Planning a holiday at Gold Coast

I use Google search to look for "Gold Coast". It gave me a good idea about the different types of accommodation that are available and the prices. It also showed me the photos of the facilities. I will probably choose a high rise apartment with a view of the sea.

Success factors for NTUC Income

I have been invited by the Australian Friendly Society Association to speak at their conference and share the success factors of NTUC Income. The conference is in June.

They asked me to discuss the following:

* what sort of competition has NTUC Income faced?
* how does NTUC Income distinguish itself from its competitors?
* what are the primary values that drive NTUC Income's business?
* are these values important in driving the success of its business?
* how does NTUC Income engage its members (customers)?
* what part does the customers' involvement play in the success of NTUC Income?

I shall be covering some of these points in my blog.

The conference is held at the Gold Coast. I shall take a holiday there as well. It will be my first vacation in this wonderful part of the world.

Change in occupation

Some personal accident policy requires you to declare a change in occupation. If you do not declare, the policy may be void.

Check your policy to see if there is such a requirement. Better still, choose a policy that does not have this requirement.

Feeder services

I suggest that feeder services should be introduced to ply certain districts and bring the commutters to the MRT trains or bus terminals.

The feeder services can be operated using light buses, like in Hong Kong.

They can serve a useful purpose of providing transport to the neighbourhood malls, schools or community facilities.

These services should be farmed out to small operators, and not placed under the large transport operators.

It is easier for the public to learn how to use the local feeder services. Many people find the current bus services to be too complicated to use.

If you agree with this suggestion, please vote in LTA portal

Selling your life insurance policy

If you are not able to continue with your life insurance policy, the insurer will pay its cash value to you. This cash value is calculated by the insurer to give them a profit when you surrender.

You may be able to find a buyer who is willing to pay a higher amount to buy the life insurance policy from you. The buyer will continue to pay the premium and collect the maturity or death benefit.

This breaks the monopoly of the insurer who issue the policy. This competition may force the insurer to pay a higher cash value to their policyholder.

There is a moral risk that the buyer of the policy may benefit substantially on the premature death of the policyholder. Apparently, this is allowed by law.

Someone has set up an operation in Singapore to buy over the life insurance policy from the policyholder. If you look for "sell endowment" in Google search, you may be able to find some links to this service.

Life insurance with regular paybacks

Some life insurers market a whole life or endowment policy with regular pay-backs every one, two or three years. They sell large numbers of these policies.

This type of plan give poor value to the customers. Here is the reason:

* the insurer charges the normal premium for the basic policy
* they add an additional premium for the regular payback
* the additional premium has to loaded to cover the commission and expenses

For example, if the regular pay-back is $3,000 every 3 years, the insurer has to add $1,000 plus $100 (to cover commisison and expenses). It does not make sense for the customer to pay an additional $1,100 a year to get $3,000 every 3 years.

This is not transparent to the customer. The customer is not aware that he is paying an incurring additional expenses for this benefit. He is worse off.

Somehow the insurance agent is able to make this plan look more attractive than its reality. This is the power of false marketing.

Critical illness

I use Google search to find out about "critical illness" policies available in other countries.

The websites are mainly from the United Kingdom. They offer critical illness on a level or decreasing cover, similar to term insurance.

I wanted to compare the premium rates in the UK with those in Singapore.So far, I am not able to get the comparable premium rates, as the websites are managed by brokers who insist on "talking" to me. I shall continue to try.

Some of the websites are quite educational and informative.

Decreasing term with living benefit

Hi Mr Tan.

I am 24 years old. I like to know whether there is term insurance longer than 20 years. Does a 20 year term insurance auto-renews itself when it ends? Do you recommend buying decreasing term (e.g.$100k) and living benefit (e.g.$50k) together?

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REPLY

You can buy a term longer than 20 years. It is available for 30 years or to cease at a specified age, say 65 years.

The term policy does not auto-renew itself. It will cease at the end of the term. You should buy term insurance for the entire period that you need the insurance.

It is a good idea to buy a decreasing term assurance and a living benefit (to cover critical illness). The living benefit can also be for a specified term.

How to invest in index funds

According to John Bogle, it is better to invest in the entire market through an index fund.

If you wish to invest in an index fund in Singapore, the closest that you can invest is the STI tracker fund, that is traded on the Singapore Exchange.

If you go outside of Singapore, there are many hundreds of choices. You can find out more using Google search to look for "index funds". Some of the websites provide educational materials.

Planning for a retirement income

Hi Mr Tan.

I am 37 years old. If I save $20,000 a year for next 18 years at 5% return, I would accummulate about $500,000 when I reach 55 years old.

With this amount being place in an annuity for next 25 years at 3%, I would only be getting about $2,000 a month from 55 to 80 years old.

With inflation, the real value of the annuity will be less than $2,000 and may not be sufficient for life beyond 55 years old.

How realistic is the return of 5%? Many funds have mentioned returns of higher than 5%, but there are possibilities that the funds may not generate such a return, as there are always up's and down's.

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My reply:

You can read the FAQ in my website, www.tankinlian.com/faq. You can get some useful information that will answer your questions.

I suggest that you re-calculate the figures on the following assumptions:

* the retirement age should be 65 (instead of 55)
* the investment return can be increased to 6% per annum

With the revised assumptions, you will be able to get a higher annuity payment on your retirement. Even after deducting for the effect of inflation (say at 2% per annum), your annuity income should be quite adequate.

You can visit the business center of NTUC Income and talk to an insurance consultant.

Feedback on Public Transport

Visit the Land Transport Authority;s portal to give your feedback on how to improve the public transport system in Singapore.

LTA

More trains needed during off-peak hours

I took the SMRT train from Dhoby Ghaut to Yio Chu Kang at 10.45 pm. I had to wait a long time for the train to come. When it arrived, the station was packed with commuters.

The train was fully loaded all the way to Yio Chu Kang station. Most of the commuters crowded near the door of the train. It is difficult for other commuters to leave or enter the train.

This is late in the evening, during off-peak hours.

I hope that SMRT will operate more trains during off peak hours, so that the commuters do not have to wait a long time and stand in a crowded train for most of the journey. I hope that they can offer a more comfortable ride for commuters during the off-peak hours.

If you agree with my suggestion, go to this portal and vote on it.

Term insurance in USA - risk factors

Here are the risk factors used to price term insurance rates in the USA

* if you are overweight by 20%, you pay a 15% to 35% more in premium
* if you are a smoker, you pay 100% more in premium
* if you quit smoking for more than 5 years, you enjoy the non-smoker rate
* if you quit smoking for 1 year, you pay 15% to 50% more in premium
* if a family member had cancer or depression, you pay 30% to 50% more in premium
* if a family member had heart disease or stroke, you pay 100% more in premium

You enjoy the lowest premium if:

* you are within the standard weight
* you are a non-smoker or quit more than 5 yers ago
* a family member did not die from cancer, depression or heart disease

If you have the risk factors, your premium can go up by 100%. The actual increase differ from one company to another. You can get a lower loading, if you shop around.

Book early to enjoy lower hotel rates

I few weeks ago, I visited the website of a specific hotel in Philadephia and found the room rate to be USD 160. I was not able to confirm the booking at that time. I made the booking today. The rate for the same room increased to USD 240.

