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Financial Planning

Why Most Singaporeans Will Never Get Enough Insurance Coverage

If you are a Singaporean, you will definitely have read that for the last few years, the newspaper has been stating that most Singaporeans are under-insured by as much as $100k – $200k, given that the average insurance coverage that one should get to protect him/her against unforeseen circumstances like Death, Permanent Disability should be around $450k+…

This Situation Will Not Improve For Years To Come – Financial Planner Version

I was speaking to my ex-colleague some time back and she was highlighting that there’s been a change in the sales requirements (or in their context, the minimum sales amount they need in order to stay in that job). Their requirements would need them to “sell” at least $15,000 (and above) of annual premium, $100,000 (and above) of single premium and around $5,000 of annual premium in Investment Plans…

If you are able to hit these amount and go beyond, you will be look upon by your sales manager and group sales director and you will get rewarded with more perks and benefits. If you are way below these amount, you may lose your job, get invited to a one-to-one sales motivational talk by your manager or be made to attend “sales clinic” to improve your selling skill…

Looking at the range of insurance plans that a Financial Planner can recommend, e.g. a Whole-Life Plan vs Term Insurance Plan and a person who really need some form of insurance coverage, e.g. Critical Illnesses… which of the above plan will the Financial Planner recommend? Make a guess… if you have talked to Planners before, you will definitely see a trend… they will recommend the Whole Life Plan… they know you need the coverage and they will do some planning for you and suggest a minimum sum assured of $100,000.

For a typical 30 years old guy, working and healthy, the average monthly premium for a whole life insurance plan can be at the range of $200/month or $2,400/year. If that guy is not willing, the recommended amount may be reduced by half to a sum assured of $50,000 with an average premium of $1,200/year. The next stage for this Financial Planner is to suggest that this new client should have his yearly review and to increase the coverage (=higher premium) if possible.

Deal is closed and this Financial Planner would just need to find around 11-12 of such similar type of client and he is more or less made it through that sales month…

If we look into another type of Financial Planner who believes in planning for others and would want to plan well, he may suggest that prospect to take on Term Insurance that may cover him for $200k and above for just $30/month (or $360/year). You see the difference in the premium amount and the coverage suggested?

Should the first Financial Planner behave like the second Financial Planner, he would have to find an average of 40 clients (I believe this Financial Planner may just collapse and eventually quit the industry because of over-exhaustion…)

Other Factors Include (Not Ultimately The Whole List):

Read More »Why Most Singaporeans Will Never Get Enough Insurance Coverage

Learn From An Expert In Becoming Rich – Ramit Sethi

How do you get rich in today’s kind of society without having to take it on your own and going through all the unnecessary mistakes? If you are interested to know how, you can learn from this expert, who is also a New York Bestselling Author – Ramit Sethi.

How To Start Learning From Ramit Sethi

If you are into reading, you can actually get the book written by Ramit Sethi – “I Will Teach You To Be Rich”.

Or if you are into reading from a blog (a highly visited site with about 250,000 readers every month), you can actually head over to his blog which is updated on a regular basis – IWillTeachYouToBeRich.com. You can even subscribe to his Newsletter when you are over there. This may just be a valuable resource to you!

Why There’s A Lot To Learn From Ramit Sethi

Read More »Learn From An Expert In Becoming Rich – Ramit Sethi

Your Comments – My Replies #3

I would like to thank Marc for visiting my blog and posting his comment after his read on my posts on the importance of having Mortgage Insurance to protect a Mortgage Bank Loan. If you are interested in reading what I have written on this particular topic, these are the links:

– Mortgage Insurance For Your Mortgage Loan – Part 1 of 3

– Mortgage Insurance For Your Mortgage Loan – Part 2 of 3

– Mortgage Insurance For Your Mortgage Loan – Part 3 of 3

And this is the comment by Marc:

“Hi, it seems from your article that one can purchase a mortgage insurance with a sum assured higher than the loan amount; coverage longer than the loan tenure.

Please elaborate how this insurance can help one in time of need after the loan has been paid up completely.  Doesn’t the insurance lapsed automatically once the loan had been paid up?”

This Is My Reply:

– With Regards To Higher Sum Assured and Longer Coverage Period

Read More »Your Comments – My Replies #3

An Insider Story – Do You Really Give/Need Vouchers For Your Insurance Plans?

