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Financial Planning

The Cons Of Having Many Of The Same Policy Types

This post is a response to one of the readers who has recently posted a comment on this post. Therefore I do hope that, with this post, I can help to bring out some pointers on the cons of having the many of the same insurance policy types…

When Are There Cons To Having Too Many Of The Same Policy Types?

The existence of cons depends on the terms and conditions stated by various insurance companies. So it is always better to check with the Financial Planners representing each of them. Things worth checking out:

#1 The Maximum Amount Of Insurance Coverage

Some insurance companies tie the maximum amount of insurance coverage against Death and/or Critical Illnesses against a factor of one’s annual income. For example, some insurance companies may set 16 – 20 times of annual income as the maximum sum assured for a whole life or term insurance. So if you are earning $100,000 per year, the maximum amount of insurance coverage that you can get may be set as $2,000,000. Any amount beyond that may mean that you are over-insured and insurance companies may just pay up to that limit.

If you are thinking that it’s unfair since you have the means to pay the premiums, but do think of people who may take advantage, e.g. a person deeply in debt and unemployed but has some savings to tide him over… he decides to get a $1 million dollars term insurance to cover himself and he decides to commit suicide after a year (of which the premium paid is just a few thousands). This will be unfair to the Insurance Company and to the pool of policyholders, do you agree?

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Cancer Finds Anyone That Is Young Or Old, Rich Or Poor

If you have ever thought that you are healthy (eat well, sleep well, exercise well) and you will be free from any form of illnesses and you do not need to have any health or life insurance to cover yourself… think again… I have just realized that one of my healthy friends have just contracted early stages of cancer but he is on the way to recovery because of early detection and after going through chemotherapy cycles.

Cancer Finds Just About Anybody

This is a hard fact that you cannot simply avoid! This form of illness will find just about anybody – regardless of age, health and financial status. You can be 100% conscious of your health or fitness level but you can never 100% avoid it if it ever does come knocking at your door. Though it is still as important to be health conscious, it does pay to have more attention that you are always financially prepared (be it now or in the future) to handle such situation!

Why It Matters To Be Financially Prepared

Understood from my friend that once you know there are signs of contracting it, it is going to be a toll financially…  from a simple pain in a particular body area  to the stage of convincing yourself to see a doctor to get a proper diagnose that is already the beginning of a financial nightmare – you have to pay (and keep paying) to go for medical tests after medical tests just to confirm the status.

Once you have confirmed that its not a good sign, you have to speak to a specialist to diagnose the stage at which you may be in and to start arranging for advance medical treatments and screenings. The road to recovery is there but the reality of life is that you have to pay to go through it. Meanwhile if you are working for a living, this road to recovery will have some effects on it as well – because of the treatments involved, you will be too tired to work, so most probably you have to put yourself on long (paid and unpaid) medical leave…

How To Get Yourself Prepared For Any Health Situation

#1 You Need To Exercise

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Are You Sure You Are Still Covered Under DPS?

It was two days ago that I received an email comment on one of my earlier posts on the topic of Dependants’ Protection Scheme (DPS) and in it I was asked to provide some advice on why a passed-on family member may not be covered by DPS when it’s obvious that there’s enough CPF money in the account…. and there’s been so much confusion/unhappiness that the family is wondering if they are still able to make claims from it and if so… how can they do so…

What Is Dependants’ Protection Scheme Or DPS?

(As quoted from the CPF Board website) The Dependants’ Protection Scheme (DPS) is an affordable term insurance scheme that provides insured members and their families with some money to get through the first few years should the insured members become permanently incapacitated or pass away.

And for most of its members, they use the money in their CPF-OA account to service the yearly premium. The deduction is usually set to automatic but there’s the usual yearly reminder that the annual premium is due and pending for deduction at a certain date. Insured members are also reminded to make sure that there’s enough money left in the CPF-OA for premium deductions…

If there’s really the case whereby the insured member has no enough money in the CPF-OA account, there will be a letter that’s being sent to notify about the lack of funds and also the alternative to top up the difference with cash at one of the designated Insurance Companies.

Should the insured member forget to make the payment after the grace period, the DPS plan will usually be terminated and an official letter will normally be mailed out to notify as well…

So Why Is It Important To Understand What’s Mentioned Above For DPS?

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Are You Financially Planned In 2011 And Prepared For 2012?

In just a few hours, we will be saying goodbye to Year 2011 and welcoming 2012… how are you, in the financial planning aspects?

Some Questions To Reflect Back In 2011

If you are not too sure of your current state, here’s some general questions that you can ask yourself and it’s also a good reflection of what you need to focus on in the coming 2012…

Ask yourself:

– Did your savings grow, remain the same or shrink?

– How’s your investment portfolio?

– Do you feel more ready for your Retirement?

– In terms of any unforeseen circumstances – are you prepared?

– With the weather so unpredictable, are your precious assets well protected (or well-insured)?

– In terms of educating yourself in the area of finances, have you done so?

– Your health – is it well maintained?

If you feel that there’s a big shortfall in terms of your planning for any of the above mentioned, I will always say that it’s still not too late – if you sit down, set your mind and draft out some plans to really tackle them in 2012. Likewise, with the financial planning industry gearing up (the recent regulations being that Planners would need to take up more investment credentials to better advise for their clients – it’s a good time to arrange for a discussion with your Financial Planner!

What You May Need To Pay Attention To In 2012

– Unforgiving Economy

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Do You Plan For Yourself With A Guide Book Or A Financial Planner?

If given a choice to properly plan for yourself, would you trust a Book that touches on the topic of what you need to know about Insurance Products or a Financial Planner who is not a newbie in the industry and qualified to give proper advice? Or would you have the combination of both?

And if you are amazed by what is being asked above, it’s not something new as there are people who plan for themselves with the help of a book. Though there’s nothing wrong with that because there are some good books that give you proper advice and even proper steps to work through your budget to sorting out your priorities to knowing what’s the order of importance in terms of getting an insurance plan.

The only concern that one may have is grabbing hold of a book that do not really guide the reader much but only list down on what’s the highly recommended insurance plan(s) in that author’s point of view and penalizes the other types. For example, I came across an author who only endorses Term Insurance, penalizes Whole Life Insurance and favors a particular type of Stock Investment in the book.

A Client Who Followed That Book And Did Changes

I have the real-case experience of having a Client who contacted me to request for a termination of the child’s Whole Life Insurance after it has been in-force for the past five years and another five more years to go before that client stops paying for that policy for the child – just because that client has read that book that says Whole Life Insurance has high expenses and fees built-in and the client is expected to face heavy losses should the policy continues…

I advised that should the client really decide to terminate that policy, the client would expect to suffer heavy surrendering charges which can amount to 60 – 70% of what was being paid till date. The client says it would be best to follow that book and confirmed that it would be best to terminate it and suffer the initial bit of losses.

Another colleague did helped to persuade that client but seemed like the client has really made up the mind and that policy was terminated on that date.

What Can You Learn From This Particular Incident

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