I have more than 20 FAQs in this webpage:
http://www.tankinlian.com/faq/
They cover a wide range of topics and were written over the past year. Most of them are still relevant today. They are educational and fun to read.
I am not able to provide specific advice to the financial planning needs of individual visitors to my blog. It takes too much time, and is really the role of a fee-based Financial Adviser. At best, I can refer them to a specific FAQ.
Try to ready my FAQs and see if you can find the answers to your issues.
Thursday, May 15, 2008
Uneasy about two insurance products
Mr. Tan,
As I read your blog, I began to feel very uneasy about the two products that I purchased recently. I hope that you could advice me, because I feel apprehensive of what insurance agents are telling me now.
Recently, because of the low fixed desposit interest rate, we invested our hard-earned savings of $40K in a unit trust (100% on GROWTH combined fund). We were also advised by the agent to purchase a life insurance plan VIVOLIFE for my son.
I like your advice on the following:-
a) Is it really necessary for me to insure my son now? Does he needs it anyway?
b) Is the unit trust considered as an "Investment linked policy"?
REPLY
I usually advice parents not to take life insurance for their child. It is not needed. It is better for a parent to save for a child in a low cost investment fund. This is described in the following FAQ:
http://www.tankinlian.com/faq/child.html
Your investment in the Growth Combined Fund is made through a single premium policy, i.e. the Flexi-Link. The upfront charge is 3%. The annual charge is about 1%. I think that these charges are all right. An alternative is for you to invest in the STI ETF (StateStreet Trakker fund), where the upfront and annual charge is 0.3%.
The Flexi Link is an ILP. However, as it is a single premium, the charge is acceptable. You should avoid the regular premium ILP, where the charges are very high.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
I hope that they help you to make the right decisions.
As I read your blog, I began to feel very uneasy about the two products that I purchased recently. I hope that you could advice me, because I feel apprehensive of what insurance agents are telling me now.
Recently, because of the low fixed desposit interest rate, we invested our hard-earned savings of $40K in a unit trust (100% on GROWTH combined fund). We were also advised by the agent to purchase a life insurance plan VIVOLIFE for my son.
I like your advice on the following:-
a) Is it really necessary for me to insure my son now? Does he needs it anyway?
b) Is the unit trust considered as an "Investment linked policy"?
REPLY
I usually advice parents not to take life insurance for their child. It is not needed. It is better for a parent to save for a child in a low cost investment fund. This is described in the following FAQ:
http://www.tankinlian.com/faq/child.html
Your investment in the Growth Combined Fund is made through a single premium policy, i.e. the Flexi-Link. The upfront charge is 3%. The annual charge is about 1%. I think that these charges are all right. An alternative is for you to invest in the STI ETF (StateStreet Trakker fund), where the upfront and annual charge is 0.3%.
The Flexi Link is an ILP. However, as it is a single premium, the charge is acceptable. You should avoid the regular premium ILP, where the charges are very high.
Read this FAQ:
http://www.tankinlian.com/faq/ilp.html
I hope that they help you to make the right decisions.
Living Endowment
Dear Sir,
I'm interested to know about the Living Endowment policy. I like to hear from an independent and unbiased views (like your good-self) on the above policy from NTUC rather than from the insurance agents.
The questions are;
> does this policy affected by the bonus change?
> does it fare better than 'Vivolife' or otherwise?
> does this policy give good value to policyholder?
> any other recommendation?
REPLY
I remember the Living Endowment was designed a long time ago. It is an endowment policy which covers critical illness and death.
I do not know how it will be impacted by the change in bonus structure and how they compare with the new plans.
My general advice on financial planning is hown in this FAQ:
http://www.tankinlian.com/faq/savings.html
I'm interested to know about the Living Endowment policy. I like to hear from an independent and unbiased views (like your good-self) on the above policy from NTUC rather than from the insurance agents.
The questions are;
> does this policy affected by the bonus change?
> does it fare better than 'Vivolife' or otherwise?
