Critical Illness Cover

Dear Mr Tan,

I would like to ask, why did you say $50,000 is enough for critical illness policy?
Let say if i am really hit by one of the illness which is insured by the policy, will $50,000 be really suffice for medical fee and hospitalisation?

REPLY

I expect most people to have a Medishield plan that will cover most of the cost of medical care.

I advice people to avoid over-insuring and pay too much premium on high cost insurance products. They should have more savings for their retirement.

Read this FAQ:
http://www.tankinlian.com/faq/choice.html

If you have adequate savings, you can use part of your savings to meet the unexpected medical expenses (instead of relying on high cost insurance).

Safari Park near Puncak

I visited the Safari Park near Puncak, outside of Jakarta. I was surprised at the high quality of the park. The visitors drive through the safari park in their vehicles. The animals were allowed to roam freely. They are in good health and well taken care of. The visitors can feed the animals with carrots.

Structured Products invested in subprime CDOs

Hi Mr Tan,

I need your advice. Last year, I invested $50,000 in the Pinnacle Notes which will mature in 2012. Will the US subprime mortages affect this product? Can you advice on the risk involved in this product ?

REPLY

I am not familiar with the actual investments of this product. I understand that some structured products were invested in Collaterialised Debt Obligations (CDOs) which comprise of these subprime mortgages.

I suggest that you ask this question to the issuing bank. I am interested to know their answer as well.

Bear Market

We are now in a severe bear market. The stockmarket around the world has dropped more than 20% from its recent peak. The drop can be 5% a day. It can drop a few days in a row.

This is the work of hedge funds. When the market is weak, they sell in large volumes, causing weak holders to panic and sell their holdings. There are no buyers, so the drop is severe. Later, the hedge funds will bear back their short positions at the depressed prices and make a profit. It has happened on many occasions in past years, during bear markets.

Long term investors should not worry. This short term massive selling last a few days and will stabilise or recover. In fact, this is a good opportunity to buy stocks at extremely depressed prices.

See a financial adviser

Some visitors to my blog sent detailed information about their personal financial matters and asked for my advice. I am not able to spend time to provide detailed personal advice on specific investments that suit their needs.

If you are in this situation, I suggest the following approach:

1. Read the FAQs in my blog and website and be educated about the financial matters
2. Find a financial adviser whom you can trust (i.e. someone you know or recommended to you)
3. Get the financial adviser to advise on your personal investments for a fee.
4. Ask the financial adviser to disclose the commission that they earn on the products that you buy.

Goal: to achieve $1.2 million in 25 years

Hi Mr. Tan,

I target to accumulate $1.2m in 25 years time. I now save $18,000 a year in insurance premiums. I wish to increase it to $24,000. My savings in CPF is capped at $17,000 a year. How can I make my savings grow faster?

REPLY:

If you save $24,000 a year and invest to earn an average of 5% per annum, you will get $1.14 million at the end of 25 years. Your savings of $17,000 in insurance policies probably earns for you a return of 3% per annum (just a guess). This will accumulate to only $0.65 million in 25 years time.

You can make your savings grow faster by earning a higher rate of return in a diversified, low cost, equity fund. You may wish to consider terminating some of your insurance policies, and investing the premium to earn a higher return.

Read this FAQ:http://www.tankinlian.com/faq/savings.html

However, you have to bear in mind that $1.2 million in 25 years time is worth only $0.73 million in real terms, if you discount for inflation at 2% per annum.

Logic Quiz B1

Can you solve this logic quiz?

There are four houses with different colours in a row. Each occupant keeps a different pet and drinks a different beverage.

1. The person who drinks beer lives to the left of the person who keeps cat.
2. The grey house is to the left of the blue house.
3. The purple house is occupied by the scientist.
4. The salesman keeps bird.
5. The green house is next to the person who drinks wine.
6. The scientist lives to the left of the person who drinks tea.
7. The accountant lives to the left of the manager.
8. The person who keeps hamster lives to the left of the person who keeps fish.
9. The purple house is the second house.

You can find the answer here
http://www.tankinlian.com/logicquiz/answer.html#B1

Here are more quizzes at three levels:
http://www.tankinlian.com/logicquiz/quiz.html#B1

And you can download the teaser to share with your friends:
http://www.tankinlian.com/downloads/Logic_Quiz_Teaser.pdf

Secret of the Amazing Numbers

It is time for me to share the secret of the Amazing Numbers. After your friend has selected the cards (that contain the selected Number), you add the first number of the selected cards to get a total (which is the selected Number).

For example, if your friends chose the cards with the starting numbers of 1, 8 and 16, the selected Number is 1+8+16 = 25. The Number 25 appears in these three cards and not in any of the other cards.

The starting numbers of the 7 cards are in multiples of 2, i.e. 1, 2, 4, 8, 16, 32, 64. Any Number can be formed by adding from these starting numbers. The Number 25, is formed by adding 16 + 8 + 1. Hence, this Number appears only in these three cards.

You can take my Amazing Numbers and make the 7 cards to amaze your friends!

Puncak - hill resort near Jakarta

I stayed at a villa near Puncak, which is a popular holiday resort outside of Jakarta. According to Wikipedia, Puncak is only 390 m above sea level, but it is quite cool and pleasant.

I found the landscape from the villa to be magnificent. I could see three large mountains in the distance, with beautiful white clouds below the peaks. I gave a great feeling about the wonders of nature.

Lawyer's Joke: Contempt of court

The lawyer was quite fed up with the judge, who was constantly ruling against him. He collected his papers and was about to leave the court.

The judge asked the lawyer, "Are you trying to show your contempt for this court?"

The lawyer replied, "No, your Honour. I am trying to conceal it!"

Books on financial planning

Dear Mr. Tan,

I am new in investments. Can you recommend a good book or financial blogs?

REPLY

There are many books on financial planning and investments available in the market. They are good in theory, but will probably have the following disadvantages:

a) They do not cover the situation in Singapore
b) They teach the theory and avoid the practical issues that are faced by real people.

I am not able to recommend any good books. Perhaps, the other readers of my blog can suggest some good ones?

I suggest that you read the following:

My blog: www.tankinlian.blogspot.com
My website, under the section Ask Mr Tan: www.tankinlian.com/faq
Dr Money's articles: http://www.tankinlian.com/drmoney/

Continue existing policies

Dear Mr. Tan

I would like to thank you for your generousity in time and advice for everyone. Your blog has been an eye-opener for me.

I would like to seek your advice on my family's insurance needs. Finance has been tight for us. We have 3 regular premium ILPs that were bought 7 years ago. We are thinking of stopping the ILPs and buying a Term insurance.

My agent has suggested that we buy a life insurance policy. Do you think that this is a good idea?

REPLY

For the three ILP policies, can you find out the following:

1. What percentage of the monthly premium is invested from now onwards (i.e. after the policy has passed 7 years).
2. What are the deductions from the monthly premium to cover the policy expenses and mortality charges?
3. What is the annual charge on the investment fund?
4. What is the spread on investing each premium into the fund?

Quite likely, you have passed the period of high upfront charges. If this is the case, it is better to keep the ILP policies as an investment for the future.

I do not recommend a new ILP policy, as it incurs high upfront charges. But, if you have already incurred it in past years, it is better to continue with the policy.

I suggest that you buy a decreasing Term insurance to cover 5 years of your earnings, reducing over a period of 20 years. Do not buy the whole life policy.

You can read the FAQs here:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
http://www.tankinlian.com/faq/ilp.html

Investing for the future

Hi Mr. Tan,

I am concerned that my savings for the future will be eroded away by inflation and that the yields in the CPFOA may not keep up with inflation.

I am considering putting some savings into UOB Growthpath 2040 fund and also the Combined Fund by NTUC Income. It seems that doing a regular ILP incurs high costs. I am thinking of putting some money in both funds over the next few months. What are your views?

Thanks for the advise on your website. It is sad that insurance agents put a lot of pressure on customers. I almost signed up an ILP with a friend only to realise of the high upfront costs, and also the relatively high annual charge of 1.5%. I was advised to put money in single country funds that are 'hot' economies. I decided to cancel the policy within the 14days grace period. I cannot afford to lose up to 18 months in upfront costs at this early stage of life.

I checked with another agent and was told that not all the information on DR Money's website is true about insurance.

REPLY:

You can read this FAQ about investments:
http://www.tankinlian.com/faq/savings.html

I am not able to give you specific views about the UOB fund. If you wish to invest in the Combined Fund from NTUC Income, you can invest through the Flexi Link policy, where the charges are much lower than a regular ILP.

You did right to cancel the high cost ILP policy. Your savings should be for your future, and not for the earnings of the insurance agent.