It’s quite a sad moment as I wrote this because I have just overheard that one of my ex-colleagues was fired and asked to resign with immediate effect because of “giving too little” shopping vouchers to the client as one other insurance agent has decided to offer “two times more…”

The Insider Story – The Art Of Giving Shopping Vouchers

I can be honest that the act of giving monetary rebates are not legally correct according to the Insurance Act but we, as Financial Planners, usually do give some form of shopping vouchers to our clients as a form of “thanking them” for taking out time to meet us and to giving us a chance to plan for them, and also that we recognize the fact that there are many other agents out in the market fighting for their business…

And we do recognize that we are not allowed to give direct cash rebates back to the clients and most of the time, they are compensated in the form of shopping vouchers either by a stipulated amount decided by the insurance company or based on personal discretion (usually depending on the commissions received…)

And usually the amount can go higher if the commissions received are high as well… (this is the extent that some Planners will go just to secure their insurance business and to hit their sales target)

This is why being a Financial Planner can be tough at times…

To Those Who Need Financial Planning – Do You Really Need To Have Vouchers?

Read More »An Insider Story – Do You Really Give/Need Vouchers For Your Insurance Plans?

Is It Okay For Me To Own Two Of The Same Policy Type Under One Insurer?

This is one common question that I have gotten from my clients and if you are one of them who have been asking around for an answer, the answer is a simple yes. But if you are referring to those health insurance, e.g. Shield Plans, you can only have one.

What You Need To Know About Owning Two Or More Same Policy Type

Basically you are not restricted to applying or owning two or more of the same policy type under one or two insurers. But for most insurers, you are only limited to the amount of coverage you are entitled to – and it can be based on your annual income (also quite subjective).

So how does it go? For example, some insurers may limit the amount of death coverage you may get under them up to a maximum limit of 10 – 20 times (or any multiples which you need to check out with your Financial Planner) of your annual income and also based on your current age group. For Total and Permanent Disability coverage, the common limit is around $1 million and likewise for critical illnesses coverage (recommended to verify as well).

That’s why you are not restricted to owning more of the same policy type but only limited to the amount of coverage you have with them. This is also one reason why in your insurance application form, it’s common to see a particular section that will ask you on the total number of insurance policies you have and the total amount of coverage. You may also be asked to provide a copy of your income tax as a proof to your current annual income status – the moment you apply for a certain amount of sum assured.

The Benefits Of Getting More Of The Same Policy Type Under One Or More Insurers

If your Financial Planner has done a financial planning review with you and recommended that you ought to get more insurance coverage but your rejection to him is that you are worried of the above – this particular section will share some light and maybe help to change your mind a little.

This is because there are certain benefits to getting more than one of the same policy type and even under more than one insurer. Benefits like:

1. You Get To Choose How You Want To Claim Or Surrender

Read More »Is It Okay For Me To Own Two Of The Same Policy Type Under One Insurer?

Why Will The CPF Minimum Sum Keep Increasing – Financial Planning Point Of View

There was quite a bit of hu-has on my Facebook’s news feed with lots of unhappiness that the CPF’s Minimum Sum has increased from $123,000 to $131,000 and that many more people will not be able to take their hard-earned money out from their CPF accounts and these money will eventually be “taken away” from them…

Be assured that the “taken away” part will not be the case as I have seen many of my clients who have reached their draw-down age, did not reach the Minimum Sum and are still able to take out their money.

I will not be dedicating this post to how you will be drawing your CPF money when you reach the draw-down age or explain what you need to do if you are unable to reach the Minimum Sum. But rather, I will explain the rationale behind the annual increment of the Minimum Sum from the Financial Planning Point of View.

Proper Planning For Retirement – The Concept Behind The Minimum Sum

If you are truly concerned about planning for your Retirement, a Financial Advisor would usually sit down with you and work out the numbers. For instance, to plan for your Retirement, you would need to know a few numbers like

  • How much you would like to have and to spend each month and in today’s dollar
  • How long you would like to have these sum of money
  • What is your feel for the average rate of inflation

An Example To Illustrate The Above

Read More »Why Will The CPF Minimum Sum Keep Increasing – Financial Planning Point Of View