Lesson: book early to enjoy a lower rate.

Term insurance rates in USA

I visited a portal to get the term insurance rates in New York state for the following:

male, non-smoker, no medical condition, standard weight

monthly premium for $100,000 for 20 year term

Entry     New York state       Singapore  
age      from top 5 insurers

30        $10.32 to $12.77      $13.40
35        $10.32 to $13.56      $18.90

To qualify for the low rates shown above, you must be in very good health. If your health is not in the top group, you may have to pay a higher rate (say up to 50% or 100% more).

The top 5 insurers are those that offered the most competitive rates.

The premium rates charged in Singapore is about 30% to 50% higher, but they apply to a broader group of people in reasonably good health.

If you wish to get a quote for our own comparsion, you can search for a Google Ad on the right panel". If you cannot find this ad, you can use the Google search and ask for "term insurance.

How to get low term insurance rates

Hi Mr Tan,

I clicked on a website on your right side of your blog, that advertise term insurance. They ask me to enter the Zip code. How do I provide it?

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My reply:

The website must be from America. The insurance charge charge different rates for different states in the country. So, you need to have a Zip code to get the actual rates. I am not familiar with the Zip codes in USA.

Try to look for a website that allows you to enter the state. Maybe, you can choose New York or California.

Anyway, you are not able to buy term insurance from the USA. You can only find out what their rates are, to compare with the term insurance offered in Singapore.

Some of the websites (that appear in the right panel of my blog under Google Ads) offer rates in Singapore. It allows you to compare the rates and make the best choice.

I hope that more insurers in Singapore will offer their term insurance rates on-line. You can get the rates from NTUC Income under its i-term contract. And compare with the rates from USA.

Common Sense Investing

John Bogle is the founder and former CEO of Vanguard Mutual Fund Group. It is among the largest fund managers in the world.

Here is the foreward to his book on Common Sense Investing:

Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner's game. Try to beat the stock market is theretically a zero-sum game (for every winner, there must be a loser) and after the substantial costs of investing all deducted, it becomes a loser's game.

Common sense tell us - and history confirms - that the simplest and most efficient investment strategy is to buy and hold all of the nation's publicly held businesses at very low cost. The classic index fund that owns this market portfolio is the only investment that guarantees you with your fair shre of stock market returns.

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In my words: invest in a large, well diversified, low cost fund.

Call your insurer first

If you are covered for medical insurance, and you need to go for medical treatment, what should you do first?

Call the insurance company.

Give your particulars. Ask them to explain what is covered under the medical insurance. Ask about the limits for each category of coverage and the exclusions.

Tell the insurer about the estimate cost of treatment given by your doctor. They may be able to advice if the estimate is reasonable, and if there are better, more cost effective alternatives.

Be better informed. Do not be shy to ask.

Claim on several accident policies

Dear Mr Tan

If I have several personal accident policy, and something happens to me, can my family make a claim on all the policies?

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My reply:

If you are insured under several personal accident or life insurance policies, you can make a claim on all of them. There is no limit to the total amount that can be claimed under these policies that cover a human life.

The situation is different for insurance policies that are intended to reimburse you for the actual loss, such as a fire insurance policy or a medical expense policy. Under these policies, you will only be paid for the amount that you have incurred.

For example, if your house is burned down by a fire, and the cost of rebuilding the house is $500,000, you can claim up to this amount only, even though you may have insured for a much larger sum.

Similarly, if you have several medical expense policy, you can only claim for the amount of your medical bills, even though the insured sum under all the policies may be higher.

The principle is: you cannot make any gain under a "reimbursement" policy.

Write a Will

Hi Mr Tan,

Do you advice people to write a will? What happens if there is no will? Will the assets be distributed unfairly?

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My reply:

Here is my view as a non-lawyer.

You should write a will if you have fairly large estate, say more than $1 million, and you have specific ideas about how the assets are to be distributed on your death.

If there is no will, the legal position is that the estate will be distributed according to the intestate law. In most cases, the surviving spouse will get 50 percent and the remainder will be distributed equally among the children.

In practice, the family members will decide how best to distribute the assets among themselves. They may wish to give a larger share to a poorer member of the family. This can be decided by agreement among the members.

If there is a dispute, and the matter is brought to court, the distribution will be made according to the intestate law.

It is usually better to have a will. If you change your mind later, you can write a new will. The cost of a standard will is quite modest.

Insurance payout are tax-free

Hello Mr Tan

I had brought the NTUC Income FlexiCash policy last year. Is the payout subject to tax? In general, will payout of life insurance be subjected to tax?

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My reply:

All payout from life insurance policies, including flexi-cash, are NOT subject to tax.

Advantages of taking a bus

I am now a regular commuter of the public bus.

Here are the advantages of taking a bus to your destination:

* I relax and let someone do the driving
* I am usually able to get a seat, eg during offpeak period
* It is economical, ie one fifth of the taxi fare
* I have the chance to exercise, i.e walk to the bus stop and to the destination
* I can think while waiting for the bus or on the journey

The only disadvantage is that it take more time. But, it is all right if I leave early and allow more time for the journey.

More insurers offer term insurance policies

NTUC Income offered attractive term insurance rates under its i-Term policy.

Recently, I read that Prudential has also advertised its term insurance rates. I do not know if their rates are as attractive as NTUC Income.

I am glad that more life insurers are promoting term insurance. It will allow more people to have adequate life insurance coverage at a low cost.

They can invest their savings in an investment fund to get a better return. Read more in this FAQ

Where to find part time work?

Dear Mr Tan

I like your suggestion for seniors to find part time work near the home. But where can we find the work? Please advice.

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My reply:

The Center for Seniors will launch its call center soon. You can call the hotline and give the following information:

* your name
* your postal district
* types of work that you are interested in
* your expected pay per hour of work

I have approached three several large organisations. They are willing to support this initiative and provide part time work for seniors. The initial number is about 300 part time jobs, but this can increase, if the pilot exercise is successful. The rate of pay is between $6 to $8 per hour.

More details will be announced within the next few weeks.

See the big picture

I observe this characteristic among many Singaporeans.

They work very hard and seek a perfect solution to the task that they are responsible for. They define clear boundaries between what each person is responsible for, instead of working as a team to achieve the bigger goal.

Even among government ministries and departments, there is a tendency for each officer to be responsible only for his own area. The public has to run around many departments to get things done.

Let us work more towards the common goal. Let us see the big picture.

Part time work for seniors

I gave a talk to 22 participants at a training program organised by the Center for Seniors.

I encourage them to consider the following option, after their retirement from their current jobs:

* take a part time job
* close to the home, to avoid travelling cost and time
* accept the market rate
* contribute well to the employer
* the employer will value their contribution and pay them more or give them a full time job.

The participants agreed on this approach.

They find a rate of $6.50 to be adequate, and that a rate of $10 to be attractive.

Money market rates are softening

In previous months, I was able to get a return of slightly more than 3% on my savings in the money market.

I read that the interbank rates have dropped by 0.5% during the past month. This means that the return on the money market will also fall. Fixed deposit rates have also dropped by about 1% during the past month.

