Tan Kin Lian's Blog: Financial Planning for a young person

Tuesday, April 13, 2010

Financial Planning for a young person

Hi Mr Tan,
I am an avid follower of your blog. I like your advice, usually neutral and conservative which suit me.

I would like to ask for some advice from you about purchasing of my first life and health insurance. I recently decided to buy insurance from a friend. He didn't approach me rather it was me who approach him.

I am a 24 year old male. I am healthy I guess without much problem. I want to buy insurance from protecting my family from financial catastrophe. I have do some reading about insurance but I think its still not enough for me to evaluate any insurance plan well. After going through my financial, my friend/agent came back to me with 3 plans, one is term insurance, one is saving type insurance, the last is investment linked. (Details of three plans provided)

My question is, am I paying too much premium? Am I covering too much? The CPF portion seems to be taking quite a lot of money away?

REPLY
I suggest that you buy my book, Practical Guide on Financial Planning, to read about the fundamentals of financial planning. It also explains why you should not buy any whole life or investment linked policy - as the distribution cost is too high.

You can buy the book here:
www.easysearch.sg/ishop

You should buy term insurance. The best type is from Aviva (SAF) or NTUC (SAFRA insurance). You can get a comparision of the cost here.
http://www.easysearch.sg/Admin/File.aspx?id=19

4 comments:

Anonymous said...: Young man, avoid these 4 products and one group of salesmen.
These products you die die mustn't touch. They are (1) wholelife or wholelife disguised as limited payment wholelife (2) regular ILPs aka as variable whole life (3) endowment (4)anticipate endowment disguised as cashbacks, coupons or dividend.
These are toxic products that will ruin your financial future . Please heed this warning. If you have read the postings there are many bad testimonies of these toxic products. Are you not convinced by the personal testimonies? Don't fall into the same trap. This is an abyss of destruction that once you fall in you are trapped for life.
Heed Mr. Tan's warning and read the secrets of successful financial planning.
Also NEVER buy any products from insurance agents. They are like drug traffickers and they traffic the above products. Be careful of their tricks. As you have mentioned your agent friend proposed 3 plans and it turned out 2 are toxic products. See, don't think it is your friend so it is safe. Have you heard of agents conning their own brothers and sisters and relatives? Let me tell you , the products your friends recommended carry high commission.
Let me give some tips.
If you are not married or have dependents you DON"T need insurance protecting against premature death or death.
You need medical insurance, eg like medishield and critical illness. Buy SaFRA critical illness plan to cover 3-5 times your salary.
Saving? invest regularly in very low charge product... available from IFA or Independent Financial Adviser and NOT insurance salesmen.
This is to save for your marriage , deposit for a car, for a house and for whatnot.
CPF? I don't you can invest now. You have to meet $40K SA and $20K OA to be locked away before you can invest.
This is for the meantime..until you get married and have children and then have a review.
Don't trust salesmen especially those disguised as financial consultants.You sure die.; April 13, 2010 9:50 PM
Tk said...: For term, anyone can help to suggest what would be the best alternative for non-safra member? Thank you.; April 14, 2010 8:51 AM
Anonymous said...: Are u a civil servant or a union member?
For civil servants you can buy POLGIS .. see your HR .
For union members buy LUV from ntuc.
Neither of the above buy decreasing term to death and disability.
For critical illness buy a standaLONE RIDER FROM NTUC.
Be warned when buying from ntuc don't fall into the trap of being conned by glib tongue salesman or woman to buy limited pay wholelife or revosave. Be steadfast and resistant.; April 14, 2010 2:34 PM
Anonymous said...: 8:51am,

If you're not safra member, other alternatives for group term are:-
a) SAF reservist -- Aviva SAF term.
b) SCDF/Police reservist -- Ntuc HomeTeam term.
c) Union member -- Ntuc LUV term.
d) Work in stat board/ministry -- Ntuc POGIS term.

If none of the above, then you need to look at personal term insurance. More expensive but the premiums are usually guaranteed fixed for the term, and the policy is guaranteed renewable. Got term for basic death & TPD, and also for critical illness, and family income too.

Most of the major insurance companies will have personal term insurance to sell.; April 14, 2010 2:56 PM