16 month old. I want to buy insurance to cover critical illness and provide investment return and saving, to be withdrawn at the age of 19. If I return to China earlier, can we withdraw all of the money with interest?

I suggest that you buy MediShield plan to cover medical expenses for your baby. It covers the cost of treatment for critical illness as well.

You should save for the baby in a low cost diversified investment fund. You can withdraw your savings at any time, based on the market value of the investments, without suffering any penalty. Read this FAQ:

Ask for quotes from a few insurance companies

Hi Mr. Tan,
I recently asked a insurance company to quote me for term insurance for critical illness. I was given the following quotation. My profile : 39 years old, non-smoker, perfect health. Term insurance for critical illness : $300,000 for 30 years. The insurer quote me $274 per month. It seems very high after referring to your table. Is this the market rate for term assurrance for critical illness?


Some insurance agents quote high premium rates for term insurance, as they wish to get you to buy whole life policies.

I suggest that you ask a few insurance companies to quote the short term critical illness insuance for you. You can get their contact number from this FAQ:

Perhaps you should ask for 20 or 25 years and reduce the coverage to $50,000 for the critical illness plan and insure $250,000 under a decreasing term insurance. Read this FAQ:

You can ask NTUC Income to quote you the Living benefit under the Family Insurance policy.

Monday, February 25, 2008

Income Benefit

When you buy life insurance to protect your family, do you prefer that the benefit be paid to your family in a lump sum or in monthly installments?

I think that most people will answer is "both". It is useful to have a lump sum of say $50,000 and a monthly income benefit of $2,000 for 20 years. It may be useful if both of these sums are adjusted by say 2% each year, so that can offset inflation.

Insurance and 4-D

What is the difference between buying insurance and buying 4-D?

In both cases, you pay a small amount and have the chance to win a large amount if certain events happen.

When you buy insurance, you hope that the insured event does not happen. You are happy to pay the premium as a "cost". When you buy 4-D, you hope that your number appears, and you can win the prize.

Liability insurance

1. There are several types of liability insurance policies:
a) Public liability
b) Worker's compensation
c) Product liabilty
d) Professional liability

2. The motor insurance policy provides third party liabilty cover. If the owner drives carelessly and caused an accident, the third party can claim for compensation for the repair of the vehicle or for injuries.

3. The home insurance policy provides third party liability cover. If an accident occurs in your home due to a unsafe cnditon, the injured person can claim for compensation. This will be paid under the policy.

4. An employer is required to buy worker's compensation insurance to cover injuries to their employees that occurs in the course of work. This insurance will pay the employee for medical expenses and loss of wages.

5. A product manufacturer has to product liability insurance to cover claims from customers who are injured by defects in your product.

6. A lawyer, doctor, accountant or other professional may be sued for compensation for losses to the client caused by neglect of duty or wrong advice. This will be covered under a professional indemnity insurance.

Sunday, February 24, 2008

Research Activities

Dr. Lee Kum Tatt’s articles on the above subject has attracted many comments. One of these comments and the reply is given in his blog

The Need to Live and Work in Harmony

In a small multiracial and multi religious country like Singapore, the need for its people to live and work harmoniously and in peace cannot be overemphasized.

Dr. & Mrs. Lee Kum Tatt (LKT) have always attracted many volunteers and others to cooperate with them throughout their lives for the benefit of Singapore.

How did they do that? Here are some accounts of what made them do what they did. Read their story in

Fair Dealing Outcomes

I will be working with Dr. Money to submit our views to this MAS consultation paper:

I invite suggestions for this paper.


I will be travelling to Bahrain tonight and will return on Wednesday. Bahrain means "two seas" in Arabic.

Concept of term insurance

Term insurance is a contract where you pay a premium and hope that you do not have to make a claim.

For example, assume that for a group of working people, an average of 2 in 1,000 people will die each year due to accidents or illness. The participants can each contribute $200 into the pool to pay $100,000 to the family of the person who passes away.

Each person hopes that he will not be the person who makes a claim and that his contribution helps the family of the unfortunate person.

The life insurance company enters into the picture to provide a service to the 1,000 people. The company needs to have a loading of about 30% to cover the expenses and the cost of capital to support the pool (in case there is more than one claim in a certain year). Each participant pays a premium of $260. This is a fair loading to the true cost of insurance.

Many insurance companies offer other product that requires a high premium of $2,000 to $5,000 to cover $100,000, but provide some cash value (i.e. partial refund of the premium). However, most of these product are still too expensive, as a large part of the premium is used to pay commission and other expenses. The expense charges are likely to be more than the total premium payable under the term insurance.