Dr Money's advice on insurance is sound. It may not be 100% accurate. My advice is not 100% accurate either. But, they are useful for consumers.

Low risk investment

Dear Mr. Tan,

I learnt from your website from reading mypaper. I'm a nerd when it comes to financial management. Apart from savings account, I know nothing much about investments. I'm not a high risk taker, but would like to know how to go about low-risk investments.

Are there any articles, websites or books to recommend for beginners? I heard that T-bill is a low-risk investment but I've no idea how to go about doing that.

Recently, I've also heard that an insurer is offering a sort of Fixed Deposit, which offers higher interest than banks. Is it trust worthy?

I'm in my mid-30s and wish to invest $50,000 for my retirement or my son's education fund. What is your advice?

REPLY

I suggest that you read this FAQ. It should contain the answers that you need.
http://www.tankinlian.com/faq/savings.html

Amazing Numbers

A few people have written to ask for my permission to use my amazing numbers to play with their friends. They are most welcomed. I asked them to make 7 cards using the amazing numbers.

I have just visited an insurance company in Indonesia. Their managers are amazed at the numbers and wish to print the amazing numbers cards to give to their clients.

What are the amazing numbers? Try it:
http://www.tankinlian.com/amazing/index.html

Migrating to Term insurance

Dear Mr. Tan,

I bought the NTUC I-young policies for my two sons at $100 annual premium for a coverage of $50,000. The policies will lapse upon the age of 29. Should I switch to a Term insurance policy, as mentioned in your blog, for an annual premium of $100 to $300 for a coverage of about $150,000 or stick to I-young? Your learned advice is much appreciated.

REPLY

Both options are suitable. When your sons are ready to buy their own Term insurance, they can buy a Term insurance for about 5 years of their income, and discontinue the iYoung policy. In the meantime, the iYoung will serve them well.

How to get started in investing

Dear Mr. Tan,

Thank you for providing this wonderful resource and for making investment and insurance products so much easier to understand.

Now I am very keen to get my money to work harder. The question is, can you please teach me how to get started? How do I buy a unit trust or an indexed fund?

REPLY

You can read the FAQ in my website, www.tankinlian.com/faq

Financial Blogs

Dear Mr. Tan,

Hope all is well with you. Your last update on your blog was 14th. Jan today is 18th. I am sure many readers like me who visit your blog everyday must be missing your posts (like I am).

By the way, I like reading Doc money's writings but they come out just once or twice in a while. Can you suggest any Singapore specific useful financial websites or blogs (apart from those already listed on your right panel) where real good, sound info is given like you and Doc money give.

REPLY:

I have been in Jakarta for the past few days, and have some difficulty in getting Internet connection. You can read my blog and Dr Money's articles. I am not aware of other good blogs on financial matters.

Investing in the Singapore market

Dear Mr. Tan,

A few weeks ago, you suggested that a good time to invest in the Singapore market is at the level of 3,000 to 3,300.

The Singapore index is now about 3,100, but there is the risk of a recession in America. Is it safe to invest at the current level?

REPLY

If you are investing for the long term, it is all right to invest at the current level (in my view). The market has dropped by more than 20% from its peak at 3,850. You may not be able to catch the bottom, so it is better to start investing. If you are unsure, you can invest in three tranches over the next there months.

If you are investing a monthly sum, it is all right to invest now. You can invest in the STI tracker fund, or the Combined Fund from NTUC Income (through the Flexi Link policy).

Updating my blog

A few visitors have observed that I was not updating my blog for the past few days.

I was away in Jakarta from Tuesday to Saturday. It was difficult for me to get access to the Internet. The Internet connection from the hotel was slow and expensive. I have just returned.

Means Testing

Mr. Tan,

What are your views about means-testing?

REPLY

It is a lot of work, all lot of uncertainty, for quite negligble savings. The Minister for Health said that the subsidy will be reduced from 80% to 65%. The savings to the government is only 15%.

Most people who uses the C wards are likely to be the older and poorer people. Those who are affluent are most likely using the A or B wards. Those covered by employers will use the higher class wards anyway.

I hope that the Minister will drop this idea. It is not worth the trouble.

Low cost funds

Dear Mr. Tan,

How can I buy low cost funds in Singapore?

REPLY

You have the following options:

1. Buy the STI or other ETF (exchange traded funds) through a stockbroker
2. Buy the Combined Fund from NTUC Income, investing through the Flexi-link policy.

Science & Technology & Singapore

Much of what Singapore is today is due to our ability to apply Science & Technology to our lives.

Dr. Lee Kum Tatt, as founder chairmen of Singapore Science Council, Singapore Institute of Standards and Industrial Research (SISIR) and a Senior Member of Singapore Polytechnic Board of Governors etc. ( 1950’s – 1980’s) contributed much to building the science and technology infrastructure in Singapore in the early days.

For those who are interested in how some of Singapore policies on science and technology are formulated and implemented, including what not to do, read the articles in Lee Kum Tatt's blog to learn how he did what he did.

www.leekumtatt.blogspot.com

Direction signs at MRT stations

A commuter approached me outside Yio Chu Kang MRT station. She wanted to know where to get a bus to go to Techpoint. She asked if it was bus service 70 (as she had checked the street directory), and where is the bus stop?

I took out the Public Transport Guide which I usually carry with me. It was indeed service 70 and indicated the nearest stop to Techpoint.

However, the commuter had walked in the wrong direction and is quite far away from the bus stop. She was not able to get clear direction from the other people.

I find the direction signs in our MRT stations to be inadequate. It is also difficult for someone to get useful directions, if they are not familiar with the bus services.

Be educated about financial matters

Dear Mr. Tan,

My daughter who has recently started work, was approached by an insurance agent from X at MacDonalds. The agent gave a long sales talk to my daughter. She was not clear about what the product was, and was coerced into buying the policy.

I told her to cancel the policy, as a large part of her hard earned money will be used to pay commission to the agent. I advised her to read your blog and understand insurance and investments better, before she make this type of financial decision.

REPLY

Many young people have been approached in this manner. In many cases, the agent who sells them the policy was their friend or classmate.

It is true that they will waste their hard earned money buying the wrong, expensive product that gives a poor return.

It is better for them to buy Term insurance or personal accident insurance first. They can accumulate their savings in the bank account and decide later on how to invest it.

Motor insurance joke

Prosecutor to defendant accused of reckless driving, "Is it true that you knocked down five people this year?"

Defendent: "No. I only knocked down four people. One of them was the same person that I knocked down twice."

Lawyer's joke

A man was being sued for returning a borrowed lawn mower in a damaged condition.

His lawyer told the court, "I will prove my client's innocence in the following ways: Firstly, he never borrowed the lawn mower. Secondly, the lawn mower was already damaged when be borrowed it. Thirdly, the lawn mower was in perfect condition when he returned it. "

Joke: Some lawyer can argue any point in a convincing manner.

Index Fund or ETF?

Mr Tan,

Should I invest in an Exchange Traded Fund and an Index Fund? Both funds track an index.

http://stquote.sgx.com/live/st/STETF.asp http://www.lioncapital.com.sg/default.asp?action=category&ID=24&order=rank&sort=asc&limit=0

REPLY

If you are investing for the long term (and not trading for the short term), it is better to buy an indexed fund, as it is based on the net asset value of the fund at the end of the day. You do not have to worry about trading based on the actual price fluctuation during the day.

Post Hospital Expenses

Dear Mr. Tan,

I agreed with Ministry of Health that there is no Medi-crisis at the macro level. My family members have been treated in public hospitals, and the charges are affordable.

But we face a financial crisis at the micro level, in meeting the post-hospital expenses covering the following:

Taxi Fare/Ambulance
Consultation Fee
Laboratory Test Scan
Meal at Hospital Foodcourt
Medicine
Food suppliment

The total cost for each medical appointment is more than $200 (not counting loss of productivity). This has to be multiplied by the number of visits over the years for two elderly persons.

Each retiree gets only $297 a month from the CPF savings.

Decreasing Term

Dear Mr . Tan,

I am 25 years old. Should I take a 40 year Decreasing Term or a 20 year policy and renew it at the end of 20 years?

REPLY

You should take a Decreasing Term for 40 years. It should cover the duration of your expected working career.

If you take a Decreasing Term for 20 years and wish to renew it at the end of 20 years, the renewal is subject to your health condition at that time. The premium will be based on your age at that time, and will be much higher.

This arrangement is not suitable, as the sum insured under the Decreasing Term will reduce during each period of 20 years.

A Message by George Carlin

The paradox of our time in history is that we have taller buildings but shorter tempers, wider freeways , but narrower viewpoints.

We spend more, but have less, we buy more, but enjoy less. We have bigger houses and smaller families, more conveniences, but less time. We have more degrees but less sense, more knowledge, but less judgment, more experts, yet more problems, more medicine, but less wellness.

