Tan Kin Lian's Blog: Group insurance from Aviva

Wednesday, April 07, 2010

Group insurance from Aviva

Aviva has offered attract group insurance - term, critical illness and personal accident - to their existing policyholders under the SAF scheme and their spouses. I have looked at the premium rates and found them to be quite attractive.

I have recommended to consumers to buy term insurance (including critical illness and personal accident riders) and to invest their savings in a low cost investment fund. The group insurance offered by Aviva under the SAF scheme is suitable and get my endorsement.

If you are not an existing policyholder under the Aviva SAF scheme, you can get similar group insurance under the SAFRA scheme offered by NTUC Income - if you are a SAFRA member (and most Singaporeans are).

For the low cost investments, it is best to invest in the STI ETF managed by State Street (lot size is 1,000 shares or about $2900) or the fund managed by DBS (lot size is 100 shares or about $290). The transaction cost and expense ratios are quite similar in both cases. The DBS fund has the advantage of being in smaller lots. (Note: there is a minimum brokerage of 40% and a higher brokerage rate for smaller transactions, so it is not feasible to invest in 100 shares lot of DBS STI ETF. It is better to invest in the Statestreet 1000 shares lot.)

If you buy term insurance for protection and invest in a low cost investment fund, you will get a much higher return from this investment strategy compared to the high cost life insurance policies that are offered in the market now. This concept is explained in my book, Practical Guide on Financial Planning ($12) available here.

Tan Kin Lian

14 comments:

Anonymous said...: I agree that AVIVA's group insurance for death is quite value for money. But look at its premiums for critical illness coverage. It becomes too expensive as one grows old. Is this too much to bear?; April 07, 2010 7:10 AM
Kyith said...: Mr Tan have you taken a look at the terms for stating claim for the SAF group insurance. Apprently the wording for before 65 years old and after 65 years old is different. it seems to say if you died of natural causes before age 65 years old its not claimable.

is this a concern?; April 07, 2010 7:52 AM
Tan Kin Lian said...: Reply to postings of 7:10 AM and 7:52 AM

Take Aviva plan up to age 60. Stop at age 60. By that time, if you have invested your savings in a low cost investment fund, you will have sufficient savings and do not need life insurance.

Life insurance is to protect young people from premature death. It is not designed to give a payout to old people, beyond age 60.; April 07, 2010 8:50 AM
Anonymous said...: Here's my problem about investing in STI ETF. The Jardines group of companies are highly influential components of the STI. They are not Singapore companies.
Though the instrument is low cost, how HK companies are perceived can influence the STI.; April 07, 2010 9:32 AM
hosingping said...: Dear Mr Tan,

Is under 60 years old die from natual causes not able to claim from death benefit.

Pls advise; April 07, 2010 10:23 AM
Anonymous said...: I think that as an international company and not a Singapore government body or cooperative, Aviva is not fair to the rest of population in Singapore, which consist a lot of non-Singaporeans and PRs too. If insurance coverage is not bounded by boundaries why impose restrictions by nationalities? Both the SAF and SAFRA scheme are discriminating towards non-Singaporeans. In fact, by pooling all the risk together with all the premiums collected in the same "life fund", the non-Singaporeans and PRs are paying more for the same coverage. It seemed like the company practices double standards. From the sneaky way that it implemented the opt-in scheme, I would be careful where I put my money.; April 07, 2010 12:50 PM
Vincent Teo said...: To Anon 12.50 pm

The SAF Group Term/PA scheme was originally run by ICS (a division of DBS) and was meant as a cheap term insurance for SAF servicemen/women. Aviva bought ICS during the late 90s and so took over the group scheme as well. Under the scheme, you can also choose to cover your spouse and children even if they happen to be non-Singaporean.

FYI, there is also another similar plan for Home Affair Ministry staff as well (but I don't know run by who). There is no such thing as being fair or unfair to non-Singaporean here. For non Singaporean, I think if you take up NTUC membership, there is also a similiar Group Term/PA insurance. I think it is run by Income.; April 07, 2010 2:16 PM
zoe said...: how about ntuc income public service group insurance? is it worth taking up for those who are civil servants?; April 07, 2010 2:56 PM
Anonymous said...: Mr Tan,

I have few policies bought before I was diagnosed with hypertension. I realised that if I take up the new policies, the yearly premium (including the medical loading) is still lower then 1-2 old policies I got. Do you think I should drop my old policies and take up the new one ? Thanks for advising.

Mike; April 07, 2010 3:31 PM
Tan Kin Lian said...: Reply to Mike (3:31 PM)

I cannot reply to your type of quesiton in this blog. Send an email to me, and I will try to answer you.; April 07, 2010 3:47 PM
Anonymous said...: Aviva's new top-up policy for SAF
is attractive,but we are already covered by Medishield and critical illness policies, should we need hospitalization or terminal diseases treatment in hospital, could we claim from all three policies. In such a case, there would be triple coverage from all three.; April 07, 2010 5:47 PM
Unknown said...: I stumbled across this website on Aviva. Apparently there are some thing happening in the background that I was unaware of.

http://insideAviva.com; February 09, 2011 2:26 AM
Anonymous said...: Hi Mr Tan, i refer to your advise to stop aviva SAF at 60. True that by then if die the dependent are capable of making their own living. but how about protection for Sickness, critical ill/ major illness? as the saying goes "can die can't sick" what will be the best buy that can protect us illness till we die?; October 12, 2011 2:01 PM
Dylan Ng said...: Hi Mr Tan, I did a calculation for the Living Care Policy under Aviva Group SAF scheme that a male at age 27 who continues to pay the increasingly expensive high premium towards the end of age 65, would have paid $53,520 for only a $300k critical illnesses coverage and nothing else. After that beyond the age 65, I have no coverage at all. I compared that with a whole life Tokio Marine Legacy Plus policy with same sum assured of $300k coverage for death/critical illnesses till age 70, which is first of all 5 years longer than Aviva Living Policy and after age 70, I will still be covered $120k death/critical illnesses till age 100. I calculated total premium I pay for a 25year premium TM Legacy Plus is $63,330 based on $274.45/mth for the wholelife Tokio Marine Legacy Plus policy. This to me is only $9,780 more for a period of a 30-40years which in actually fact isn't really much per year but I enjoy wholelife coverage. On top of that, if I decided to stop this policy at age 67, Tokio Marine will provide a surrender cash value of $157k. This would mean I enjoy 40 years of free insurance coverage and yet made a profit of $90k which if I put my $53k into the Aviva Living Policy, there is every chance I may not get anything back which I can add this amount into the $90k profit that I would have made in the TM Legacy Plus policy. What do you think? Should I go for the wholelife policy instead since end of the day I only pay about $9k+ more for 30-40years but I have a chance to earn back the $53k that I may lose if I invest into the Aviva Living Care and on top of that the $90k profit from the life policy which total up is about $140k?; January 06, 2012 9:07 PM