I will still keep my savings in the money market fund, as I do not wish to invest in the stock and property market at the current high level.

Walk down Orchard Road at night

I hosted a dinner at Orchard Hotel. After the dinner, I walked down Orchard Road to the MRT station. It took about 10 minutes.

I saw some interesting sights of that stretch of Orchard Road, as I passed by some bars and karaoke lounges. These are experiences of a tourist, which is usually missed by Singaporeans who drive.

If you have the chance, do walk down Orchard Road.

Tribute To Our Pioneers and Unsung Heroes

The services of volunteers are often taken for granted.

It is refreshing to have people like Dr. Lee Kum Tatt to acknowledge and show appreciation to those who had worked with him, honorary and voluntarily, and contributed to make Singapore what it is today. The satisfaction and joy derived from such activities is something that money cannot buy.

The message is to have more people to continue to serve others as one of the important missions of our lives for the good of our future generations if not for Singapore.

Blog

Tan Kin Lian

Expensive taxi ride

I took a taxi from Stamford Road to Orchard Hotel. It cost me $7.70, inclusive of the CBD surcharge. I find it to be too expensive for such a short journey.

I wanted to take a bus, but I could not find a bus that takes me close to the destination.

Better to take public transport

I drove to Cricket Club for a lunch and to Changi Road for a meeting.

My experience?

* the traffic is congested at the Central Expressway and in town
* I could not find a parking space at or near the building in Changi Road

My conclusion: better to use public transport or taxis. It has less hassle.

Time line planning

Thomas Phua plans for his retirement early. He has over 80 insurance and investment policies bought for himself and his family.

He adopts a technique called "time line planning". You can read more about it in his

blog

Travel insurance for more than 90 days

Dear Kin Lian,

After realising that most annual travel insurance policies currently sold in the market have a limitation of 90 days (stay outside the country), what sort of travel policy should I carry, if I expect to travel on several occasions for more than 90 days?

The simple answer may be just buy individual travel policy each time I travel, but this is complicated by the fact that: at the point of departing Singapore I do not really know how long I will stay outside the country (overseas) before i return to base country (Singapore).

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My reply:

It may be better and cheaper for you to buy a personal accident policy to cover one year. See if there are able to cover evacuation (in case of emergency) at a modest additional cost.

This policy does not cover the events, such as flight delay and loss of baggage, but the amount of compensation is small.

Continue with your existing policy

Hi Mr Tan,

I am 30 years old. I bought a Living Policy from another company in 1995 ($500/yr) for $25k. I bought another Living Policy from NTUC in 2006 ($1800/yr) for $100k. I also have a growth policy with NTUC for $30k (1996).

But from your advise in your blogs, it seem that getting a Term is a better choice than Living.

Should I give up my Living and change to terms before the next payment is due this May? I heard that term does not cover critical illness? Does it have any effect if i discontinued my living?

-------------------------

My reply:

Please read my "Financial tips, April 2007" posted in my blog. It contains relevant information for your decision.

Tips

Generally, if you have already bought a whole life policy (such as the living policy), it is probably better for you to continue with the policy, as you have already incurred the upfront cost.

If you wish to terminate the policy and move to a new arrangement, you have to get the actual figures of the available options to make an informed decision. I will ask (name) to help you to get the relevant figures.

If you are taking up a new additional policy, you can follow my advise to buy term and invest separately in a fund. You can buy term with extension to cover critical illness.

Switch from Living Endowment?

Dear Mr Tan

I'm thinking of giving up the living endowment and switch to a decreasing term insurance and invest the extra money in the combined fund.

I'm paying $x for this policy. You think is advisable to do? How much do I have to pay for a decreasing term insurance?

Which is a better to invest in the combined fund?

* Pay a single premium, say $20,000 or
* Monthly premium of $100

Give me your very frank answer.

-------------------------------

My reply:

I will ask X to give you the figures for you to make an informed decision - on whether to continue with the living endowment or to switch to a new plan.

As the global stockmarket is now quite high, it is better to wait for the market to correct before you make a large investment. It is all right to start investing a monthly sum now.

You can read my investment tips (april 2007) which have just been posted in my website.

Tips

Save for your future needs

Dear Mr Tan

I am 26 years old and getting a take home pay of $2,200.

I have bought a NTUC Pioneer Policy and two limited payment life policies from two other companies. The total sum assured is $120k from the above three policies. They also cover critical illnesses. The total premiums from the 3 policies are about $260 monthly. I already bought the NTUC IncomeShield enhanced advantage with rider.

I am considering to increase my protection by taking two additional plans:

* Term insurance which covers critical illness for a sum assured of $100k at premiums of $40/mth and

* Personal accident plan with sum assured of $100k at $10/mth.

Hope you can advice on my views.

------------------------------------------

My reply:

You already have adequate life insurance coverage.

I suggest that you should make additional savings for your future needs. Perhaps you can put aside $100 a month on a regular premium investment linked policy or a unit trust.

Select a plan with the lowest upfront load. It can be from NTUC Income or from a unit trust.

You can read my investment tips at FAQ

Cactus flower in bloom

I live in Cactus Crescent but I have not seen a cactus flower before. My friend Thomas Phua sent this cactus flower to me.

You can see more flowers in his blog.

Expensive taxi ride

I took a taxi from Wisma Atria (Orchard Road) to the Cricket Club (Padang). I was surprised that the fare was $5. It probably included the ERP surcharge. A MRT journey probably cost $1.

Travel Insurance

Many people perceive that they face a higher risk of accidents when they travel overseas. They engage in an unfamiliar routine, travel to unfamiliar places and meet unfamiliar people. They buy travel insurance to cover them for the period that they travel.

The most important coverages for a travel policy are for death, permanent injury and medical expenses due to an accident, and for the cost of evacuation, in the event of a emergency.

The other coverages are:

* loss of baggage
* flight delay and cancellation
* theft or loss of personal belongings

The policy exclude medical expenses due to illness (unless it is directly caused by an accident), or after returning home.

Some policyholders suffered an injury overseas and return home for treatment. Technically, the policy excludes payment for the expenses (as they are incurred in Singapore). Some insurance companies are willing to give an ex gratia payment.

The exact coverages may be different for the various insurance companies. It is important to select an insurer that is fair in handling claims, and does not hide under the fine print.

The premium is charged at a rate (according to the level of benefits) and the period that you are covered, ie while overseas.

Where to buy term insurance?

NTUC Income offers the best deal in term insurance.

You can buy term insurance by visiting the business center at Bras Basah Road, or by calling 6510 2860.

You can also call your insurance adviser. They can offer the term insurance to you as well at the same low cost.

You can buy the following types of term insurance:

* level term
* decreasing term
* extended to cover critical illness
* mortgage protection

Mortgage Protection Policy

What is a mortgage protection policy?

It is a term insurance policy with the sum assured decreasing over the term to match the outstanding housing loan.

If death or permanent disability occurs during the term, the sum insured will usually be sufficient to pay off the outstanding loan. The actual payout is a sum that is stated in the policy.

There may be a small difference with the outstanding loan at the time of claim, e.g. due to change in interest rate or repayment. Any shortfall can be met by other source. Any excess can be retained kept by the claimant.