We drink too much, smoke too much, spend too recklessly, laugh too little, drive too fast, get too angry, stay up too late, get up too tired, read too little, watch TV too much, and pray too seldom.
We have multiplied our possessions, but reduced our values. We talk too much, love too seldom, and hate too often.

We've learned how to make a living, but not a life. We've added years to life not life to years. We've been all the way to the moon and back, but have trouble crossing the street to meet a new neighbor. We conquered outer space but not inner space. We've done larger things, but not better things.

We've cleaned up the air, but polluted the soul. We've conquered the atom, but not our prejudice. We write more, but learn less. We plan more, but accomplish less. We've learned to rush, but not to wait. We build more computers to hold more information, to produce more copies than ever, but we communicate less and less.

These are the times of fast foods and slow digestion, big men and small character, steep profits and shallow relationships. These are the days of two incomes but more divorce, fancier houses, but broken homes.

These are days of quick trips, disposable diapers, throw away morality, overweight bodies, and pills that do everything from cheer, to quiet, to kill. It is a time when there is much in the showroom window and nothing in the stock room. A time when technology can bring this letter to you, and a time when you can choose either to share this insight, or to just hit delete...

Remember; spend some time with your loved ones, because they are not going to be around forever. Remember, say a kind word to someone who looks up to you in awe, because that little person soon will grow up and leave your side. Remember, to give a warm hug to the one next to you, because that is the only treasure you can give with your heart and it doesn't cost a cent.

Remember, to say, "I love you" to your partner and your loved ones, but most of all mean it. A kiss and an embrace will mend hurt when it comes from deep inside of you. Remember to hold hands and cherish the moment for someday that person will not be there again. Give time to love, give time to speak! And give time to share the precious thoughts in your mind.

AND ALWAYS REMEMBER:

Life is not measured by the number of breaths we take, but by themoments that take our breath away.

George Carlin

Crisis in health care?

Do we have a crisis in health-care?

Read the articles in Today paper:

a) Article by Stanley Jeremiah – Medisave, Medishield, Medi-Crisis?
http://www.todayonline.com/articles/230532.asp

b) Article by Alex Har – Medi-Debate: Why I’m Optimistic
http://www.todayonline.com/articles/231761.asp

c) Letter by Karen Tan, M of Health – We can be proud of 3M
http://www.todayonline.com/articles/231791.asp

Some points to ponder:

a) Do we have a medical insurance crisis?

b) Many people have several medical insurance policies. They are over lapping, duplicative and wasteful. Do you agree?

c) Medishield has Deductible and Co-insurance to encourage people to use medical services carefully. This is negated by offering a rider to cover these items. It makes the system more complex and costly to administer. Do you agree?

d) What is portable medical insurance? How can we get more people to be insured under a portable insurance policy?

Time to enter the market?

Hi Mr Tan,

Is it a good time to enter the market? Should I wait and see, since the market is expected to be volatile in 2008? This is the first time I am investing in unit thrust, so not too sure. I hope to seek your advice.

REPLY:

It depends on whether you are investing a large lump sum or a small monthly sum.

Read this FAQ:
http://www.tankinlian.com/faq/savings.html

Hide! Here Comes the Insurance Guy

http://www.kevinquinley.com/nlstory.cfm?ID=565&NLID=2231

The Envelope, please … the Top Risk Management Book of the Year … By Kevin M. Quinley CPCU, ARM AIC, AIM, ARe Hide! Here Comes the Insurance Guy by Rick Vassar, iUniverse, 2006, 196 pp., $17.95

Author, risk manager and consultant Rick Vassar has penned an illuminating primer on insurance and risk management in his book, "Hide! Here Comes the Insurance Guy."

The title is a take-off on the notion that, for most people, meeting with an insurance person or discussing coverage is as much fun as a root canal or proctological exam. Part of his theme is that most companies have risks that are overseen by someone whose title is not "Risk Manager."

Most companies do not have risk managers; you need to have a pretty big insurance budget to justify that as a full-time position. No company vies to be paying so much in insurance premium that they spotlight the problem by having a full-time individual to tend to it. Nevertheless, all companies have risks and need to manage it.

For these risk managers without title or formal portfolio, Vassar's book – perhaps the best risk management book of the year even without that phrase in the title -- is an indispensable primer and guide. Reading and heeding his advice will save businesses much money, frustration and Excedrin-consumption.

Vassar divides his book into three main sections. Part I discusses business strategies to even the playing field between policyholders and insurance companies. Part II walks through the major basic forms of insurance coverage for most any business. Part III rounds out with a useful; glossary and index. Vassar's focus is practical and hands-on, leavened with a self-deprecating sense of humor.

Did I say "humor"? Yes, though few comedy clubs are likely to feature an Open Mike night for insurance reps, Vassar takes the human antipathy toward insurance and turns it into a source of mirth and amusement. So run -- but don't hide - and get your copy of "Hide! Here Comes the Insurance Guy." Get out from under the desk. Leave the closet and face your fears. Insurance and risk management may not be fun (though they are occasionally funny), but Rick Vassar has come as close to anyone in blending sharp wit with money saving risk management insights.

Amazing Numbers - on cards

I showed the Amazing Numbers, printed on cards, to several people during lunch. They were amazed at my ability to guess the number that they picked.

When I showed them the secret, the were even more amazed. They asked me, "How did you generate the numbers on the cards".

Can you guess the secret? Do you know how I generated the numbers?

http://www.tankinlian.com/amazing/index.html

I have decided to make 1,000 sets of cards to be sold at a modest price or given away.

Lesson in Money Management

Someone sent this message to his daughter. He asked me to share it.
-------------------------------------------------------------------

Many Singaporean work hard and earn a lot of money in year 1990's and early 2000's. Under Goh Chok Tong policy, he encouraged investment. A lot of CPF money and personal saving just gone to the sea. Why?

Sale person make a lot of commission and they don't have a heart (conscience). The commission alone can buy at least one condo within a short time. The sales person does not risk their life, like engineer yet enjoy life. Are you working for sales person?

You better read this Blog and Dr Money's article to protect your hard earned money :

http://www.tankinlian.blogspot.com/
http://newpaper.asia1.com.sg/columnists/story/0,4136,150939,00.html?

The blog and articles are updated every day/week. It does not matter if you don't understand the technical term, just go through it. When you need to make a decision later , you know where to find infomation.

Last few days, Lee Kuan Yew advised people NOT TO TAKE RISK. This is a lesson learnt after so many years.

REPLY

My advice to people who visit my blog is to invest in low cost, diversified equity fund for the long term. By investing for the long term, the investor will average the good and bad years and get an average return that is better than the return from safe investments.

The advise is different from your view of "do not take risk". Do you agree with my advice?

Read this FAQ:
http://www.tankinlian.com/faq/savings.html

Term Insurance to age 90

Dear Mr. Tan,

What are your views about buying Term insurance to age 90 and above? The agent said that the premium rate is lower than whole life policy.

REPLY

It is much cheaper to buy Term insurance to age 65 or 70 (rather than age 90). After that age, you do not need any life insurance, as you have retired from work.

If you need life insurance beyond age 70, it is better to buy a whole life insurance (rather than life-time Term insurance), as the whole life policy accumulates cash value. The life-time Term insurance is cheaper as it forfeits the cash value when you terminate the policy. There is a chance that you may terminate it by oversight, and suffer a loss.

Private Credit Counselling Service

Dear Sir

I need some advice from you. I have some credit debts amounting to $X from various banks. They are demanding for payment. All the facilities has been cancelled for the past two years, but the amount keeps snow balling.

I am selling flat and will be able to pay off most of the debts when the sale is completed in a few many months time.

I approached a private credit counselling company to get their assistance to work out an instalment plan with the banks. They wrote letters to the banks on my behalf using my name, and charged me a fee. I am not sure if this is the correct approach.

REPLY:

I am not familiar with the business practice of these private credit counselling service.

Maybe, you can talk to the bank directly and see if they can reduce the interest charged on the delayed payment. Alternatively, you can approach this non-profit organisation:
http://www.ccs.org.sg/help.html

Charges under a investment linked policy

Dear Mr. Tan,

I am confused about the many charges under an investment-linked policy. The insurance agent does not explain them clearly to me. I am now stuck with these high charges. Can I get out of them?

REPLY

It is better to buy a low cost Term insurance, to provide the life insurance protection. You should invest in a unit trust or an investment fund with low upfront or annual charges.

If you invest in an investment-linked policy, make sure that 100% of your premium is invested and that the only charges are the initial spread (which should not exceed 3%). Make sure that the annual charges of the fund is less than 1.5%.

