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Thursday, 30 August 2012

Gasp! I've gone half-naked!

Yesterday, I went down to the AIA tower at Robinson Road to cancel my Life insurance policies.:

Term, critical illnesses, disability, and personal accident.


The only one that I've keep is the remaining whole-life policy that may "break-even" in 2 years' time at the 20 year anniversary mark. 

But looking at the surrender cash value today, its far behind the projected cash value when I first signed up for it age 27. May have to wait for a few years more to break-even due to the current low interest environment...


This is not a rash decision.


Insurance is great to create an immediate networth when I was age 27. 

It's a bit like playing options: we speculate on a high probability that we will "lose" small money (make no insurance claims), to benefit from a low probability that we will "win" big money (Choy! And double choy!)

OK, whole-life insurance is another animal. It's more a play on your inflation expectations (why would you buy insurance if you no faith on your government with the printing press?) and more a savings plan for conservative (or clueless) savers.

For example, savvy Indonesian insurance buyers who bought whole-life policies in Sing dollars rather than in Indonesian rupiah 20 years ago would have "won". Those who chose US dollars would have "lost"... (and praying hard US don't devalue their currency even more!)

Now why no one told me at age 27 that I need to have some ideas on inflation expectations, yield comparisons from alternative investments, and some forward currency views!? 


The good news is that after 18 years of hard work and pure dumb luck, my net-worth today is now more than the "created" instant net-worth from my insurance policies. So the policies have served their purpose and are now "obsolete".

I have no desire to "profit" from my lost. 

But more importantly, I am at peace with myself.

I know my own medical and family's history. And in the event that I'm diagnose with a serious medical condition, I know what I would do.

If it's terminal, I'll focus on palliative care than expensive "Hail Mary" medical procedures. It's interesting what doctors and nurses would choose themselves knowing what they know.

If it's wear and tear replacements, with medishield and medisave, I should be able to afford them. Class B2 is OK with me. That the benefit of being a care-giver now. I've base my observations and decisions on personal experience rather than hearsay.

I am pleasantly surprised that mom's medical costs were quite affordable after the medishield and medisave deductions - and she is a full-time housewife all her life. (OK, for families that earn less than $2,000 per month can be a different story... Hence I count my blessings daily.)

I exercise (I'm a walker - no, not that kind of street walker! I walk 1.5 hours average per day), and go for my annual medical health screenings (early detection increases my odds of recovery). 

My vice is I eat "unhealthy". Baby steps.


I've never understood why millionaires have life insurance policies. Once upon a time when there was estate duty I understand.

But putting my salesman hat on, the answer is crystal clear.

Cheers to all the million-dollar-round table members!


14 comments:

  1. Hi SMOL,

    I have never had term policies.

    I have never had disability policies.

    My accident insurance policies have all lapsed.

    I have CI policies but they will lapse progressively by ages 55, 65 and 75.

    I have a couple of whole life policies and plenty of endownment (forced savings) policies. I also have Incomeshield plus rider.

    I am just keeping the status quo and not doing anything to change how I am insured. I am concerned about how I should not be a burden to anyone if I should become very sick or very old.

    ReplyDelete
    Replies
    1. Hello AK,

      Its good to review periodically the original reasons why we bought Life insurance in the first place - just like for stocks. Much better than buy and forget!

      For some, we may need more coverage, for you its status quo, and for me it's a case of termination :)


      It's not a question of "burden" or not "burden". It's all about LOVE ;)

      I can be invalid and still not be a burden to my family since I can be "abandoned" at a JB hospital...

      I can be well and fit but I'll always be a burden to mom :(

      She always be worried if I forgot to eat lunch, if I got caught in the rain, why I so late not home yet :)


      Delete
  2. I think that term life insurance and medical insurance is a basic. Term life insurance(not whole life) is cheap and everyone with dependents should have one just in case that god forbid, if something happens, the dependents can have enough to live on. Nowadays, medical bills are expensive, medisave and medishield can't help much if any major surgery or a long hospitalization is required. Insurance is there not because we can't pay the bills by ourselves, but that we can pay less thus to stay longer. No one would like to stay alive but without any money left.

    ReplyDelete
    Replies
    1. Hello anon 3:02,

      Thanks for sharing your thoughts!

      I apologize in advance, but you sound like vested interest using what ifs scenarios ;)

      If I am "vested interest", I would rather appeal to prestige and proxy for love as my main selling points - that's where the big premiums lie.

      Highlighting on the individual's kiasuness and kiasiness is basic 101 - focusing on kiaboness is upsell!

      LOL!

      Delete
    2. Sorry that I sounded vested interest. But there is no point for me to prove anything. Everyone has his/her right to believe whatever they like to believe.

      bear me a few more minute. Why would I think a term life and medical insurance is a basic? I am single just like you. I do not have any other dependent other than my parents. God forbid, if I am to leave earlier than them, I would like them to be taken care of financially just as I am still around to support them(no matter how much they have for their retirement, it is my responsibility to take care of them when they grow old, just as they have taken care of me when I was a child). How much is a simple term life insurance premium? For NTUC Income i-Term, it costs about S$30 monthly(400 annually) to insure for 200,000 for 30 years for a 30-year-old male(not that I am recommending NTUC Income i-Term, just as a simple example). 400 is not much for me to have a peace of mind knowing that my parents would be taken care of. I would not mind to lose the 400 annual premium to just stay alive.

