Monday, March 12, 2018

Insurance premium is a heavy commitment

Sally visited my office to seek my office on the life insurance policies that she and her husband had bought. They are paying too much premium and wish to reduce their budget.

Sally is 35 and her husband is 40 years.

TKL - Do you have any children?

Sally - No.

TKL - Is it your choice or you had difficulty getting a baby?

Sally - Baby hard to come by.

TKL - Is it due to stress and over work?

Sally - Quite likely. I have many friends in the same situation.

We went through the life insurance policies from two companies. We found that three policies were bought for investments, but gave a negative return. Sally will probably give up these policies.

She and her husband had adequate term insurance. They provide adequate cover, even after the life policies are cancelled.

They also bought two critical illness policies. Are they necessary? The premium is more than $100 a month. It does not provide any return.

I do not have any statistics on the claim to premium ratio. This would be a good way to understand if the policy is good for consumers.

My own preference is to avoid this type of cover. But I am not able to give a convincing reason - other than to say that the insurance company makes a big profit from selling this type of policy.

Sally decided to reduce the sum assured by 50%. This will reduce the premium by 50%. It seemed to be a good approach.

As Sally is having a difficult time with her budget, I did not ask her to make a donation to FISCA for my time.

Tan Kin Lian

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