The premium for this policy can be a single premium or payable over the term, but excluding the last few years.

Some policies are extended to cover critical illness, but the cost is much higher.

Cover for critical illness

HI,

I am already sufficiently covered for life and term insurance. But in medical insurance wise, I am only covered with NTUC medishield plan B.

Do you think it is necessary to get a critical illness insurance? And for how long? I am 31 years old. What is the most affordable option?

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My reply:

Here is my frank advice. Many insurance advisers want you to buy a critical illness policy. It is really a whole life policy. The premium is high and the return is generally poor.

I prefer to put the savings in an large, well diversified, low cost fund, invested mainly in equities. It gives an attractive return. The accumulated savings may be more than the critical illness cover in 20 years time.

If you have a Medisheld plan, it should take care of the medical expenses, even for critical illness.

You can read more from my "Investment Tips, April 2007" which has just been posted in my blog.

"All Risk" insurance of valuables

There was a new report that an insurance company refused to pay for the theft of a valuable watch under an "all risk" policy. Their policy condition stated that the theft must occur while the insured item is being worn. It does not cover theft in the house, even if the item was locked.

Here is the reason for the "fine print" in the insurance policy:

* the owner may be careless and did not lock the insured item
* the owner may make a false report that the item was stolen, when it was given or sold away

My view?

If the insurance company does not trust the honesty of the owner, it is better to decline providing the insurance.

As the owner, it is better to avoid an "all risk" insurance, if there are fine prints that limit the cover.

Cactus in bloom

Thomas Phua updates his blog regularly. His latest posting is on "cactus in bloom". He has some nice photos.

I live in Cactus Crescent. So, I am associated with his flower.

Blog

Visit to the Turf Club

I went to the Turf Club yesterday, with my wife.

It was a social event. I met many friends there. We were invited for a delicious lunch and high tea. The main race was for the Queen Elizabeth Cup.

I placed a few small bets on some of the races. It was fun.

The amounts involved are very small, compared with betting on the stockmarket.

Return from endowment policy

Mr Tan,

You mentioned that the return on an endowment policy is about 4% per annum. In the advertisement by NTUC Income, it should an actual return of 6%. What is the difference in yield?

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My reply:

The return shown in the advertisement is for the past 20 years. During this period, the interest rate earned on money has been quite high and the stock market investments have shown a high appreciation, due to the rapid growth of the Singapore economy. This produced a high yield of 6% on the endowment policies.

The investment yield for the future is likely to be more moderate for the following reasons:

* interest rate has been at a low level for the past few years
* this affects the yield on interest bearing assets (which takes about 70% of the portfolio
* the growth in stock prices is likely to be more moderate, as the economy has matured.

Return from an annuity is more than 2% p.a.

Dear Kin Lian,

In your blog today on investment tips, you mentioned about investment of an annuity for a person 60 years and over. I looked up the NTUC web site. It shows a monthly payment of about $468.60 per month for $100,000.

I did a quick calculation and found that the return is not about 4 - 5% as stated by you, but closer to 2% per annum. In that case, why buy an annuity? The rate is about bank's rate.

-----------------------------------

My reply:

If you invest $100,000 to earn 2% per annum, you will receive $2,000 a year or $167 per month.

If you buy the annuity, you will get $469 a month, or $5,628 a year. This represents a nominal return of 5.6%. The monthly payment will increase each year with bonus, which is expected to vary from 0% to 3% a year.

The higher payout under the life annuity is possible because of the consumption of the capital during the lifetime of the annuitant.

Is my savings adequate?

Hi Mr Tan,

I read your blog faithfully for financial tips because I really trust and value opinions from a veteran like you. Most younger financial planners (not all) that I've met seemed too eager to sell despite their claims to want to help. Sometimes, one can tell.

I have a question for you. I am a 30-year old married female with cash savings of almost $30K. I don't have other assets apart from co-owning a HDB flat with my husband.

Can I find out if this is an "acceptable" amount of savings at my age? I only have one life insurance policy. How much cash assets do most Singaporeans have when they are in their 20s, 30s and 40s?

---------------------------------

Ny reply:

I suggest that you read the FAQ in my website, www.tankinlian.com/faq

You and your husband should save about 10% to 20% of your monthly earnings and invest in a large, well diversified, low cost fund.

Assuming that you have worked for the past 5 years and your combined annual income is $50,000, a 10% saving rate require you to save $5,000 a month. Your total saving of $30,000 seems to be just about right.

This looks like a financially prudent approach. You can call me at (nuamber), if you wish to talk to me.

Enjoy a higher interest rate with the money market fund

Hi Mr Tan

I've enjoyed reading your blog site and those valuable advices your have given to the people.

Recently, my life savings of S$50K in fixed deposit is maturing soon. The interest rate is not as attractive as 6 months ago, if I renew with the current bank or transfer to another bank. Could you kindly advice me how can I make my $$$ work

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My reply:

I am in the same situation as you. I have some money to invest, but find the interest rate on fixed deposit to be unsatisfactory. The stockmarket is too high at this time.

I decided to invest in the money market fund with NTUC Income, through the flexi-cash product. It earned a money market rate, which is about 3% to 3.5% per annum.

You can withdraw your money from the money market fund at any time, without any penalty. This allows you to invest in the stockmarket to earn a higher return, when it corrects down to a lower level.

You can find more details in www.income.coop/faq. You can telephone or visit the business center of NTUC Income to talk to a consultant.

Present views of commuters

Mr Tan,

I read your postings where you encourage people to use public transport and make suggestions to improve the system. You even use public transport regularly.

Why don't you volunteer to serve in the Land Transport Authority or the Public Transport Council? You may be able to present the views of commuters.

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My reply:

Perhaps you can pass your suggestion to the Minister for Transport? Or you can make this suggestion in the website of the Land Transport Authority?

Our aim should should be to improve the public transport system in the following ways:

* improve service for commuters
* make public transport affordable
* allow transport operators to make a reasonable level of profit

This can be achieved through:

* greater efficiency
* avoid wastage
* achieve balance between interest of commuters and transport operators

Advertisements by Google

My friend, Larry Haverkamp, did not like the advertisements that appear at the bottom of the right panel of my blog. He says that they spoil the independent nature of my blog. These advertisements are inserted by Google.

In my view, the advertisements are generally suitable, and give my visitors a chance to see what is available on insurance products from overseas. I found that most of the advertised websites give useful, educational information.

If you find any advertisements that are misleading, send an email to me at kinlian@gmail.com.

Two modes of transport

My friend and I ordered a MaxiCab to Harbour Front. It can comfortably accomodate 7 people. The journey cost $35 (ie $16 plus the meter fare).

On our return, I found a long queue at the taxi stand in Harbour Front.

My wife and I decided to take the MRT from Harbour Front to Yio Chu Kang. It cost $1.70 per person.

As she used a single trip ticket, she had to pay a deposit of $1 for the ticket, which was refunded at the GTM machine in Yio Chu Kang. It was her first experience to take the MRT after many years.

Waterfront City, Batam

15 years ago, the developer had an ambitious plan to develop a city. This did not materialise. They had to stop work after the initial phase.