A good example is the Combined Fund from NTUC Income, which you can buy through the Flexi-link plan.

You should avoid the regular premium investment linked plan as it has another layer of charges that can take away 15 to 21 months of your savings (with a few exceptions).

You can read the following FAQ to understand the charges in an ILP:
http://www.tankinlian.com/faq/ilp.html

Insure big loss with small chance of occurring

1. Buy insurance to cover the big lossses, which has a small chance of occuring. For example, total destruction of a property due to fire, or a major accident. You can insure the risks where the chance of occuring is less than 1% in a year.

2. Pay small losses out of your savings, eg deductible under a medical insurance or motor insurance policy. Do not insure these small losses. It is costly, as you have to pay a loading to cover the expenses of the insurance company. It is also a hassle for you to make a small claim.

3. Buy low cost insurance just to cover the risk. It does not matter that you do not get any return, provided that the cost is less than 5% of a similar "investment product".

4. Do not invest in an insurance policy, as the return is low (due to the expenses). It is better to invest separately in a transparent, low cost product.

Medical insurance for Pensioner

Dear Mr. Tan,

I am a pensioner and currently working. I am entitle for class A wards but hve to pay 15% of the total medical bill each time I visit a doctor. Is it necessary for me to take up the Medishield plan?

REPLY:

I assume that you will continue to enjoy the medical benefit provided by the Governmetn after your retire from work and that it will continue to be provided to you for your lifetime.

If this is the case, there is no need for you to buy Medishield. There is no point in paying the premium for a medical cover where you only need to insure for 15% of the total cost. If you are hospitalised, you can pay the 15% from your Medisave account, or even from cash. It is likely to be quite small anyway.

Tips on financial planning

1. Here are my tips on financial planning.

2. Have adequate life insurance to cover your life. Insure for 5 to 10 years of your income. This ensures that, if anything happens to you, your family will have adequate financial security.

3. Buy decreasing Term insurance over 20 or 30 years. The premium rate is affordable. It should take less than 1% of your earnings. This is better than whole life, endowment or critical illness insurance.

4. Save 10% to 15% of your salary and invest in a low cost, diversified investment fund. You can earn an attractive return over the long term. The savings can be used for emergencies (including paying medical bills) and for your long term needs (such as education for your child or for your own retirement needs).

5. Do not buy financial products (including life insurance policies) where there are high charges that is taken away from your savings.

6. You can insure your children under Medishield. It will take care of the larger bills. The smaller bills can be paid from your Medisave account, or from your savings plan.

7. Do not buy life insurance policies for your children, as they do not provide a good return (due to high charges). It is better for you to save and get a high return from your investment fund. You can use the money for their education or transfer the savings to them when they start their own family.

8. Your children can take their own life insurance policies when they start to work. At that time, they should buy low cost insurance and save in a low cost investment fund.

Get adequate life insurance on your life first

Dear Mr. Tan,

1. You advised me to have medical insurance for my daughter and to save in an investment linked plan with low charges. Do I need to buy other insurance for her, such as a critical illness policy?

Reply: There is no need to buy the critical illness plan. She can buy it later, when she starts to work.

2. When is the appropriate time to buy living insurance? If I buy living insurance, does it mean that I have to terminate the Medishield?

Reply: If you buy critical illness insurance, you do not need to terminate Medishield. They cover different types of expenses.

3. I only have living insurance coverage of 30K. Is this adequate? Do I need to buy a life insurance so that my family's financial needs are covered if something happens to me?

Reply: You should have adequate insurance on your life. Buy a decreasing Term insurance to cover up to 5 years of your income. Your priority is to have adequate insurance on your life. Do not worry about life insurance for your child at this time.

Read this FAQ: http://www.tankinlian.com/faq/choice.html

Late notification of an motor accident

Dear Mr Tan

A few months ago, my friend was involved in a minor accident. He bumped into the back of another vehicle. He contacted his insurance agent and furnished the necessary details to the insurer upon being contacted by the solicitor who was acting on behalf of the claiming party.

He was informed by them a few days ago that the claim will not be entertained, as he had failed to make a report within 2 days of the accident. Is there any guideline on what would be a reasonable notification period?

REPLY

Under a motor insurance policy, the insured person is required to notify the insurance company within a stated period (usually 1 or 2 days) of any accident that may lead to a claim.

If both parties agree not to make a claim, then there is no need to make this report. In this particular case, it appears that the other party must have made a report and wish to claim against your friend.

I suggest that your friend should speak to his insurance company and get their advice on how to handle this claim. The insurance company should assist their customer in such matters.

If the insurance company does not provide reasonable assistance, your friend can lodge a complaint with FIDRec:
http://www.fidrec.com.sg/website/faq.html">http://www.fidrec.com.sg/website/faq.html

Whole life policies

Hi, Mr. Tan,

I have two whole life which I bought in 1994 and 1995. I am now a pensioner. Should I continue with the policies? I wish to convert them into a life annuity, but I was told that it is not possible. The return from buying insurance is not very encouraging as the returns have been revised downwards in the past years.

REPLY:

You can ask the insurance company to quote the cash value of each policy as follows:

a) if you terminate the policy now
b) if you terminate the policy in 5 years time
c) premium payable for the next 5 years
d) if you temrinate the policy in 10 years time
e) premium payable for the next 10 years

You can make a better decision when these figures are available. You can show me the figures and we can decide together on which option is best for you.

Read this FAQ:
http://www.tankinlian.com/faq/exist.html

American Humour

Humour #1

The people who don't like Hillary Clinton said, "We don't want Hill and Bill back into the White House".

Humour #2

During the days of the Cold War, an American told a Russian, "In America, we have free speech. I can go to the White House and tell President Johnson - President, I don't like the way that you are running America".

The Russian said, "I can do the same in Russia".

American was surprised. "You mean you can go into the Kremlin and said the same to President Breshnez?"

Russian replied, "Of course, I can go into the Kremlin and tell President Breshnev - Comrade President, I don't like the way that President Johnson is running America!"

Primary election in the USA

I am watching the primary election in the USA with great interest.

1. It is interesting to see how the Americans select their candidate for the Presidential election in November. It reflects democracy at its best.

2. Will America select, for the very first time, a woman President or a black President? Or will the Republicans (white, male candidate) win again?

Mortality charge under a ILP

Dear Mr. Tan,

I have $300,000 coverage under an investment-linked plan. The mortality charges are about the same as for a Term insurance policy from the same company. Should I continue with the coverage under this policy?

Reply:

You can ask for a quotation on Term insurance (based on your current age and remaining duration) from a few other companies and compare it with the mortality charge that your current policy.

If the difference in premium is quite small, you should continue with the coverage under your policy. If the difference is large, then you can consider making a switch.

Read this FAQ:
http://www.tankinlian.com/faq/termd.html

Insurance for a child born premature

Dear Mr. Tan,

Do I really need whole life policy for my three year old son who was born premature?

Most insurance company hesitate to take his insurance proposal. Company X offered a whole life policy with premium paid for 20 years. I am concerned that in future, he may have problem getting policy on his own, due to his past history. I know that based on insurance needs, he only needs medical coverage now.

Reply:

My understanding is that the highest risk for a premature baby is during the first month and there is a smaller risk during the first year. After one year, the risk should be quite small.

There is no need to insure your son now. When he becomes an adult, he should be able to get life insurance on his own. By that time, I hope that he will buy Term insurance and invest the difference in a low cost fund.

It may be a good idea for you to make additional savings for him. Invest in a low cost equity fund for the next 20 years. It can accumulate to a large amount of savings (compared to the whole life policy).

Premature birth

From Wikipedia, the free encyclopedia

Premature birth is the birth of a baby before the standard period of pregnancy is completed. In most systems of human pregnancy, prematurity is considered to occur when the baby is born sooner than 37 weeks after the beginning of the last menstrual period (LMP).

Approximately 12 percent of babies in the United States are born prematurely each year.

The shorter the term of pregnancy, the greater the risks of complications. Infants born prematurely have an increased risk of death in the first year of life (infant mortality), with most of that occurring in the first month of life (neonatal mortality).

Prematurely born infants are also at greater risk for developing serious health problems such as cerebral palsy, chronic lung disease, gastrointestinal problems, mental retardation, vision or hearing loss and are more susceptible to developing depression as teenagers.

In developed countries premature infants are usually cared for in a Neonatal Intensive Care Unit (NICU).

Some of the complications related to prematurity are not apparent until years after the birth. For example, children who were born prematurely have a higher likelihood of having behavioral problems, delays in motor development, and difficulties in school. Specifically these problems can be described as being within the executive domain and have been speculated to arise due to decreased myelinization of the frontal lobes. Throughout life they are more likely to require services provided by physical therapists, occupational therapists, or speech therapists.