> does this policy give good value to policyholder?
> any other recommendation?
REPLY
I remember the Living Endowment was designed a long time ago. It is an endowment policy which covers critical illness and death.
I do not know how it will be impacted by the change in bonus structure and how they compare with the new plans.
My general advice on financial planning is hown in this FAQ:
http://www.tankinlian.com/faq/savings.html
Persevere
Dear Sir,
After going through your blog, I really admire your integrity. During the negative publicity of IDAC, so much injustice has been done to you.
Somehow, I could recall that, during the 50's and 60's, whoever is a champion of the man in the street, will be labeled as communist. When you try to bring down the motor insurance rate, so much bad publicity of IDAC is published.
Mr Tan!, persevere, God Bless
GW
After going through your blog, I really admire your integrity. During the negative publicity of IDAC, so much injustice has been done to you.
Somehow, I could recall that, during the 50's and 60's, whoever is a champion of the man in the street, will be labeled as communist. When you try to bring down the motor insurance rate, so much bad publicity of IDAC is published.
Mr Tan!, persevere, God Bless
GW
Policies with high terminal bonuses
Hi Mr Tan,
I heard about your collective protest on the recent changes in Income's bonus structure. I am not a par fund policyholder but I principally do not agree with such bonus structures in the market. They have the risks of investment-linked plans but do not offer the transparency and much value to policyholders.
I have managed to collate some simple statistics from MAS returns on fund solvency and investment allocations, which may help you build your case. We can clearly see that those companies using the "terminal bonus" strategy has very high solvency ratios, yet I wonder why they do not invest more in equities or vest more of the returns on their policyholders?
Hope it helps. Good luck.
T
I heard about your collective protest on the recent changes in Income's bonus structure. I am not a par fund policyholder but I principally do not agree with such bonus structures in the market. They have the risks of investment-linked plans but do not offer the transparency and much value to policyholders.
I have managed to collate some simple statistics from MAS returns on fund solvency and investment allocations, which may help you build your case. We can clearly see that those companies using the "terminal bonus" strategy has very high solvency ratios, yet I wonder why they do not invest more in equities or vest more of the returns on their policyholders?
Hope it helps. Good luck.
T
Investing in Foreign Currency Deposits
Dear Mr. Tan,
What do you think about foreign currency fixed deposts that pay about 7% to 8%? I am of investing in NZ$ and A$. The money has been in the saving account for quite some time.
REPLY
I have a lot of my own money invested in AUD and NZD. I like the high interest rate. I hope that the currency will be stable, but this is a risk that the investor has to take.
Read this FAQ:
http://www.tankinlian.com/faq/foreign.html
All the best to you!
What do you think about foreign currency fixed deposts that pay about 7% to 8%? I am of investing in NZ$ and A$. The money has been in the saving account for quite some time.
REPLY
I have a lot of my own money invested in AUD and NZD. I like the high interest rate. I hope that the currency will be stable, but this is a risk that the investor has to take.
Read this FAQ:
http://www.tankinlian.com/faq/foreign.html
All the best to you!
Managed Care
I have agreed to present a paper to a conference on "managed care". It is targetted at human resource managers.
Why are HR managers interested in "managed care"? They find the cost of providing medical benefits to employees for both outpatient and in-hospital treatment, to be increasing over the years. They hope that "managed care" can help to slow down the increase.
What is "managed care"? Under managed care, the insurance company is more active in managing the costs of treatment, e.g. to make sure that the patient gets the right treatment, avoid overcharging by the providers, avoid abuses, and most importantly, to keep the employees healthy.
If the costs can be managed, the employer pays a lower premium for the medical benefits next year. The HR manager will get a better performance rating!
Why are HR managers interested in "managed care"? They find the cost of providing medical benefits to employees for both outpatient and in-hospital treatment, to be increasing over the years. They hope that "managed care" can help to slow down the increase.
