The purpose of term assurance is to provide a capital sum in the event of premature death during the years when your children are still young. After 25 years, your children would have grown up and are likely to be independent. If you make adequate savings during the 25 years, you will have sufficient savings to meet your financial needs after that period. There is no further need for life assurance.
Under a decreasing term insurance, the protection reduces each year over the term. For example, if you insure for $300,000 over 25 years, the protection will reduce by $12,000 a year. Although the protection reduces, it can be compensated by the increased saving that you have put aside each year. Regular saving is an important part of your financial plan. The cost of decreasing term assurance is less than half of the cost of level term assurance for the same duration.
You can buy a term assurance that covers critical illness as well. The cost is about 2 times of a basic term assurance that covers death only, but will be still quite affordable.
You have the choice of paying a level premium for the entire term or to pay a premium that varies according to your age. Both methods are suitable. For most people, a level premium is probably better, as they do not have to worry about whether the higher premium charged each year is at a fair rate.
You have the choice of paying a level premium for the entire term or to pay a premium that varies according to your age. Both methods are suitable. For most people, a level premium is probably better, as they do not have to worry about whether the higher premium charged each year is at a fair rate.
There is no need to buy life assurance for more than 25 years or beyond age 60. The premium will be too high. Some insurance agents recommend term insurance up to age 75, which is unnecessary and costly There is no need to buy life assurance for more than 25 years or beyond age 60. The premium will be too high. Some insurance agents recommend term insurance up to age 75, which is not necessary and too costly (and give higher commission to the agent).
Tan Kin Lian
10 comments:
Some insurance agents are unethical. When a client ask for term insurance, they offer a term insurance up to age 75 or older. The premium cost nearly as much as a whole life policy, and does not have any cash value. The client finds the term policy to be unattractive and take the whole life policy instead.
If they offer a 25 year term, the premium will be much lower (perhaps less than one-third) and more suitable for the client.
The agent is misleading the client and only wants to earn a bigger commission.
The greedy agents are motivated by commission , by self interest and NEVER the client's interest.
Have you ever heard of sales motto by some guru that if you are selling to the client sell as much as possible to him or her by cross selling , up selling, down selling and never stop selling. Isn't this telling you to clean out the client? Isn't this legal robbing?
if under the previous topics, somebody mentioned their mom expenses for cancer is 150k, so why there is not a need to cover for critical illness beyond 60?
last i heard from another friend medication and chemotherapy is not cheap even subsidy and will surely cost in excess of 70k to 150k for the years of treatment excluding bills for hospitalisation. anyway i thought our medisave limit is only abt 50k?
please enlighten.
When you are working, your employer will cover you for medical expenses. If you stop working and have no income, you can be covered under basic Medishield. It should cover most of your expenses, including cancer treatment.
Some people a lot of money for cancer treatment because they must have paid the non-subsidised rates.
The stories told by insurance agents of expensive treatments could have been exaggerated in terms of frequency and the total expenses. We have to look at the actual cases and get the facts.
Do not spend too much on insurance, including Shield insurance, as you will need the money for your retirement needs.
Hello REX comments.
This is the third time i am raising this question on the blog.
To my knowledge, Medishield limits payouts to only certain illnesses, and there is no "as-charged" option. Also the dollar limits for basic medisave claim are rather restrictive. Therefore i don't quite agree with MR Tan's view that upgrading to private plan is a "status" issue (this was mentioned in another post, not the current one), and basic medisave is already good enough, keep the money for "retirement needs". (as per this post from MR tan). Therefore to throw bricks at all the insurance agents, is perhaps a bit premature until one settles the above issues.
I think that Mr Tan's advice, is correct if one falls sick in accordance to the schedule of sicknesses in basic medishield.
However, as one grows older, the probability of all kinds of strange conditions - not limited to those in the schedule of sicknesses - increases, therefore, i too am confused just like Anon. 2.05 above, as to why MR Tan strongly believes it is unnecessary to cover beyond age 60?.
Today we think we are quite healthy and reasonbly ok in $$$ savings, so Mr Tan's argument that if we already achieved some financial stability,too, please forget about coverage beyond 60 (at least that is the advice which i understood from our host blogger) and keep the money. But life may not be so kind. Along the way, you may get swindled (aka minibonds), suddenly you find you need cover.. again. Or you fell down and need hip replacement surgery because you never realise your bones were so fragile. Basic Medishield doesn't pay for this type i think. But if one upgrades the medishield to a private plan with as-charged option (payable by cpf up to a certain point), you will get covered for any hospitalisation, regardless of the sickness. The copayment is quite the same like basic medishield, but you get benefit of coverage of any illness any bill. Expensive premium? Well it sure is, but if you really sway and hospitalised, you would find it is cheap. It is a matter of how kiasu one is, if one is not kiasu, in the first place, he doesnt not even to buy ANY insurance for all his whole life anyway.
In summary, "retirement needs" should be taken in the context of increasing probablity of unexpected illnesses and accidents, as well as escalating medical costs, before one decides that "insurance beyond 60 is unnecessary"....
REX
(i declare i am not an insurance agent!)
Rex
I advice cover up to age 60 for life assurance. But for medical, you can cover as long as you live. I advice Basic Medishield as the premium is affordable. You can look at the cost of Private Shield at the older age to understand why the premium is too expensive.
But if you can afford the expensive premium and wish to cover for private Shield, it is your decision. There is no need for us to debate this point.
I think that the client's circumstance and objective is very important. Is the policy proceeeds intended to be a personal retirement fund or a bequest to successor? Or a contingency plan in case something happens? All these, the agent must find out and know before making a recommendation.
i think some of you guys miss the point here.. as anon 2.05 points out, its 70 to 150k EXCLUDING hospitalization.
so even you have a private shield plan, it might not be enough right? so maybe the only way is to claim from critical illness coverage?
well maybe in life there is no definate right or wrong. term or plan coverage for critical illness may be cheap or expensive depending on the term and it really depend on the consumer's perspective how "safe" he/she wants to be.
but from what i understand, critical illness coverage is not the same as hospitalization coverage.
Critical illness policy pays you the sum assured (plus bonuses if participating) upon diagnosis. You can use the money however you like, nothing to do with hospital bills. You can even refuse hospitalisation if you wish. However, if you're hospitalised and the bills exceed your claim proceeds, too bad.
Medical insurance like the "shields" pays out according to hospital bills incurred. So, even if you got diagnosed but refused hospitalisation, there's no claim payable.
There're other differences of course, but these are the main ones to note.
Not to sure about payment from critical illness "upon diagnosis"; presumely of the stated illness. I did check once with an agent and was told to read the fine prints. Seems must be proven real "jia luck" before the insurer willing to make the payout.
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