For more details, read:
http://en.wikipedia.org/wiki/Premature_birth

Congenital disorder

Most health insurance excludes congenital disorder. What is a congenital disorder? Here is a description from Wikipedia.

A congenital disorder is any medical condition that is present at birth. However, a congenital disorder can be recognized before birth (prenatally), at birth, years later, or never.

The term congenital does not imply or exclude a genetic cause. Congenital disorders can be a result of genetic abnormalities, the intrauterine environment, a mixture of both, errors of morphogenesis, or unknown factors.

Congenital conditions can be referred to as diseases, defects, disorders, anomalies, or simply genetic differences or uncomfortable. The usage overlaps, but also involves a value judgement as to the harmfulness of the condition. In particular, people may disagree as to whether a specific physical anomaly should be considered a birth defect or a normal variation.

A congenital disorder can have trivial or grave consequences. The most severe, such as anencephaly, are incompatible with life. Others, such as congenital tumors, vary from causing stillbirth to requiring fetal intervention or special delivery procedures such as the EXIT procedure, to needing surgery in the neonatal period.

The most common congenital tumor is teratoma. Congenital physical anomalies (birth defects) are a leading cause of death in early infancy, accounting for the deaths of nearly 2 out every 1000 infants in the United States.

"Congenital disorders" is a broad category that includes a variety of conditions. Congenital disorders include minor physical anomalies (e.g., a birthmark), severe malformations of single systems (e.g., congenital heart disease or dysmelia), and combinations of abnormalities affecting several parts of the body. Congenital defects of metabolism are also considered congenital disorders.

For more details:
http://en.wikipedia.org/wiki/Congenital

Improve the Singapore MRT system

I am impressed with the following features of the Taipei MRT system:

a) Good signage
b) Helpful staff
c) Short waiting time
d) Easy to get a seat, even during busy hours

These are conditions that are easy for Singapore MRT to achieve, even though the system is older. What cannot be done through hardware can be achieved through software.

What is needed to get the Singapore system to be less crowded?

Operate more trains. The waiting time for trains during off-peak period is now between 5 to 8 minutes. If the waiting time is reduced by 1 or 2 minutes, the capacity can be increased by 25%. This will impose a small increase in operating cost but a big reduction in waiting time and 25% more people can have a seat.

I accept that during peak hours, our MRT trains are already operating at full capacity. But, we can make the system more comfortable during the off-peak hours, like in Taipei.

Public Transport Guide

The Public Transport Guide is sold in Popular Bookstores for $6.42. I wish to share this story on its usefulness.

I have to attend a 1 day event at Ulu Pandan CC today. I have the choice to drive there as I live quite far away. This means paying parking charges for 1 day.

I decided to try MRT but was not sure about how to get there. I looked at the Public Transport Guide and select page 6 (Queenstown). I guessed that the nearest MRT station was Buona Vista. Indeed it was. From there, the guide indicated that I could take bus 92 to my destination.

I found that the distance from the station to the destination. was quite short, so I have the option to walk the last leg.

The advantages of this Public Transport Guide are:

a) It also acts as a street directory
b) It is easy to locate he bus service
c) It is light and can be easily carried

I have suggested to LTA to display a map in each MRT station and bus stop showing the street directory and bus stops within 3 km. I hope that they will take my suggestion. It will be convenient for commuters who do not have the street directory with them.

Some people are not familiar with using a street directory. They can ask for advise from another person at the station or bus stop.

Insuring a risk

If you face a risk with possible losses ranging from $0 to $10,000 and an expected loss of $500, will you pay $700 to insure the risk?

The answer should be "yes". Although the expected loss is $500, the actual loss can be as high as $10,000.

The difference of $200 (about 30% of $700) represents the cost of providing the insurance protection. It goes to cover the marketing, underwriting and claim processing cost of the insurance company. An expense margin of 30% is fair, in the case of an insurance contract that provide indemnity for losses. For a competitively priced insurance, the ratio of losses to premiums should be around 70%.

In the case of a life insurance contract that accumulate savings for the future, the expense ratio should be much lower, say from 5% to 10%.

Secret Formula

Do you know the secret formula for the Amazing Number puzzle?

http://www.tankinlian.com/amazing/index.html

High charges on regular premium ILP

Hi Mr. Tan,

I've just realised to my horror that I've tied myself down to a useless investment product - a regular ILP. This is with X. My monthly premium is $100.

I have been paying premiums for the past two years. The value of the investments is only about $600. If I surrender the policy, this is what I'll get back. Should I continue? Will this investment ever even break-even?

REPLY

You have incurred most of the upfront expenses already. From now on, most of your premium will be invested. What you have spent in high charges in the past should be written off. I suggest that you keep this ILP policy.

Lesson: Avoid regular premium ILP. The charges are too high. 18 months of the premium has been taken away to pay commission and marketing expenses.

Rejection of medical claim - congenital condition

Dear Mr. Tan,

I have taken medical insurance for my daughter since she was a baby. There was no claim for more than 10 years.

Recently, we discovered that she was suffering from a serious medical condition. The insurance company X rejected the claim as the medical condition was congenital. We feel that this is most unfair. What is your advice?

REPLY

I suggest that you bring this this matter up to the senior management of X. You can point out that this illness was discovered more than 10 years after the policy was taken up. Due to the long lapse of time, it may not be fair for them to apply the congenital clause.

Perhaps you can ask them to get their doctor to certify that the illness is really congenital and should be excluded.

If they do not give you a satisfactory explanation, you can lodge a complaint with the Financial Dispute Resolution Center: http://www.fidrec.com.sg/website/faq.html

I wish to extend my sympathies on your predicament, first on this unexpected illness and second on the rejection of the claim. I hope that the senior management of X will take a sympathetic view. I wish you all the best.

Sudoku Challenge - Preliminary Round

The preliminary round of Sudoku Challenge (for people 40 and over) was held at Bishan Community Club on 6 January. A total of about 130 people participated in the two sessions. They spent about 25 to 60 minutes to complete 5 Sudoku puzzles.

The top 16 winners have been identified. They will take part in the Finals to be held at Suntec City on 13 January.

The public is invited to watch this event. There will be other mind games which are being held at the same time. There is also an exhibition.

Risk Management and Insurance

I conducted the first class on Risk Management and Insurance at Singapore Management University today.

I enjoy the experience. The students participated well. From their feedback, they like the topics covered, which are useful and relevant to them.

I enjoy teaching and sharing my working experience with the students.

Disability income insurance

Dear Mr. Tan,
What are your views about disability income insurance?

REPLY:

As a general principle, disability income insurance is useful. If a person is disabled due to illness or accident and is not able to earn an income, the insurance will make a regular payment to replace the lost income.

In practice, the situation is different.

Here are my views, based on my limited knowledge of the market for disability income insurance in Singapore.

1. The market for disability income insurance taken by individuals is quite undeveloped in Singapore.

2. The premium rate tends to be quite high in relation to the actual cost of the risk. You will probably have to pay a high premium for a cover that is worth much less.

3. There is a long waiting period (usually three months), before the disability income starts to pay. The period of payment may also be limited.

4. If you buy disability insurance in a group, for example through an employer, or an association, you are likely to get more competitive premium rates.

5. For individuals, you can insure for temporary disablement caused by accidents through a personal accident policy. The premium rate is quite competitive.

Personal savings for your retirement

Many Singaporeans rely on the Central Provident Fund as their main source of savings for retirement.

Many have found it to be inadequate. In 1999, only one-third of people reaching age 55 had sufficient savings to meet the Minimum Sum of $60,000. The Minimum Sum has now been raised to $99,600. This is only sufficient to meet the very basic cost of living in Singapore.

For a more comfortable standard of living, you need at least two times of this Minimum Sum.

Let me share eight tips with you on how you can get adequate savings for your retirement.

Click here for the full article:
http://www.tankinlian.com/articles/savings.html

Technique to solve Logic Quiz E-1

Here is the technique to solve Logic Quiz E-1 (see below).

Start with clue 11 which fixes the house of the engineer. From there, you can use clues 10, 12 and 20 to fix the houses for the stated characteristics. You can use clue 3 to fix the house of the lawyer.

After you have fixed the house of the engineer and the lawyer, you can use clue 13 to fix the house of the accountant and salesman.

The remaining two occupations are the technician and doctor. If you study the clues 2 and 8, you will be able to find their houses.

It will quite easy to complete the remaining clues. Look for the clues that fit exactly into the blank squares (i.e. only one solution).

If you take step by step, you can complete the whole quiz. It may take you 30 minutes to solve this quiz the first time, but with practice, you can reduce the time down to 10 minutes for a similar quiz.