      A good medical insurance will not cost much as well. 200 - 300 annual premium. It will significantly lighten the financial burden of ourselves and our parents/children if any illness and big hospital bill comes as a surprise. When we are young and strong, we seldom get sick. All the premium paid are simply loss. But it is strategical for me to buy medical insurance early, as we are likely to get sick when we grow old and unlikely to get insured after we get sick.

      I have replied once, but the reply was gone. If it is a double post, please delete it. Thanks.

      Delete
    3. No worries anon!

      You wrote anonymously without a nick. I merely highlighting this fact to other readers as I believe in perspective and context :)

      Don't get me wrong. I NEEDED Life insurance as you describe from age 27 till now. I bought coverage for $1; now I have $5 in hand. Why still the need to profit from the $1 in claim? That's where I am coming from. Peace of mind is one thing; kiasu greed and kiasi unfounded fear is another...

      As for medical insurance, I am big supporter of Medishield, Eldershield, etc. More "atas" people can opt to add the private "shield plus" plans.

      Class B2 is good enough for me ;) And I have lots of faith in our medical profession. They won't treat me "less equal" just because I stay at class B2 (personal experience).

      A few black sheep are every where in all industries, and I know how to deal with them without making a big fuss.

      Oh, the nurses I've met for the past 6 months are so wonderful!!!



      Delete
    4. Very often we hear some people saying these:

      1) When they are sick; they will need private medical care.

      2) When their child is sick; they will need paediatrician.

      3) When their wife is pregnant; they will need car.


      Are these real needs?

      Can they comfortably afford them?

      Trust me, XX years have passed, I happily went through without them. Maybe some of us will need them so badly, I don't know.

      Delete
    5. CW8888,

      I've always enjoyed your views from the perspective of having walked the talk and having ate more salt.

      Sometimes we forget to ask ourselves what exactly are we insuring against... (what others might say?)

      "Cannot lose face! Wife pregnant must go Goodeagle. Mother knee replacement must go Mt EasyBird hotel!"

      Prestige and proxy for love are much more profitable than selling fear!

      Heads-up for new agents out there ;)

      Delete
  3. Hi SMOL,
    I have Incomeshield with rider.
    Also have 2 whole life with CI cover with NTUC. THink break even already.
    I have 2 mortgage insurances for my investment properties.
    If anything happens to me, my wife and kids get free rental income. SHe can be full time housewife to look after kids.
    If nothing happens to me, I get my rental income few years later.

    ReplyDelete
    Replies
    1. Financialray,

      We are on the simillar wavelength.

      I believe mortgage insurance combined with investment properties bought at reasonable prices can be a great alternative to Whole-Life insurance.

      It's DIY. Guess what insurance companies do with our premiums? Buy bonds, buy shares, buy properties - what else is new? LOL!

      1) There is capital gain potential from the investment properties far greater than the best projected yield on wholelife policies.

      2) Having a constant rental income can be better than leaving the missus to figure out on her own the big lump sum when we not around. As if throwing money at her will solve everything...

      While still around, you can show her the ropes on how to be a landlord (how to fish). Now that's true love in my book!

      3) Of course we have to be financially literate first. And you are more than savvy yourself ;)

      It's not so fun to be sitting on negative property valuation, or bought properties in locations and size that are hard to rent out during recessions...

      4) The best of all, the odds are we will "heng heng" survive with "wu jing wu xian" to our old age.

      Now try cashing your wholelife policy compared to the equivalent worth of your investment properties at 65. Let the facts speak for themselves.

      Property is a much better inflation hedge.

      You the man!


      P.S. Lots of successful insurance agents are property investors too. I wonder why... LOL!

      Delete
  4. Insurance is one of those topics that I love to cover.


    Do you care to read more?

    ReplyDelete
    Replies
    1. You huh!

      Don't kick ass lah... So violent! LOL!

      (Psst, your arms and legs got "ang kong"?)

      Poke gently can already ;)

      Delete
  5. Hi SMOL,

    Those insurance that you cancelled ranked high in my insurance portfolio, but I guess you have your own reason behind it.

    Just to share, personal accident plan is important to me and my Dad. I do sports and injuries are very common (not that I wish for). Thus far, insurance has helped defray a large part of my bills. In fact, my claim amount could well cover my premiums till my 50s. My dad is a part time taxi driver. Although, I believe the company may cover in the event of an accident, it never hurts to be privately insured, just in case.

    Cheers!

    ReplyDelete
    Replies
    1. Hello Derek,

      Precisely! You are much younger than me, our lifestyles are different, and thus our insurance needs will differ ;)

      It's good to review our insurance needs every 5 years. For me, it's a bit of overkill due to my new situation.

      For others, it may be a case where they should increase the coverage or add new riders.

      Nothing is more sad than "assuming" you are "insured" only to find out that the policy you bought 20 years ago now only serve 1/4 or 1/2 of its intended purpose due to inflation or changed personal circumstances...

      Having said that, insurance will not work if only those who need them sign on. To pay for the claims and make a profit for the insurance companies, we need those "just in case" to sign on too ;)

      Delete

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