When I visited Waterfront City, I found the following:

* a hotel
* some recreational facilities, i.e. fishing, cable ski, go-kart
* about 300 houses, of which 80% are vacant
* about 100 shops, largely unoccupied

The place is quite charming and relaxing. The people are friendly.

I hope that it is possible for this place to be developed as a getaway for Singaporeans. Better to be not too crowded.

Send your articles for posting in my blog

I welcome articles from visitors to my blog.

If you have views on the topics covered in my blog and you wish them to be known more widely, you can send them to me. I shall publish them in my blog, if they are suitable.

Liu I-Chun shared her views about a financial product sold by a local bank to her elderly relative. She felt that the product was not sold properly. She sent her article to me. I posted it in my blog.

Ask the great questions

Here is an article from Dr. Lee Kum Tatt on what to do when in doubt. His wife who is close to him should know better. Accompanying the article are her comments.

Blog

Tan Kin Lian

Activities in Harris Resort

Harris Resort is at Waterfront City. It is the new name for a hotel that was developed 15 years ago. Previously, it was known by another name.

The interesting activities in the resort include:

* go kart
* cable ski
* bicycling
* sing with live band

The staff are very friendly and helpful.

I visited the cable ski. I was surprised to see many people participating in the sports. Many of them came just for the day, to enjoy the ski.

I met a young girl from Singapore. She has been coming to the cable ski about two times each month for the past two years. She enjoyed this sport. It is her only sport.

Logic9 at Harris Resort

I spent a day with a few friends at Harris Resort in Waterfront City, Batam.

At breakfast, I organised a Logic9 (Sudoku) contest for my friends. The children beat the adults.

I showed my friends how to play the puzzle at the moderate and difficult levels, using the 3 box rule. They enjoyed it.

I showed the game to the staff at the resort. They enjoyed it. They wanted to organise the competition for their other guests.

Logic9 (Sudoku) and Business Skills

After each business meeting, I present the Logic9 (Sudoku) booklet to the participants. I teach them the three tips on how to solve the difficult puzzles.

I told them that the puzzles teaches 3 business skills:

* strategy - the right way to start
* analysis - learn from what is missing, and what is there
* entreprenerial - decide when you are uncertain and be ready to adapt

They were amazed.

I am giving talks at the Ang Mo Kio Library (19 May) and in Millenia Mall (17 to 19 July).

Direct access to a contact center officer

NTUC Income won the global, most innovative award for its contact center.

A key feature is the direct access to a contact center officer. The call is answered within 3 rings by a human voice. This is welcomed by customers.

Most contact centers operate differently:

* the call is answered by a machine
* you have to hear the different options and press a button to get ahead
* you often have to spend 1 or 2 minutes, before you can talk to a person
* if you are unlucky, you have to wait for that person to be available
* usually, they are not able to help you anyway

Which model do you prefer? NTUC Income or the conventional model?

Role of Idac Center for Motor Repairs

Mr Tan

There is still some confusion. What is the role of an Idac center, which is supposed to handle motor claims?

-----------------------------------

My reply:

The main role is to assess the damages to the vehicle and to take an accident report.

The motorist should go to an Idac center immediately after the accident. The surveyor at the center will take photographs and record down the damages. You can also submit a claim report on the spot.

The Idac centers are located at various parts of Singapore and have long operating hours. Their surveyors only focus on one job. This makes it convenient for the motorist. It is a "one stop" service.

The actual handling of the repairs is a separate step. If you are insured with NTUC Income, they will ask you to leave your car at the Idac center. They will arrange the repair and ask you to collect your vehicle in a few days time. Generally, the quality of the repair is satisfactory, based on the customer feedback.

The other insurers do not offer this one-stop service. You will have to their appointed workshop, or you have to find your own repairer.

Some insurance companies have moved out of the Idac scheme. They make their own arrangements for the repair. You will have to call them directly and ask them on what to do. You can also go to your workshop, and they can claim on your behalf.

In my view, it is better to have a scheme like Idac, as it is transparent and offers better service to the motorists.

Is the financial product really guaranteed?

Dear Mr Tan,

I visit your blog quite regularly. A recent negative experience encountered by a relative at a local bank prompted me to share some basics in evaluating an investment product.

I have appended my article below for your perusal to see if you would like to publish it on your blog or use it to educate the elderly at the Centre for Seniors.

Liu I-Chun

------------------------------------------------------------------------------------

The unprofessional selling of investment products by many bank staff upsets me.
What's disturbing is not just their aggressiveness, but their unethical sales
tactics.

I have written to the press (The Business Times, The Straits Times and Today) about it in December 2004, but have yet to see any marked improvement. As such, I always tell my parents NOT to invest their money without first telling me about the product in question.

Bank staff, in their eagerness to meet high sales targets and earn commissions, tend to make empty promises like telling customers that the return is "guaranteed" when it is NOT. They also fail to highlight the risks and relevant fees involved.

In Singapore, only two main types of financial instruments have guaranteed returns: bank fixed deposits (provided that the bank is reliable!) and AAA-rated Singapore government securities SGS (treasury bills and bonds), provided that the SGS are
held to maturity and coupon payments (if any) are reinvested at the same coupon rate.

As of April 12, banks pay about 2.6% p.a. for fixed deposits. The 90-day Singapore government treasury bill gives a yield of 2.3% p.a., and the longest 20-year bond yields about 3.2% p.a.

When a financial product offers a guaranteed return (for example a guaranteed return single premium endowment plan), the guarantee is made using bonds in which they invest with your money. If bonds only give 3.2% p.a. now, the financial institution should not be expected to guarantee an investor more than 3% p.a. return since it has to make a profit.

Any product that offers a return of above 3% p.a. will carry some risk, and is likely to include equities (stocks/shares), and/or Real Estate Investment Trusts REITs (a REIT is a hybrid between a stock and a bond as it pays dividends but its price can move up or down), and/or other financial instruments.

The return from equities and REITs can NEVER be guaranteed. So be careful when anyone tells you that a product promises to give a guaranteed return of more than 3% p.a. It doesn't seem possible under current market conditions.

Money market funds which invest in short-term financial instruments like treasury bills currently yield about 3.5 p.a. and is considered to be quite safe. The return is stable, but also not guaranteed. It is the next safest thing to invest in after fixed deposits and Singapore government securities.

Always read all about a fund from the prospectus and not just from the marketing brochure. Marketing brochures tend to highlight all the attractive features but only the prospectus will outline the fine print like "return is not guaranteed" and "payout can be made out of your capital".

Ms Liu I-Chun

High turnover of agents in China

My friend is a top level manager in a large insurance company in China. He told me that there is a high turnover rate of insurance agents in China. 75% of newly recruited agents leave within the first year.

My view?

It is extremely costly to recruit and train an insurance agent. The cost will have to be borne by the consumers. The people in China are paying a higher premium to cover this wastage.

This problem exists in other countries. It also exist to a smaller extent in Singapore.

The insurance industry has to find a better way to sell its products, and reduce the cost to consumers.

Check your financial transactions

Many years ago, I used to trust the financial institutions, such as banks and insurance companies. I believed that they will act honestly and ensure that all the transactions are properly handled.