Logic Quiz E-1

If you want a challenging logic quiz, try the following. Put our name and time taken in this blog. If you can get the answer within 15 minutes, you are very good!

There are six houses with different colours in a row. Each occupant likes a different fruit, drinks a different beverage, drives a different car and speaks a different language.

1. The person who speaks French lives to the left of the person who speaks German.
2. The technician lives to the left of the green house.
3. The person who drinks water is the lawyer.
4. The person who likes melon lives to the left of the person who likes durian.
5. The person who speaks Japanese lives two houses left of the brown house.
6. The person who speaks Italian lives two houses left of the person who drives Hyundai.
7. The person who drives Honda lives two houses left of the person who drives Nissan.
8. The person who likes mango lives two houses left of the doctor.
9. The person who drives BMW lives two houses left of the blue house.
10. The engineer lives two houses left of the person who drinks water.
11. The engineer lives in the third house.
12. The person who likes apple lives to the left of the engineer.
13. The accountant lives to the left of the salesman.
14. The person who likes banana lives two houses left of the person who drinks beer.
15. The person who drives Peugeot lives two houses left of the person who likes strawberry.
16. The person who drinks tea lives two houses left of the yellow house.
17. The person who drinks juice lives to the left of the person who drinks wine.
18. The white house is two houses left of the person who speaks Russian.
19. The person who drives Toyota lives three houses left of the person who drinks milk.
20. The red house is to the left of the person who likes apple.

Question: Who speaks Chinese

Low cost Term Insurance

Dear Mr. Tan,

Where can I buy low cost Term insurance?

REPLY

Read this FAQ:
http://www.tankinlian.com/faq/termd.html

Give a call to 3 companies and ask them to quote the Term insurance for your age and sum assured.

Read this FAQ for the benchmark rates:
http://www.tankinlian.com/faq/term.html

Low cost insurance and funds

Many people have sent an e-mail to ask for my advice on how they can buy low cost insurance and funds.

I have referred them to the following:
1. Business center of NTUC Income
2. i-Term available from Income's website
3. Flexi-link and Combined Fund from NTUC Income
4. Exchange Traded Funds from the Singapore Exchange

I have also referred them to a few NTUC Income advisers, who have agreed to offer only the low cost insurance and funds. As they earn a small commission, you should not expect them to spend too much time visiting your home. Discuss with them by e-mail or telephone, or visit their office.

Some other people have recommended unit trusts available thorugh Poems (Phillips Securities), Fundsupermart, DollarDex and Finantiq. I agree with the use of these internet portals, but you should choose the low cost funds.

See this FAQ:
http://www.tankinlian.com/faq/savings.html

You can read the following FAQs on how to buy insurance directly:
http://www.tankinlian.com/faq/termd.html
http://www.tankinlian.com/faq/motord.html

People will buy insurance

For decades, insurance professionals have held the view that "insurance has to be sold". People will not buy insurance on their own. The solution was to train insurance agents and pay them high commission to sell the insurance products.

Times have changed. People will buy insurance for the following reasons:

1. They want to be protected financially against the risk of death or disability
2. They want to save and earn a good return for the future
3. They will buy an insurance product that gives good value to them.
4. They need to find someone that they can trust.

In my blog and website, I will educate people about the good value products, including the following:

1. Term insurance
2. Personal accident insurance
3. Low cost, diversified investment funds

Tan Kin Lian

Low cost funds

You can buy low cost funds directly through the following internet portals:

a) Poems, http://www.poems.com.sg/
b) Fundsupermart http://www.fundsupermart.com/main/home/index.svdo
c) DollarDex http://www.dollardex.com/SG/INDEX.CFM
d) Finantiq http://www.finatiq.com/home/index.shtm

More details at:
http://www.tankinlian.com/faq/lowcost.html

Low cost Personal Accident

You should buy a Personal Accident insurance to cover 5 years of your income. If you earn $30,000 a year, you can insure for $150,000.

This policy will cover death and permanent disability caused by accidents, as follows:

a) Amount payable on death: $150,000
b) Double indemnity under certain circumstances: $300,000
c) Permanent disablement: depending on extent of disability, up to $150,000
d) Temporary Disablement: $150 a day, up to 104 weeks
e) Medical Expenses: up to a specified amount for any one accident
f) Emergency Evacuation and Repatriation

An accident is usually defined as being caused by an external, violent, unexpected event. This is intended to exclude claims for illness or poor health.

The standard policy will usually exclude pre-existing physical or mental defects,
pregnancy and childbirth, war risks, motorcycling, climbing or mountaineering necessitating ropes or guides, judo, karate and some hazardous sports. You can pay a higher premium rate to cover some of these risks.

The annual premium for a sum assured of $150,000 varies from $100 to $300, depending on your occupation and on the insuranced company that provide the insurance.

More details can be found at:
http://www.tankinlian.com/faq/pa.html

Big change in Taiwan over 32 years

My last visit to Taiwan was 32 years ago. The tourist guide explained the many restrictions under martial law. Strict action was taken against dissenters. People were put behind bars for minor offenses.

Today, the situation has changed considerably in Taiwan. People are free to express their views. Democracy thrived. People are more confident, more courteous, more relaxed. They enjoy life.

Impression of Taiwan

I have now returned to Singapore, after spending 12 days in Taiwan. This is the longest holiday that I have taken.

My impression of Taiwan is favourable. I like the following:

1. The MRT system and taxi service
2. Taipei 101 and the nearby buildings
3. Politeness and helpfulness of the people
4. Food and snacks
5. Hot spring and spas

Amazing Number game

Write down a Number between 1 to 99. Check your number against the numbers listed in my Amazing Number cards. I will be able to guess your Number.

http://www.tankinlian.com/amazing/index.html

Show it to your children and friends. Ask them the same question, "how is this done?"

Can you guess how I guess your Number? Send your reply to me at kinlian@gmail.com. Do not post your answer and give away your secret.

Coldest winter in 12 years

Taipei is cold. The news reported that the temperature during this winter is the coldest in the last 12 years.

Is this due to global warming, or just the cycle of nature? I suspect that the global warming is causing big climate changes around the world.

Ecocities

I found a book entitled Ecocities in the public library in Beitou, Taiwan. It is written by Richard Register. The author described how cities should be developed to be environmentally friendly and to give a better quality of life to the residents.

The author encouraged people to work near their place of residence, and reduce the travel between home and place of work. He also encourage the use of rail transport, instead of private cars.

More details:

http://www.newsociety.com/bookid/3923
http://www.newsociety.com/

I have given similar ideas in this paper:
http://www.tankinlian.com/articles/housing.html

Gifts for a mother and baby

Visit these websites:

http://www.pupsikstudio.com/

http://www.pupsikstudio.blogspot.com/

Visit to Xin Beitou and Danshui

I visited Xin Beitou and Danshui. Danshu is at the coast and the end of the red MRT line in Taipei. It is a popular tourist destination. The visitors enjoyed the local food, shopping and atmosphere.

The stall holders are helpful. If you ask for information and do not buy their goods, they still thank you for your interest.

I saw an interesting system of garbage collection. The collection truck came at night. The stall holders could hear the classical music that is being played by the truck. They bring their grabage bags to be dumped into the truck. Apart from the driver, there is no need to have any workers.

The red MRT line has a few stations that are underground, a few that are at ground level and a few stations that are elevated.

Hot springs

Hot springs are popular with the local people in Taiwan. They are also popular in Japan and China.

The minerals from the hot spring provides some health benefits. After spending two hours at a hot spring spa, I could sleep soundly during the night.

Bus trip to Xin Beitou

I took the bus from one terminal (Taipei City Hall) to the other terminal (Xin Beitou) in Taipei. The journey took 1.5 hours. 30 minutes was used as a feeder service to pick passengers in the area around Taipei 101. The journey time could have been reduced, if there is a separate dedicated feeder service.

Passengers are allowed to pay the fare on entering or leaving the bus. The bus driver has to be vigilent to identify passengers who did not pay the fare. It depends a lot on the honesty of the passengers.

The fare is NT15 (SGD 0.70) for short distance and NT30 (sge 1.40) for longer distance. The passenger can pay by cash or stored value card. For long distance, the passenger has to tap the stored value card twice (as each tap deducts NT15 from the card).

The bus has segments with one seat and other segments with two seats. Those travelling alone can choose to sit in the single seat segment.

My return journey by MRT took about 30 minutes.

Road names in Taipei

I observed some good features in naming of roads in Taipei:

1. Long roads are identified by sections, such as Zhongxiao E Rd Sec 1, Zhongxia E Rd Sec 2, etc. It is easy to locate an address according to the section of the road.

