Daily Life: Which Insurance do I really need?

Since the last posting in March 21, I was engaged in many issues solving until I am too dead tired to update the blog. There is only so much I can do with the limited time I have each day. But I managed to put through. Things have quiet down so got time to keep my blog alive with new chapters.

Last sat I was at a seminar on insurance, property and stock investment. The speaker is one who is a millionaire at age 41. There is nothing wrong with that and he gives clear insights on how to achieve 1 million within the time frame he gave himself. One area he touch on is insurance.

It's no brainer to say that most people if not all people have insurance today. What is most unfortunate is most people do not have the proper financial knowledge to choose the correct plan & avoid many pitfalls later in life. Most people will be conned to purchase whole life first. There is nothing wrong with it but lets see things in respective. Whole life is primarily for people who are working or about to enter the work force. Whole life is insurance with cash back, meaning at the end of the insurance term say 20 years, there will be some money paid back from the premium. But the payback is not guaranteed and due to the financial crisis of 2007-2009, most whole life are losing money. Moreover if we sit down to calculate the premium for the whole life policy of the duration, we will most likely find that the premium is more than the money we can get back.

The reason for this is most insurance agents will sell whole life or saving policies to its customer as it generate the most commission. Insurance agents are paid very little and got most of their income from commission. The most basic insurance that all people should get in my opinion, is medical insurance. The thinking is very logical, it is more likely we will fall sick at any point in our life be it 20,30 or 50 but we are less likely to die at 35,40 unless there is a major illness. There is a saying 'its easier to die than be sick'. it illustrates the high cost of medical coverage be it in Singapore or any parts of the world.

And not just any medical insurance. Those that cover private & government hospital and will reimburse the bill 'as charged' are the best medical insurance money can buy. Meaning if say the patient has a heart operation and is charged $150,000 for the stay and everything else, the insurance will pay full sum vs one who got pro-rated insurance coverage. Yes there will be co-insurance and deductible that the patient has to pay from his/her own pocket but these will be small compare to a pro-rated or amount based medical insurance.

After getting medical insurance, then a term insurance which cover major illness will be more than enough for the average working Singaporean. Any extra savings/income, there are many other forms of investments that offer better returns than savings (endowment policy) or investment-linked policy.

Do not take my word for it. Do the calculation yourself and you will be surprised by the figures n finally know why some insurance agents can be in the million dollar round table while others are not.

Ps: The earlier one gets medical insurance, the better and whats more, medical insurance can be paid for by medisave (a component in CPF that handles medical)