Today I had a chance to do a review for a client on her Hubby’s Two Insurance Policies bought in the Year of 2001. (note, at the juncture of reviewing, I only thought this is just purely understanding what the policies are all about… read on…)
Let’s see what the Hubby had bought in 2001:
- A Whole Life Policy covering Death and Total, Permanent Disability worth around $20,000. There is an additional decreasing term rider of $80,000 for the next 9 years (when it’s bought in 2001) and by this date, the decreasing term rider is around $20k
- A Mortgage Protection Plan of $100,000 for the next 20 years bought like 4 years ago.
One thing to note of the Second Policy is that the Hubby has been diagnosed with Stroke, therefore coverage for Total and Permanent Disability has been declined. Secondly, there was a loading of an extra 100% on the inital premium.
Instead of rejecting the plan and the loading (as many would), the Hubby reduced the Sum Assured by half and accepted the application. By this date, the initial sum assured is $50,000 and has reduced to around $44,000.
The Actual Happening
As previously mentioned, I thought my current service is to review what they have bought. To the acutual reality, the Hubby has acutally passed away (my condolences) due to a fall (the wife is shocked to realize that a simple fall can still kill someone). His wife was at the insurance company doing his death claim (getting back around $80,000).
The Disargreement and The Acknowledgement
There was a disagreement on the claim as the wife felt that they have been short-changed in the claims and the nature of the policy. Main concern of her disagreement is that:
Why did the Planner not advise them, right from the start, to take the whole sum assured of $100,000. Instead it was coupled with $20,000 + decreasing rider $80,000.
My explanation to her was, “Mdm, your acutal premium, then, was around $140 ($100 + $40)/month for the package of Whole Life ($20,000) and Decreasing Term ($80,000). If the Planner has advised a cool $100,000 whole life plan, you could be seeing 5 times of the $100, which is $500/month. Would you have agreed to go ahead with the plan?” Her answer was No.
Also, the lady has a budget of around $300/month, that’s the reason why the Planner has introduced this package.
Then I asked back again, “If the Planner has only advised $20,000 whole life coverage and save you the additional $40/month for the decreasing rider, would you have gotten back around $40,000?” She agrees with where I am heading.
So Are You For or Against Insurance?
Before bidding each other farewell, she told me something that warms my heart and make me feel proud of what I am currently doing.
She said that many people around her do not ever like the idea of getting any insurance, but she went against all odds and had the insurance done for her hubby 9 years ago. Now she is able to see the benefits of getting an insurance when it is much needed now.
If you are a logical person reading this, she has set aside a total premium of around $18,000. With insurance, she receives around $80,000 – a meaningful gift, I feel, from the hubby to the family.
If she has only leave this money with the bank, she is only getting back around the most $19,000 (with interest). With insurance, that money has multiplied 4.2 times (this is lower because the hubby has a health condition).
My Take To You…
Do not reject insurance. Even if you are against the idea of taking a whole life plan (because of the poor returns) – take on a term plan. Lower premium but Higher Coverage and Better Piece of Mind.
Do not wait till your health is getting lousier than you decide to get some insurance. You have to know, insurance companies may reject your application or introduce special terms/additional loadings. You may end up paying more!
If there is ever a loading/special terms, do not reject the application straight away. If you are able to accept a lower coverage, go for it. It’s better to transfer your risk to the insurance company rather than to bear it all upon yourself.
Remember… Getting an insurance is never a waste of money. Even if you get a Term Plan today, the money you had set aside for this plan has been converted to a Peace Of Mind (something priceless). You’ll never know, as seen above, a simple fall can even kill. Therefore a small premium today can become a lump sum of money tomorrow.
Do not wait. There is a saying… “Time and Tide wait for No Man.” Speak to a Planner today for your insurance planning!