Recently, I have decided to monitor my transactions closely. My reasons are:

* the number of transactions have increased significantly
* there is high turnover of employees
* the chance of mistakes are high
* there is the risk of fraud

I am learning to use the online access of these financial institutions, so that the transations can be monitored online.

I will stop doing business with instititions that do not provide convenient online access, or an efficient contact center.

Motor insurance premiums likely to escalate

The motor insurance premiums is likely to escalate during the next two years.

Reason?

During the past 18 months, several insurers have slashed their premium rates to uneconomical levels. They reduced their rates below the market leader, but were not able to keep their expenses low or to control their claims. Several of these insurers are now "bleeding".

A few days ago, it was reported that the insurance commissioner (from MAS) has asked the insurers to be responsible in pricing their premium rates.

This is similar to the situation in 2002. At that time, the insurers collectively lost over $200 million in the previous 3 years and had to increase their premium rates by more than 20%.

Lesson: Stay with NTUC Income, as they are able to manage the claims. Move to them now, before the premium rates start to escalate.

Repair your car after an accident

There are three main methods adopted by insurance companies around the world to handle the repair of the car, after an accident:

1. motorist find a workshop who claim against the insurer
2. insurer arrange the repair and pay the bill
3. insurer offer a payment and the motorist arrange his own repair

The most common method adopted in Singapore in method 1. This method has led to inflated claims. The workshop is able to aggravate the damages, get a surveyor to prepare a report and submitted an inflated claim.

NTUC Income adopted method 2. The motorist leaves the car at an Idac center and collects it a few days later, when the repair is completed. The quality of service and repair is satisfactory, as it is monitored by the claim specialists.

This method is also used by many large, successful insurers in other countries. It is effectively in producing the best results for the consumer and the repairer.

Method 3 is widely adopted in some countries. NTUC Income has also offered method 3 as an option. Less than 10% choose this option. They prefer method 2, as they prefer the repair to be taken care by the claim specialist.

Motor insurance

Surveys of customers show their top preference to be:

* lower premium rates
* good service when making a claim
* convenience in renewal the insurance

How is this possible?

When I was in NTUC Income, we developed a good working model that served the needs of most consumers.

I shall talk about how the model can be improved, for the benefit of consumers and ensure long term profitability for the insurance company.

Visitors to my blog

An average of 530 people visit my blog every day. This has increased since I left NTUC Income. I need to find out what interest you. Perhaps you can give your comments.

Can you ask your friends to visit my blog? I like to see an increase in visitorship.

Car pool

I took the MRT to attend a meeting in Tiong Bahru Plaza. After the meeting, I took a lift from a friend who attended the same meeting and was living near my home.

Since many people drive to a meeting, it is quite easy to get a lift to a nearby MRT station. Sometimes, I can get a lift all the way home.

Consolidated my ILP investments

In past years, I made several ILP investments. A separate policy was issued to me on each occasion.

I found it difficult to track so many different policies.

Recently, I requested for my investments to be consolidated into three policies, as follows:

* Growth fund (for my SRS investments)
* Global Equity fund (for my cash investments)
* Technology fund (for my cash investments)

It is easier for me to keep track of 3 separate policies, each invested in 1 fund.

I will also save on the policy fee payable for each policy.

Make it easy for the customer to reach you

My PDA device had some trouble with the internal battery. I wanted to call the helpline of the manufacturer.

I visited the website of the manufactuer to get information. I had a lot of difficulty:

* the website does not show the contact telephone in the home page
* I had to search through many webpages
* Some of the webpages were slow in loading, as they insist on showing some video (which I do not need)

I found a webpage which was supposed to help me to find a reseller. I had to answer many questions into a form for the search. When I click on "submit", there was no response for a few minutes. The database server hung.

It seems that they do not want to talk to a customer. Instead, they impose a form to chase the customer away.

I hope that all corporate websites can be made friendly, easy to access, and helpful to their customers. The most important information is a 24 X 7 contact number, e-mail address, and a physical address with operating hours. They should aim to welcome a customer contact.

Give your rating to the suggestions in the LTA portal

I read the suggestions posted in the LTA feedback portal. For the suggestions that I agree, I posted my rating as "agree". So far, I seem to be among the very few, who are willing to give a rating.

I wish to encourage other people to give your views on the suggestions that you agree with. Let us be prepared to lend our voice and give our support to the useful suggestions.

LTA portal

The purpose of a business

Here are some interesting points from Peter Drucker's book, "The Essential Drucker".

A typical businessman says, "The purpose of a business is to make a profit".

Peter Drucker says that this answer is not wrong, but it is irrelevant. He said that the purpose of a business is to "create a customer". It is the customer who determines what the business is, and is willing to pay a price based on its utility, i.e. what the product or service does for him.

Profit is the final outcome of servicing the customer's needs, collecting the revenue and paying the expenses. It require the business to be runned efficiently.

Making a profit is a condition of business survival. If the business is not profitable, it will cease to exist. It is not the purpose of the business.

In his book, Peter Drucker identified eight important business objectives, covering:

* marketing
* innovation
* human resource
* financial resource
* physical resource
* productivity
* social responsibility
* profit requirement

I share the views stated by Peter Drucker. It is important to have a clear understanding of the purpose of a business, in servicing the customer. They will guide the setting of the other objectives and the implementation of the business strategy.

Maintain flexibility in a financial contract

When you invest in a financial contract, make sure that you have the flexibility to terminate the contract, without penalty.

Do not be locked into a long term contract that imposes a heavy penalty. Examples of contracts to avoid are:

* traditional life insurance, eg whole life or endowment policy
* structured products

These contracts incur a high, upfront cost. If you terminate the contract, you will suffer a penalty.

If you wish to buy a traditional life insurance policy, you should a cooperative (such as NTUC Income) as most of the future profits are returned to the policyholders.

In a commercial insurance company, the profit are given to shareholders. If you are locked into a long term contract, you may get a poor deal.

The flexible savings products are:

* unit trust or mutual funds with a low upfront charge, and no penalty

If you do not like the performance of the fund or the charges, you can withdraw your investments and put the money into another fund. This flexibility ensures that you will get a good deal all the time.

If you need life insurance protection, choose a term insurance plan (where the premium is very low). You can reduce the premium further, if you choose a decreasing term insurance plan.

Growth plan gives a moderate return with low risk

Mr Tan kin lian.

I am a housewife. I like to seek for your advice.

I have $10,000. I wanted to put in fixed desposit at NTUC INCOME for 10 years at about 4% per year. The insurance adviser recommanded the Growth plan under combined Fund.

Can I invest on that?

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My reply:

I suggest that you invest in the growth plan (ie single premium endowment), rather than the Growth Fund (Combined Fund). It gives a moderate return and has low risk.

You can read the FAQ on this product at www.income.coop/faq or ask the adviser to tell you the difference between the Growth plan and the Growth Fund (i.e. Combined Fund).

Land Transport Authority Feedback Portal

During the past 10 days, there were 4 postings in the portal.

This morning, I posted 3 suggestions. I also encouraged visitors to my blog to visit the LTA portal.

I found that there were 18 postings today, after my posting. I suspect that many of these postings were from visitors to my blog. Some probably went to the LTA portal directly, after reading the newspaper (like I did).