What is "managed care"? Under managed care, the insurance company is more active in managing the costs of treatment, e.g. to make sure that the patient gets the right treatment, avoid overcharging by the providers, avoid abuses, and most importantly, to keep the employees healthy.
If the costs can be managed, the employer pays a lower premium for the medical benefits next year. The HR manager will get a better performance rating!
International Health Plan
Dear Mr. Tan,
My work requires me to travel around the Asian region and to visit many cities. If I fall sick in any city, how can I get medical treatment? Is there an international plan that provides wide coverage?
REPLY
A few international insurance companies offer this type of plan. It offers access to a large number of hospitals around the world and pays for the cost of medical treatment (except for a small co-payment).
In the globalised world, more people are working in other countries. Many Singaporeans are now working overseas. Many expatriates work in Singapore. There is a need for this type of international health plan.
Apart from paying the bills, these international plans provide easy access to the quality hospital. For example, they know which is a good hospital to be admitted and will pay the bill. It is "cashless payment" for the customer.
If you do not have an international health plan, you have the option to fly back to Singapore and be treated here and be covered by the Shield plan. This may be suitable for non-emergency situations.
My work requires me to travel around the Asian region and to visit many cities. If I fall sick in any city, how can I get medical treatment? Is there an international plan that provides wide coverage?
REPLY
A few international insurance companies offer this type of plan. It offers access to a large number of hospitals around the world and pays for the cost of medical treatment (except for a small co-payment).
In the globalised world, more people are working in other countries. Many Singaporeans are now working overseas. Many expatriates work in Singapore. There is a need for this type of international health plan.
Apart from paying the bills, these international plans provide easy access to the quality hospital. For example, they know which is a good hospital to be admitted and will pay the bill. It is "cashless payment" for the customer.
If you do not have an international health plan, you have the option to fly back to Singapore and be treated here and be covered by the Shield plan. This may be suitable for non-emergency situations.
Cover for Natural Disasters
Dear Mr. Tan
Does a life insurance policy cover death by earthquake, such as happened in Sichuan? I am told that "acts of God" are excluded. Is earthquake considered an "act of God"?
REPLY
A life insurance policy, e.g. whole life, endowment or term insurance policy, covers death by earthquake and other natural disasters. It actually covers death from all causes, except for suicide during the first year.
Natural disasters are usually excluded for property insurance, i.e. insuring your home, factory, shop or motor vehicle. These natural disasters are specifically excluded in the policy, e.g. earthquake, windstorm, volcanic eruptions, etc. You can buy specific cover for these events by paying an additional premium.
I am not sure if these natural disasters are excluded from personal accident insurances. You have to enquire about it. It is better to pay a slightly higher premium and have these events included in the cover.
The terms "act of God" or "natural disaster" are not specifically used in the policy. The specific events are named in the Exclusion clause.
Does a life insurance policy cover death by earthquake, such as happened in Sichuan? I am told that "acts of God" are excluded. Is earthquake considered an "act of God"?
REPLY
A life insurance policy, e.g. whole life, endowment or term insurance policy, covers death by earthquake and other natural disasters. It actually covers death from all causes, except for suicide during the first year.
Natural disasters are usually excluded for property insurance, i.e. insuring your home, factory, shop or motor vehicle. These natural disasters are specifically excluded in the policy, e.g. earthquake, windstorm, volcanic eruptions, etc. You can buy specific cover for these events by paying an additional premium.
I am not sure if these natural disasters are excluded from personal accident insurances. You have to enquire about it. It is better to pay a slightly higher premium and have these events included in the cover.
The terms "act of God" or "natural disaster" are not specifically used in the policy. The specific events are named in the Exclusion clause.
Reduce commuting - view from NZ
Dear Mr. Tan,
I read your article titled "Reducing commuting time - national effort needed" in The Online Citizen. Here Are my observations, based on my working experience in both Spore and NZ:
1) When I was in Spore, I subscribed to the idea of buying a flat. With that, I lost the freedom to live near my work place which changes on average once every few years. I spent between 1 to 1.5 hours commuting one way daily, and it's not a pleasant journey because of the crowded public transport.
