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Term Insurance

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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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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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):

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Why Some People And Their Family Just Hate Insurance

This is true! There are people who simply just hate insurance (except for car insurance because this is made compulsory). And for these people, no matter how much you persuade, how many articles, how many real life incidents you can share to showcase the importance of getting insurance… they are just not interested!

I have personally came across some of them and through a few series of conversations, I have managed to compile a few suggestions on why they hate insurance… I will also be giving some of my opinions on how to resolve this hatred.

Reason #1: I Can’t Claim Anything From The Insurance Plans That I Have Bought

This is one top reason why people just hate insurance, they pay and pay for so many years of premium, and till one fine day that they can make a claim, it’s either that their claim is invalid or being rejected.

Reason #2: I Lost Money Because Of My Insurance Plans

This is very typical especially for Investment-Linked Plans and Term Insurance. This is also typical for any early withdrawal/surrender of insurance plans (e.g. whole life insurance, endowment plans).

Reason #3: I Buy So Much Insurance Plans Yet Nobody Is There To Take Care Of Them

Because of the high turnover rate in the insurance industry, the chances of people having their insurance plans become “orphaned” literally became higher as well.

That’s why when there’s some form of urgency, they can only depend on themselves and do not know what they can do next. And the two reasons above will apply as well.

*If you have other personal reasons for you to hate insurance, I hope you will share it with me with your comments below.

Personal Opinion To Reason #1

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Are People Around You Living Longer Or Shorter?

Have you asked yourself this question before Are people around you living longer or shorter?

If you do not have an answer or do not wish to answer this, my suggestion is that you flip through the Straits Time and just have a glimpse at the Obituary Page. You do not have to understand in details but just have a rough feel at the age of people passing on…

My personal opinion is that the answers to the above are both a yes! And the point that I want to bring across is  – Have You Planned for both situations?

What Happened When You Live Too Long…

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