LTA portal

Dr Money: A Dozen Quick and Easy Tax Tips

Dr Money has given 12 tips on how you can save on your income tax. You can visit his

Blog

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A brief introduction:

Time flies. It is tax time again. This year’s taxes are due on April 18 for e-filing and April 15 if you mail in a return.

The maximum fine for not filing or filing late is $1,000, but you can receive an extension if you have a good reason.

The Inland Revenue Authority of Singapore (IRAS) hopes 80 per cent of the 1.34 million taxpayers will e-file this year. That is up from 73 per cent last year.

The new e-filing system is fast, easy and almost fun. Gone are past years’ glitches when the screen would suddenly hang just as you completed your return.

Talk to LTA: pubic transport service

I visited the website of the Land Transport Authority and posted three suggestions on how to improve the public transport service. Talk to LTA

I hope that you will go into this website and give your views. You can also vote on my suggestions.

Medical fee guidelines

Is it wise to have guidelines for medical fees, to be set by the medical association?

I think so.

If medical fees are open to free competition, the consumers may be worse off. It is quite difficult for the consumer to judge what is right and fair, in the fees that are charged by doctors for various types of treatment and medication.

If the guidelines are set by the medical association, the public can refer to the association to act as the standard bearer.

I wish to quote the situation with the financial services industry. The institutions are free to design their products and to charge their prices. This has resulted in financial products that are profitable to the issuers but do not give a fair deal to the consumers.

Hot property market

The property market is hot, especially for the high end properties.

Even a listed large book distributor have decided to invest their cash and borrow money the bank to invest in properties, in the hope of cashing in on the hot market.

Is this wise?

During 1996, when property prices went up to high levels, many people jumped to invest in the market. Subsequently, the prices dropped. A recent survey showed that most of the prices today for these properties are still far below the prices during 1996.

Lesson: The sharp increase in prices apply only to new properties. If you are not able to sell the property to another buyer, while the market is very hot, you will be stuck with a high price property that may not recover your cost, after 10 years.

Right for owner to moderate comments in his blog

Last week, there was an article in the newspaper discussing the right of the owner to moderate comments posted in his blog.

Arguments were presented on both sides. Some people felt that the owner has the responsibility to moderate comments that are offensive and defamatory. Others defend the right to "free speech".

My views are:

* As the blog owner, I have the responsibility to ensure that comments are polite
* I welcome opinions, even if they disagree with me, provided that they are polite
* I will remove comments that are impolite to me or to other commentators
* I respect differing opinion, if they are given responsibly and are not anonymous

Be Confident & Optimistic

When Singapore became an independent nation, many people thought we could not make it. But we did. This is due to the spirit of many Singaporeans who contributed to make Singapore what it is. We refused to accept what others thought was inevitable without trying.

Here is a story from Dr. Lee Kum Tatt and her granddaughter. Blog

Tan Kin Lian

Should I terminate my existing whole life policy?

Questions:

Currently I have a policy "Young Family" with NTUC. I have been paying a monthly premium of $154.50 since 1984.

As this is a life policy, it means that I will be paying premiums for nearly the rest of my life. I am already 59 and retired, and I am thinking of cashing out (about $51000 now) at this point.

As I have 2 children (aged 20, 26) who are almost done studying , I am also looking around for a good term policy available to seniors which will be for 5 or 10 years.

Although one of your officers at NTUC suggested buying an annuity, I do not think this is a good proposal as I am keen on buying a low cost term insurance which can cover for 5 to 10 years.

Does NTUC or other insurance companies plan to offer low-cost short-term policies for seniors?

------------------

My reply:

I suggest that you should continue the young family policy for another 5 years and terminate it at that time.

You can ask NTUC Income to tell you about the following:

* cash value now
* cash value in 5 years time (projected)
* total premiums payable for the next 5 years
* term insurance for 5 years

You can make a better decision, after getting the figures.

You can visit the business center at Bras Basah Road and talk to a consultant.

Buying a decreasing term assurance

Dear Mr Tan,

I read about your suggestion on buying a 20 years decreasing term assurance. I had a few questions on this policy.

1) If there's protection, what are the protection given?Death and TPD only?

The decreasing term insurance covers death and permant total disability.

2) Can I add a Critical illness rider to this assurance?

Currently, this is not available. But the expenses of treating critical illness is covered through a medical insurance plan (eg Incomeshield).

3) If I buy a decreasing term assurance and do not make any claim during the term, do I have to buy another assurance?

At the end of the term, you probably do not need any life insurance as you have adequate savings (hopefully) and your children are grown up.

4) If I want protection (including whole life, TPD and CI) and good return savings at the same time, is it possible?

I suggest that you buy protection through a decreasing term assurance and to save and invest in a large, well diversified, low cost equity fund. You can read more about this concept in my FAQ at www.tankinlian.com/faq

5) Is it wise to keep my current policy?

Generally, it is wise to keep your current policy, as you have already incurred the upfront load.

Parents wants more term insurance and savings

Hi, Mr Tan,

I wish to find out more about Term insurance. Currently, my husband has the following insurance coverage:

Husband age : 43 years
Annual income: 100k

Existing policies: investment linked, endowment, term, whole life, medishield, eldershield

We are family with 3 kids, with all Term living coverage - 200K each, we have no debt or any loan been paying, now trying to save for the children's university fees.

--------------------------

Reply from insurance adviser:

I checked on a Term Policy for your husband. The premium for $150,000 for your husband is $291.90 yearly (your current term plan charges $800 yearly).

Saving for our children is an excellent thought. Our Ideal Plan is
flexible and gives good returns. How old are your children?

If you are open for discussion, a proper financial planning for your needs is required.

More trains for a comfortable ride

I took the commuter train to the city this morning at 10 am. I took the train back home at 9 pm.

On both occasions, the train was quite crowded. I was not able to get a seat for the entire journey.

These are off-peak hours.

I hope that the SMRT will put more trains, so that the commuters can have a more pleasant ride during the off-peak hours. I can understand that, during the peak hours, when there are too many commuters, it may not be easy to add more trains to meet the demand.

It may mean somewhat lower profit for the SMRT to add more trains during the off-peak hours. But, I am sure that it will still be quite profitable for SMRT. And it will mean more comfort for commuters.

If more commuters find the train to be comfortable, then some of them will decide not to use private cars, which congest the roads. It will lead to a more efficient public transport system.

I hope that the public transport council will consider this request.

Reduce holdings of Singapore shares

I find the Singapore stockmarket to be too high. I reduced 12% of my holdings today (i.e. individual shares). I intend to continue to reduce my holdings within the next few days by a total of about 50%.

For the time being, I will keep my investments in the combined fund (which is largely invested in global equities and bonds).

Accident and term life insurance

Accident insurance covers death and permanent disability (partial or total) caused by accident. An accident is defined as being caused by a violent, external, visible force and excludes illness, self-inflicted injury, natural disasters, war and certain other risks.

Term life insurance covers death and permanent total disability arising from accidents and illness. Nearly all causes of death are covered, except for suicide during the first year of the insurance.

The premium for accident insurance usually vary according to occupation (in a few broad categories), and does not vary according to age.

The premium for term life insurance varies according to age. It can be two times of accident insurance at the younger ages, and much higher at the older ages.

