Dear Mr Tan,
Recently, I wanted to buy an Aviva term insurance with coverage of $350k that covers premature death, In the application form, I was asked to list down the insurance policies that I already had. Subsequently, our insurance agent informed us that Aviva would require us to furnish them our financial information which includes submission of income tax assessment as my total coverage for all his policies is more than $1m.
I would like to enquire whether it is a norm for insurance company to request for financial information and whether I should submit to Aviva as I find that the information required is quite personal. Is it true that one could not have coverage more than $1m?
REPLY
Most insurance companies needs to do financial underwriting - where the total sum insured exceed a large sum. This is to prevent moral hazard. Different companies have different thresholds. I think that $1 million is probably a reasonable threshold to ask for this information. Although Aviva is covering for only $350k, it is still necessary for them to consider the total picture.
You can read my book, Practical Guide on Financial Planning, for tips on buying life insurance coverage.
Personally, I would never allow my insurance coverage to be handled by only one insurance company.
ReplyDeleteIf I plan to have a $1 million estate upon my death, I'd spread the insurance policies with 3 insurance companies.
That way, if I die under potentially "suspicious" or legally contentious circumstances ... the $1 million dollars insurance payout is spread out over 3 insurance companies.
Otherwise, a $1 million dollar payout from only ONE insurance company is just asking delays, investigations, queries etc.
In general, the smaller the payout (per insurance company basis), the less the questions and paperwork.
I am sure it is good for Aviva know more about your personal information to prevent moral hazard. It also serves to add to their database of potential leads for their value-added services from the various tied-ups. If you get more calls from DBS/POSB asking you if you want to do credit transfers or buy some new products, you now know why.
ReplyDelete