2) Since I do not plan to live for the long term in NZ, I'm renting now, and I managed to find an apartment that's a 5 mins walk from my office, right at the heart of the city. It's very convenient with everything within 15 mins walking, and many people are quite surprised to learn that I don't own a car here. One problem though, rental can fluctuate a lot, I was recently hit by a 25% increment. I believe it's the same situation in Spore.
3) Living near one's work place has many benefits, for example, more sleep, less stressful commuting, better concentration and productivity at work. A healthier lifestyle too, because I can go home for lunch instead of eating out (the cost saving is not significant in Spore's context, but it makes sense in NZ). Not to forget the savings in transport cost, as mentioned in your article. A lot of things can happen in a 1 to 1.5 hrs commute, eg. MRT break down, accident on the road causing massive jams, which add to the stress(knowing one will be late for work).
4) For the majority of Singaporeans, it probably makes more financial sense to buy a HDB flat at the 2.5% mortgage rate, because it makes the mortgage payment very affordable than the average rental. In NZ, the mortage rate is over 9%, so renting can be more attractive.
5) The differences in the culture, especially in the mindset of most employers. In the 3 jobs I have held in Spore, most of the time I'm expected to be on call 24/7, this is very disruptive to my personal life. In NZ, although I'm in the same line, the expectation is 40 hours a week, and it's up to us to adjust our daily hours. I tend to believe that Sporean employers need to see their employees working at their desks in the office, and one feels uneasy to leave on the dot. Telecommuting is also very common in NZ. People work from home at times for various reasons, like to take care of their children.
It's a pity that the public transport in Auckland is not very well implemented and expensive, low demand leads low frequency. Even so, the buses seldom reach their full seating capacity. If only they are better, I'll definitely live in the suburbs.
HL
I read your article titled "Reducing commuting time - national effort needed" in The Online Citizen. Here Are my observations, based on my working experience in both Spore and NZ:
1) When I was in Spore, I subscribed to the idea of buying a flat. With that, I lost the freedom to live near my work place which changes on average once every few years. I spent between 1 to 1.5 hours commuting one way daily, and it's not a pleasant journey because of the crowded public transport.
2) Since I do not plan to live for the long term in NZ, I'm renting now, and I managed to find an apartment that's a 5 mins walk from my office, right at the heart of the city. It's very convenient with everything within 15 mins walking, and many people are quite surprised to learn that I don't own a car here. One problem though, rental can fluctuate a lot, I was recently hit by a 25% increment. I believe it's the same situation in Spore.
3) Living near one's work place has many benefits, for example, more sleep, less stressful commuting, better concentration and productivity at work. A healthier lifestyle too, because I can go home for lunch instead of eating out (the cost saving is not significant in Spore's context, but it makes sense in NZ). Not to forget the savings in transport cost, as mentioned in your article. A lot of things can happen in a 1 to 1.5 hrs commute, eg. MRT break down, accident on the road causing massive jams, which add to the stress(knowing one will be late for work).
4) For the majority of Singaporeans, it probably makes more financial sense to buy a HDB flat at the 2.5% mortgage rate, because it makes the mortgage payment very affordable than the average rental. In NZ, the mortage rate is over 9%, so renting can be more attractive.
5) The differences in the culture, especially in the mindset of most employers. In the 3 jobs I have held in Spore, most of the time I'm expected to be on call 24/7, this is very disruptive to my personal life. In NZ, although I'm in the same line, the expectation is 40 hours a week, and it's up to us to adjust our daily hours. I tend to believe that Sporean employers need to see their employees working at their desks in the office, and one feels uneasy to leave on the dot. Telecommuting is also very common in NZ. People work from home at times for various reasons, like to take care of their children.
It's a pity that the public transport in Auckland is not very well implemented and expensive, low demand leads low frequency. Even so, the buses seldom reach their full seating capacity. If only they are better, I'll definitely live in the suburbs.
HL
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