2 Lanes are identified by reference to the road, eg Yanji St Lane 1, Yanji St Rd Lane 2.

3. The names of Road, Street and Lane in a consistent manner to identify different sizes of roads.

It is useful to adopt these principles in the naming of roads in Singapore. I find the naming of roads in the new towns to be rather inconsistent. The name Avenue, Road and Street are being used for similar size of roads.

High distribution cost

Someone said that Axa promoted "Buy Term and invest the difference".

When you invest in the Axa fund, you should select the single premium option, where the charges are quite modest.

If you select the regular premium option, you will have to incur a high distribution cost, which may not be disclosed to you by the agent. This was the experience of my friend, who was being offered a regular premium ILP at a roadshow.

For a comparison of the distribution cost, read this webpage:
http://www.askdrmoney.com/Ins_ILP_RP.htm

The distribution charge of 19 months under the AXA regular premium plan is quite high.

200% increase in premium for Plus rider

Dear Mr. Tan,

Happy New Year to you.

I have just received renewal letters for my medical insurance. Looks like the objective in INCOME has changed since your retirement. They have increased the premium tremendously.

I appended below the details of the "Plus Rider" for my family. The increase of 200% in the premium seems exhorbitant to me at one look. (details deleted).

Most likely we will continue with the plan unless there is a better product in the market. Please give us your expert advice.

REPLY

You have the option to cancel the Plus rider. In my view, there is no need to take the Plus rider to insure the Deductible and Co-insurance. You can pay them out of your Medisave account or by cash.

Read para 3 of this FAQ:
http://www.tankinlian.com/faq/choice.html

Travel tips for Taiwan

Hi Mr. Tan,

I will be going to Taiwan in May 2008 for around ten days. I plan to go Taipei and one more other area. Any places that you would strongly recommend?

REPLY

Perhaps you can visit the places that I mentioned in my blog? You should also try the hot springs, which is popular with the local people.

If you are travelling free and easy, you should try the train system. I was given a guide book of the attractions in each town served by a train station. You should also search the Internet, which has a wealth of information.

I hope that you are travelling with some friends. It is more fun when you have people to travel with.

Hot spring in Wulai

I visited the village of Wulai yesterday. I spent 2 hours at a hot spring there. It is refreshing to visit a hot spring during winter. Many of the local people visit the hotspring to relax and be refreshed.

There are separate pools for males and females. You are not allowed to wear any clothing into the pool, not even a swimsuit. You have to wash your body, before entering the pool. This is to ensure cleanliness and hygiene.

The hot spring uses the mineral water from a nearby volcano. It has certain minerals that are good for the body.

If you are shy, you can rent a private pool for 1 or 2 people.

The normal charge for the public pools is NT 500 (SGD 25) per entry. Many places offer a promotional price of NT 250 (SGD 12).

First Prize for the Amazing Number game

Dear Mr. Tan,

Happy New Year to you.

The number is "guessed" by .............................. It seems to work something like a ...... system, so there is only one combinatiion of the cards that can result in a particular number in the range. Working backwards, all the 99 numbers can then be filled up in the cards.

Thanks for another interesting entry to keep my mind thinking.

Due to my enginnering background and being a software engineer, I am able to find out how the program works after a few clicks ........ So I probably have an "unfair" advantage over the other readers who have no similar training.

REPLY

Wonderful. You have a powerful logical mind. You get first prize, for being the first person to send the correct answer to me!

I am printing the Amazing Number cards. Give me your address, so that I can send the prize to you (but it may take 1 or 2 weeks).

It is all right to have an advantage, due to your training. That is what training is about. That is how one becomes a champion. Congratulations!

Treating High Blood Pressure

My friend's mother has high blood pressure. He sent an e-mail to ask for my recommendation on a specialist to treat this condition. I asked my wife for advice, as she is familiar with this medical condition.

My wife's advice is:

1. Send your mother to see a doctor (i.e. general practitioner) near your home.
2. The doctor will be able to take the blood pressure and prescribe the medication.
3. If the condition need specialist attention (and this is usually not necessary), the doctor will recommend a specialist.
4. High blood pressure is quite common and can be treated quite easily by a general practitioner in most cases.

Views on investing your money

COMMENTS POSTED IN MY BLOG

1) KEEP YOUR MONEY IN FIXED DEPOSIT AND CPF

I think it is perfectly fine for a person to buy Term insurance and not invest but use the money for other purposes - go for travel, catch the latest movies/musical, buy a branded watch, touch-up the house etc.

Whether he invest or squanders it away, that is his business. You all have no right to force people to invest. If i think investing is too troublesome, then I don't invest. I have this choice.

I think it is rubbish to force someone to invest. You can still live a good stress-free life with decent income.

I hope this blog do not use fear of inflation, fear of not enough for the future, fear of losing out, to scare people into investing. Using this emotion is just as bad as scaring people to buy insurance.

I find some of the comments and articles on this blog using this "scare" tactics to force people to invest. Your money in 20 years time will halved, etc. This is nonsense.

I have not invested my money for the last twenty years and my money is safe with CPF and I am still have money for travel and others. my insurance cover is $20,000 and I have 3 kids. So?

I don't understand why you all want to force people to invest in low-cost funds. "Low cost" is still cost right?

Are you saying our government is incompetent in managing our money? I think not. Inflation projection is just a "projection". If you saying inflation is 2% p.a, can you guaranteed that next year this time, everything in Singapore go up by 2%?

Therefore, I rather keep my money in fixed deposits and CPF, where it is truly no costs. If investing in low cost funds is right way, our government would have help us to invest already. If Mr. Tan wants to push his own products as part of his retirement business, that's his choice but please don't force people to invest because they have a choice not to and still stay happy and stress-free.

Anonymous.

2. EDUCATING THE PUBLIC

I think that is your business whether you wish to invest or not to invest. Whether you have enough for retirement is also your business. Everything is your business. You have complete freedom.

There is no force nor touting nor promotion of any product. I think you got it all wrong to think Mr. Tan's blog is to promote his products and that he has vested interest whether you agree or not agree to his advice or to other posters' advice.

This blog is to educate the buying public to do what is right. If you disagree with the comments you should rebut or debunk the advice, instead of accusing Mr. Tan of instilling fear and exploiting emotion as tactics to make people buy his products or ideas. He has none of these.

You must be very rich and have a huge balance in your CPF to care whether you earning a decent rate or will have enough to retire. This blog is not for you.

It is for those poor souls who are inevitable victims of unscrupulous insurance agents ..... You are safe from these agents but the poor ones are not. They are uneducated, ignorant, gullible, and too trusting that they get cheated ...................They need protection and help with their personal finances.

So you see the objectives of this blog is not to force anyone to invest in low cost funds. You can invest under your pillow ......... It is your freedom if you think that is the best place to invest your money.

The blog is also to educate and to create awareness of ........ agents on the loose and how to spot them out. It is also to identify the good products from the bad ones. This is a service to people who want to know about insurance and investment.

Zhumeng

3. DISAGREE WITH MY VIEWS

My blog is for people who find my advice to be helpful.

There are people who disagree with my views for the following reasons:

a) They are quite knowledgeable and find my views to be too simplistic
b) They are intermediaries making a living on selling high cost products

If you disagree with my views, you can ignore them, or stop visiting my blog. I am not forcing anyone to my point of view.

I expect to be challenged by intermediaries with a vested interest to sell high cost products. I allow their views to be posted, so that they can give an alternative point of view. I will only edit statements that are offensive and defamatory.

Elevated expressways in Taipei

Taipei had a network of elevated expressways. They travelled along the same path as the road beneath them. The traffic moved fast on the expressways. I was never caught in a congested exprssway, even at busy hours.

I think that the road congestion in Singapore can be reduced by building elevated expressways. It will be cheaper, faster to build and less disruption to existing buldings, compared to underground expressways.

When I moved to Yio Chu Kang in 1998, I found the Central Expressway to be quite busy. I wrote to the government to suggest that a second level be build over the Central Expressway. I received a reply that this was not possible, due to difficulty of building the access roads. I did not want to pursue the matter - but I was sure that a solution could have been found.

Ten years have passed. The Central Expressway is very congested. We are still waiting for the completion of the underground Kallang Paya Lebar Expressway (which is expensive and took a long time to complete).

Perhaps, we should try the elevated expressways, which is adopted in Taipei, Shanghai, Beijing and many other cities?

MRT ride in Taipei

I took the MRT in Taipei from City Hall Station to Xindian station. The journey of 13 stops took 30 minutes and involved two transfers. The transfers were convenient and easy. One transfer was on the same platform.

All the stations are modern, well designed and standardised. The entire system is underground.

At each door of the train, there is an electronic message board that tells the previous station, current station and the next station.