It is better to pay a fair premium for the term insurance and hope that you do not make a claim.

Support for new life insurance company

Hi Mr. Tan,

I follow your blog and appreciate your insights into insurance and other social topics. Your recent posting on the New Life Insurance Comany set me thinking.

Why don't you start a new insurance company with investors or start a cooperative like before based on your concept stated in your blog? Actually, I was also wondering why you didn't convert INCOME to this form when you were the CEO? The concept is completely in line with INCOME being an NTUC supported cooperative!

Give them a run for their money. I for one would certainly be interested in buying policies from the company.


I hope that your suggestion will materialise in one or two years' time. I also hope that many people, like you, will support it. I tried to introduce some elements of this strategy when I was in NTUC Income. It was stated in another posting in my blog.

Paying benefits by installments

Dear Mr. Tan,
I am covered under term life, whole life, living and endowment with NTUC & Great Eastern. I intend to arrange the payout to beneficiaries in form of monthly instalments similar to annuity instead of lump sum in event of death. However, both insurance companies rejected such arrangement without giving any reason.

My wife is not savvy in financial management and investment. I prefer to provide them with a steady regular incomes in event of claim. NTUC suggested that claimant buy to a new annuity with the payout. I am not sure whether my wife will take my advice or not. This is within my control. Please advise me what feasible actions can take.


You have made a sensible request. More people should be thinking like you. I am quite sad that the two insurance companies are not able to meet your request.

The next best thing is for you to write a request to be lodged with the insurance companies, and to educate your wife about this arrangement. When the time comes, your wife may authorise the insurance company to act accordingly.

If I can think of any better idea later, I shall tell you later.

A new life insurance company?

Dear Mr. Tan,

I have been reading your recommendation to "Buy Term and invest the difference". If you were to run a life insurance company today, what products will you offer to the public? Will you be able to get agents to sell the low cost Term insurance?


I will offer the following products:
a) Term insurance (level and decreasing Term up to age 65)
b) Critical illness cover, up to age 65
c) Personal accident insurance
d) Medical expenses and daily benefit
e) Travel insurance
f) Low cost, diversified investment fund (equity, bonds, currencies)

All of these products will be offered directly through the Internet or call center. The public can attend educational talks on investment and insurance. Basic financial planning advice will be provided by salaried consultants for a modest fee of $50 to $100. The customer has to visit the consultant in the office.

I hope that the public will welcome this new insurance company, should it be set up in one or two years' time.

Review of existing policies

Dear Mr. Tan,

Thanks for your blog and your insurance tips, they are very helpful to us laymen. I have the following policies with NTUC Income: (details of four policies are provided).

Do they give value for money? Do you recommend me to terminate them? Should I switch to Term for any of them? If you like, you can also put these examples in your blog to for illustration.

I suggest that you write to NTUC Income and ask for the following information for each of your policies:
a) Cash value when you terminate the policy now
b) Cash value in 5 years time
c) Premium payable for the next 5 years
d) Amount of coverage provided by each policy.

You will be able to make a better decision, when you get the relevant figures. You can show the figures to me, and I will help you to make a decision.

Read this FAQ:

Low cost products

Dear Mr. Tan,

Why are you recommeding "Buy Term and invest the remainder" now, when you are no longer heading NTUC Income. Why did you not recommend this approach earlier?


NTUC Income introduced the low cost investment fund, called the Combined Fund in 2003. It introduced the family insurance plan, which provides low cost riders (to cover death, critical illness and medical benefits) earlier. The low cost term insurance, called i-Term, was introduced around 2005 or 2006.

These products were sold by the insurance agents who wanted to give good value to the policyholders.

The traditional insurance products, such as whole life and endowment policies, introduced during my tenure offered reasonably good value, compared to similar products in the market. This was possible because of our low cost structure.

These were done during my tenure as CEO. I left NTUC Income on 1 April 2007. I am not sure if the new management of NTUC Income still abide by these values. You have to judge by yourself.

Keep your savings in CPF up to the caps

Dear Mr. Tan,
I recently got approached by a friend working in an investment company to invest my CPF ordinary account into equities and fixed income plans and my CPF special account in endowment insurance.

As the government plans to cap the amount in 1st April, she advises that I invest 90% of what I have so far in both accounts and leave enough to pay off fees incurred. Is this advisable?


It is better to leave your money in the CPF to earn the attractive interest rate and bonus paid by the government. After 1 April, you can consider investing the excess (above the caps eligible for bonus interest) in low cost investment funds.

Do not take the advice of your friend as you will be incurring high sales charges, and will get a poor return on the investments (after the charges).

Read this FAQ:

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