It is better to buy term life insurance to protect the family from death arising from all causes. Alternatively, you can buy say $50,000 in term life insurance and say, an additional $150,000 in accident insurance.

Delay in payment of death claims

Dear Mr. Tan,

My sister in-law died on 16/12/2006 in New York at age 43.

The only documents at hand are :

1) the death certificate
2) cremation certificate
3) Acknowledgement from the S'pore Consulate for receipt of the deceased's passport and nric.

The family submitted claims to three life insurance companies (not NTUC) in January 2007.

The insurance companies had not approved the claims yet. They are still investigating the cause of death and require more information. All policies were in force and at least more than 2 years from the date of inception.

How can I get the insurance companies to settle the claims earlier?

---------------------

My reply:

If the insurance company is unreasonable in delaying the payment of the claim, you can lodge a complaint with the following organisation:

FiDREC

If there is delay of more than two months in the payment of the claim, the insurance company is required to pay interest for the period of delay.

Interest on late payment of claims

There is a guideline by the Life Insurance Association which requires a life insurer to pay interest on late payment of maturity and death claims.

The interest is payable if the claim is settled more than two months from the date of receipt of written notification of the death. For an endowment policy, interest is payable if payment is made more than two months from date of maturity.

The interest is calculated based on the 12-month Fixed Deposit rate and savings rates of major local banks, weighted in the ratio of 80:20. It is calculated from the date to the date of payment.

Inspiration – Human Nuclear Energy

Dr. & Mrs. Lee Kum Tatt, not only shared their lives together. They also helped each other in their professions and careers to do things of interests to them both. This is why they can cope with so much more than otherwise.

How they did this is something we can learn from them. Mrs. Lee gives her account of some of the things she did.

Blog

Tan Kin Lian

Should I withdraw my profit?

Dear Mr Tan,

Last year, I was forced to withdraw 8k from flexilink (the profit). And despite that, there was some more profit by Feb 2007.

Do you normally withdraw the profit (leaving the what we put in initially, i.e. the capital) or do we leave the profit alone, as I understand the capital will double in ten years time?

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My reply:

It is better to leave the gains to accumulate in the fund. If you need to spend some money, you can make a withdrawal, and it does not need to be tied to the amount of profit.

I allow my investments in the fund accumulate and will draw money from my bank account (which earns 1% interest), if I need to spend.

If the fund earns 6% per annum, it will double in value in 12 years (if you leave it to accumulate).

Wish you all the best in your investments.

High coverage at low cost

I met two new friends over a cup of coffee. They asked for my advice on how to obtain high coverage at a low cost.

I said:

* if a person in the late 20s buy a whole life policy for $200,000, he has to pay a monthly premium of $300

* if he buys a 20 year deceasing term assurance, the premium is only $20 a month.

They were surprised that the secnond plan is so affordable.

I explained that they can invest the difference of $280 into a unit trust or mutual fund, and get a good return over the next 20 years, and have a flexible savings plan.

"Why did not insurance agent not offer this option?"

The reason: the insurance agent earns much more by selling a whole life policy, instead of a decreasing term policy.

Savings for retirement

Someone told me that a hawker was sold a 20 year endowment policy with an annual premium of $7,000 as a form of saving for retirement.

Here is my analysis of the product:

* assume that the return on the endowment policy is 3.5% p.a., the maturity benefit is $204,000.

* if the hawker buy a decreasing term assurance and invest the difference in a unit trust to earn a net interest of 6% p.a., the expected maturity benefit (not guaranteed) would be $245,000 (after allowing for the normal charges of the fund). This is 20% higher than the endowment policy.

An endowment policy is rigid and requires the savings to be made for 20 years. If the plan is terminated in the early years, the policyholder may suffer a loss, due to the high marketing charges.

The unit trust is more flexible.

If the policyholder is able to claim tax relief on the insurance premium, then the tax savings will reduce the difference. But, if the policyholder does not pay any tax, then this advantage does not accrue.

Foreign funds are responding to investors' demand

Someone told me that the foreign funds are "not manipulating" the stockmarket. They are just responding to investors' demands to invest in Asian markets. Singapore is an attractive place for their investments.

This is correct.

However, the Singapore market is quite small. When the foreign funds flow into the market, they will push up the prices to a high level. When they have made enough profit, they will sell the shares and move to other Asian markets.

This has happened many times in the past. We must be prepared that it may happen again.

Local taxis

In some countries, there is a separate licence for a local taxi. It can only operate within a certain zone. This is to avoid competition with the long distance taxis. The taxi driver probably pays a separate licence fee.

I suggest that we should have this concept to provide a feeder service to MRT stations or bus terminus. We can allow private cars to be used to provide this service. The cost should be kept low, say $1 per passenger or $2 per trip.

If there is an efficient feeder service, more people will use mass transit. There will be less cars on the road.

Watch out for outflow of foreign funds

My friend told me that the recent increase in the stockmarket is due to "manipulation" by the foreign funds. They are able to control the market.

I recall that, on three occasions in past years, the market fell a lot when the foreign funds move out (which they did, after they have made enough profit). When the market falls, you will not be able to get any buyer, unless you are prepared to take a big cut in prices.

If you wish to take profits, the best time is when the stockmarket is still moving up. Do not wait for it to turn.

Organising my folders

I use a folder in Big Trumpet to store my important data, including:

* website address, user names, id
* credit card numbers, telephone, PINS
* bank account number, PIN

As they are stored in a server, it is easy for me to retrieve them from anywhere in the world.

The folders are encripted and are quite secure. I get an e-mail alert, each time that my folder is accessed. So far, all the access are by me.

If someone else made an unauthorised access, I can be notified by the e-mail alert.

My impression of Huangshan, China

Many people said that the scenery in Huangshan is magnificent. I agree.

My wife and I have spent three days in Huangshan. We enjoyed the changing scenaries and the long walks along the mountain paths.

The different parts of the mountains are named as the "north sea", "west sea", "front sea", etc. Why do they name them as "sea", when they are high up in the mountains?

The mountains are high and are above the clouds. When you look at the clouds from above, they look like the "sea".

We flew to Huangshan City from Shanghai. We took a taxi to get to the foot of the mountain. To get to the hotel at the top, we had to take another taxi and cable car ride, and walk for 1 kilometer.

On our return, we took the overnight train from Huangshan City to Shanghai. It was a great experience.

How to get adequate insurance

In the Sunday Times, there is an article by Lorna Tan. She reported that it is possible to get a large amount of term insurance at an affordable premium. It is even more afforable, under a decreasing term plan. She also quoted a financial adviser.

I agree with the views. They are similar to the views that are advocated in my blog and my website.

FAQ

NTUC Income offers a very attractive rates under its i-Term product. Visit www.income.coop/faq

Difficult to buy Term Insurance in China

A friend told me that she wanted to buy term insurance in China. It was not available. The insurance agents do not carry this product.

Two years ago, she was quoted a premium rate of 2,500 RMB to insure for 250,000 RMB, under a plan that offers a partial premium refund. She found it to be too expensive. This plan was no longer offered.

For her age of 25 years, she would be able to buy a 20 year term insurance of 250,000 RMB in most countries at a premium of about 500 RMB.