I find this board to be helpful, as I am not familiar with the stations. I can be sure that I am heading the right direction. I am also know one station ahead. If I missed my station, I could still find out and alight at the next station. There is also a clear voice announcement in Mandarin, Hokkien and English.

The minimum fare is NT 20 (SGD 1) and can take up to approximately 6 stations. The maximum fare is NT 40 (SGD 2). Those using a store value card gets a discount of 20%.t

I was able to get a seat on my forward and return journey, although I travel during the busy time of the day. The train is not as crowded as in Singapore.

I give top marks to Taipei MRT.

Buy the simple, good value product

If you go into the shop to buy product A for $1,000. There is another product B which is similar to A, but it cost $1,500 and gives additional items worth $300. Do you prefer product A or B?

Some life insurance products are designed to be like product B. It charges a higher premium and gives you frills that are worth less than the additional premium. But the customer is not able to know the value of the frills. The sales agent sells the enhanced product, because they can earn a higher commission. The enhanced product gives poorer value to the customer due to the higher marketing cost.

Lesson: Go for the standard products that can be compared easily. You can get better value due to competition. If you buy a complicated product, you are likely to be over-charged.

New Year Celebration in Taipei

Taipei celebrates the New Year in style. At the stroke of midnight, fireworks are set off in many building in Taipei. The most spectacular is the fireworks at Taipei 101, the tallest building in the world. This is followed by the fireworks at other buildings. Here is a short video clip.

http://www.youtube.com/watch?v=dbVWrIAdD1U

Observatory at Taipei 101

I visited the observatory at Taipei 101 on New Year Day, 1 Jan 2008.

It was crowded. I had to queue for 30 minutes to take the lift to the 89th floor. The observatory occupied the entire floor and give a 360 degree view of the city of Taipei from the tallest building in the world.

The observatory provided an audio guide. It explains the various landmarks that can be seen from each side of the building. It uses high-tech in an effective way.

The express lifts to the observatory travelled fast and smooth. It received the world record for being the fastest lifts. It reached 89 floors in 37 seconds, without any jerk or noticeable acceleration.

Admission to the observatory cost NT 350 (SGD 16).

Get adequate insurance at a low cost

Dear Mr. Tan,

You advised to buy personal accident insurance now, and life insurance later. What happens if at a later date, I am in poor health and not accepted for life insurance?

REPLY

The risk of uninsurability is quite low (less than 0.5% a year).

The bigger risks are:

1. People hesitate in buying expensive insurance, and are inadequately insured against accidents (more than 50%).

2. People buy an expensive life insurance and lapse the policy due to inability to continue paying the premium (5% a year).

It is better to have adequate personal accident insurance now, and upgrade to a more expensive insurance at a later date. For young people, the risk of meeting an accident is much higher than contracting a serious illness.

High speed train - Taipei to Kaoshiung

What is the fare of the high speed train from Taipei to Kaoshiung? I found this information from the internet.

A brand-new high speed (300 km/h) train service using Japanese bullet train technology started running in January 2007 between Taipei and Kaohsiung. It is run by the Taiwan High Speed Rail Corporation, http://www.thsrc.com.tw/

The 300km/h trains link Taipei and Kaohsiung every half hour throughout the day, or at times more frequently.

Journey time is 1 hour 40 minutes on the faster trains, 1 hour 55 minutes on the slower services. The fare is 1,490 Taiwan dollars (SGD 70) in economy class, 2,440 Taiwan dollars (SGD 110) in business class.

Investing in Exchange Traded Funds

Hi Mr Tan,

1) What are the investment risks or disadvantages involved in U.S. Cross-Listed ETFs, listed in

http://www.sgx.com/psv/securities/etf/ETF_US_Cross-Listed.shtml

DIAMONDS®
SPDRs®
iShares S&P500 Index Fund
iShares MSCI Singapore (Free) Index Fund
iShares Dow Jones U.S. Technology Sector Index Fund

REPLY:
I am not aware of any special risk or disadvantages involved in the US Cross Listed ETFs.

In selecting an indexed fund, you want to look for a fund that is managed by a reputed fund manager, charges low fees and provide good service in accounting and execution.

You are taking the investment risk of the specific market. If you are investing for the long term, the risk will averaged out to give you an average return for the period.

2) There are more than 10 ETFs listed on SGX but why is it that you are only recommending STI-ETF. Since STI-ETF is only focused on Singapore, would it be better to invest in e.g. Lyxor ETF MSCI AC Asia-Pacific (covering Asia minus Japan?

REPLY
I recommend the STI ETF for people who are familiar with investing in Singapore stocks and wish to remain in Singapore currency exposure. If they are familiar with investing in Asia, the Lyxor ETF is suitable.

All indexed funds are suitable, if they cost is kept at a competitive level and the investment is for 10 years or longer.

Fed Ex Logo

Someone gave me the link to a forum discussing the Fed Ex logo. It is creative. Can you see the arrow between the letters E and x?

Overcome your Fear

Hi Kin Lian,

Thanks for sharing the video of the firework in Taipei.

I read from your blog about your recent experience on upgrading your computer. It is very encouraging and inspiring for computer illiterates like me to want to try too. What holds us back is the Fear Factor. What if our computer hangs! Only we can overcome this fear ourselves. You have shown the way.

Many are held back by their own fears. They fear doing maths or science, making decisions and even making simple comments on matters of special or even common interest. These are too many KIASU people. Unfortuantely some are even proud of this too!.

We all have our own talents to do certain things to make contributions which can benefit others. You and I have been doing this throughout our lives in various ways as a purpose of our lives, if not our mission, to add values to the lives of others.

Carrefour, Taipei

I visited Carrefour in Taipei. It offers mainly local products, unlike the Carrefour stores in Singapore and Dubai.

I learned something about the Carrefour logo. Caj you see the small red arrow pointing to the left and a larger stylish blue arrow pointing to the right. Did you wonder what the two arrows meant?

I discovered it on my visit to Carrefoure in Taipei.

Answer: If you look at the white space between the red and blue arrows, you will see the letter C. This is creative!

A new approach to improve the taxi service

To improve the taxi service in Singapore, we have to adopt a new approach. Here are my suggestions:

1. Taxi fares should be regulated (and not left to the market). The regulator can balance the interest of commuters and taxi drivers and seek to achieve an efficient system that that provides quality service at a fair price. This approach is adopted by most countries, including Hong Kong and Taiwan.

2. The regulator can approve premium taxi service that charge differently from the standard service. The premium service has to pick passengers by telephone booking only (i.e. not from the road or taxi stands). Commuters willing to pay a higher price can telephone for the premium service. This service will use a different color of taxis (i.e. not the same as the regular taxis).

3. Booking of taxi should be reduced to $1.50. This will compensate the taxi driver adequately for taking the call and improve the usage of the taxi (instead of plying the road to look for taxis).

4. Commuters should be allowed to share a taxi, if they are travelling in the same direction. The appropriate fare should be fixed. This will improve the usage of the taxi, reduce cost for the commuters and increase earnings for the taxi drivers.

Make a lump sum investment

Hello Mr. Tan,

You have mentioned in your blog that up to 21 months of savings can be taken away to pay the agent to sell a monthly sum investment-linked policy. Does it mean it will be more worthwhile to buy a lump sum unit trust instead? I'm looking for long term investment actually.

My insurance agent has been asking me to buy monthly sum investment-linked policy and recommends that I treat it like a savings plan. I am not too sure whether I should take his advice.

REPLY
You should invest in a single premium ILP, such as the Flexi Link from NTUC Income. It has low charges, compared to a monthly plan.

You can see a comparison of the charges here:
http://www.askdrmoney.com/Ins_ILP_RP.htm

Read these FAQs to make your decision:
http://www.tankinlian.com/faq/savings.html

http://www.tankinlian.com/faq/ilp.html

Adequate insurance

Dear Mr. Tan,

I have already bought a five years term insurance($15,000) from NTUC income, do you think I still need the DPS ($46,000) required by CPF board?

REPLY

It depends on your personal circumstances. If you have dependents, you should aim to insure for 5 to 10 years of your earnings. If you have accumulated savings, the insurance cover can be reduced by this amount.

Read this FAQ
http://www.tankinlian.com/faq/choice.html

Investing a lump sum at 51 years

Dear Mr. Tan,

My mother is 51 years old now. She has $50,000 of cash to invest. What is your recomendation investment, annuity, etc?

REPLY
If she is investing for 10 years or more, it is better to invest in a low cost, diversified equity fund.

When she needs to draw out a monthly income, she can convert it into a life annuity. At that time, she should wait for a has good time when the investments showed a good gain of 5% to 8% per annum.

Read the following FAQs
http://www.tankinlian.com/faq/life.html

http://www.tankinlian.com/faq/savings.html