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Tuesday, 3 November 2015

Aspirational and Keeping up with the Joneses Insurance



Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.


Listening to some people, they talk as if they are treating insurance like a lottery ticket?


Let's take travel insurance. 

A friend of my sibling was caught in the Bali bomb blast several years ago. His medical flight evacuation from Bali to Singapore alone cost about $150,000 plus. Now that's the type of travel insurance one should look into if one is afraid of getting seriously sick or injured in a foreign country!

"Celebrating" you made a claim for a flight delay, lost luggage, or a medical claim for a minor ailment during or after the trip is not exactly the main purpose of travel insurance, is it?

I mean even if you had not bought travel insurance for these "good to have" claims, your lifestyle is not going to be meaningfully changed. A few hundreds or thousands out of pocket expenses are at most an annoyance, right? Just like getting the flu while travelling - a bummer - but it won't kill us. 

Have you checked your travel insurance covers medical repatriations? 

Too expensive? You wanted to "save" on the premium? You should listen to yourself...


Aspirational and keeping up with the Joneses Insurance

I guess this one of the main reasons why there's quite a large percentage of people who bought Integrated Shield Plans for stays at Private hospitals or higher class wards in Public hospitals - don't lose face to others - decide to downgrade themselves when the time comes for them to be hospitalised.

Aspirations are good; not when you extend beyond your means.

So what happens to the wasted higher premiums you have paid? 

Thank you very much! So say those who made the medical claims with glee!

They go in and out of hospital every other year, and its all free! So lucky of them they tell you!?

A perverse kind of lottery mentality? Did they say they were lucky again?

Notice what they focus on before buying Private hospital plans and after their hospital stay differs?

Before hospitalisation say in earnest its for less waiting time, can choose own doctor, good better best medical treatments, etc. 

After? Can only say the room very posh like 5 star hotel, food excellent, etc. You want to bet anyone took selfie and post in Facebook to show off?

You would think a staycation at a 5 star hotel or resort can easily be arranged. And the whole family can get to enjoy the facilities too!

So you buy medical insurance to cover the medical treatments or for sleeping in style?


Sell the printer cheap; make money on the ink cartridges

Just the other day, there's one interesting advertorial (nice fancy word to mean I'll only say nice things for my sponsor) on child insurance.

It started well. 

Medical insurance for child? Makes sense if you fear the rising medical costs in Singapore.

Education fund for child? Again makes a lot of sense especially if you do not have a good track record of DIY investment... Its basically a kind of forced savings to prevent you from blowing this money on money losing investments which some have already experienced! 

And then it has to happen.

Life insurance for the child!?

The comparison between term or whole life insurance is just what we call smoke and mirrors in the trade. 

It's just sleight of hand to prevent you from asking who is the dependent of your child? And if there are none, then duh! 


Now make a guess.

Medical insurance, Education fund, and Life insurance for child, which 2 are the printers, which one is the ink cartridge?

Same goes for eating out at the restaurants. 

The main courses are competitively priced. But the literary icing on the cake for the restaurant owners are on the desserts menu.

If you are thrifty you'll skip desserts right?

Strange? Yet when it comes to insurance, you just pile on the desserts!

Yummy!






16 comments:


  1. Don't be frugal on medical insurance. Don't you dare! :-)

    Everyday, our lifestyle is Class C so what wrong with Class A when we are sick?

    We should deserve the best treatment and stay with best comfort and privacy.

    We should! :-) :-) :-)


    ReplyDelete
    Replies
    1. CW,

      LOL!

      Now that's delayed gratification extreme for you and me!

      The present don't enjoy; sick then enjoy!?



      Delete
  2. Hi Smol

    Some icing on cake is better than none, and girls (obstetrics) dig that.

    Want the honey ? Get the icing .

    Uncle 8888

    Alone in Class A could be scary at late night , especially in...

    haha

    ReplyDelete
    Replies
    1. Small Time Investor,

      Just ask a girl whether she wants a basic plain vanilla medical plan with a 1 carat diamond ring upfront; or a super deluxe medical plan - guess most will choose which?

      I'll definitely choose the one with diamond ring ;)

      Today is today. Who knows when we'll breakup tomorrow?

      LOL!

      I guess that's why I'm a man-whore?

      Give me sugar I shout, "Mommy!"

      Delete
  3. Hi SMOL

    Hope I didn't inspire you to write this post. Haha...no wonder my eye lip keep jumping.

    I agreed that travel insurance are more for the bigger cost, but if you got "ah chew" problem and you can claim, you let it pass to save money for the insurer? haha. Travel insurance is essential but there are usually lot of promotions out there. Have to read fine print what are covered and not.

    For shield plan, seriously, the private shield plan is not expensive before the medishield life kick in. Most average wage earner would be able to finance it through medisave (don't talk about riders). The reason why my wife go to private hospital because the public hospital given us a nightmare report and we seek this senior consultant for 2nd opinion. We have superior trust with him given that my child is also delivered by him. I am readily to downgrade my shield plan if premium become unaffordable. I have no qualm about staying in ward C actually. Did I answered your question? haha.

    For the rest of the insurance, I think no need to buy much depending on individual situation. Not everyone is as smart as SMOL who can manage money. Rather than get cheated by girls, mind as well let insurance companies help you "auto save" your money. haha.


    ReplyDelete
    Replies
    1. Frugal Daddy,

      Yup, your post was the catalyst ;)

      For laypersons I don't touch. For financial bloggers, don't you agree the bar should be higher? LOL!

      Knowing what we NEED and can AFFORD is the key message I am conveying.

      Rich people throw money around I "ke chiu" fully support! Consumption helps our economy mah!

      But when what started as a hedge or insurance become a burden, then its not fun and games for the common commuter on the SMRT train.


      Start with the big rocks and place them in the jar first.

      The rest of the pebbles or sand we can place them in at a later time; when life gets better ;)

      Delete
  4. HI SMOL, I have a different take

    H & S dun "giam". You ask me of all the insurance, life insurance, CI uni endowment, accident blar blar.. One better jolly well get H&S first!

    Easy, you die, no payout, your dependents suffer. But you kena hospitalised, become a burden, your "dependents" cannot go out and "find a living" but need to take care of you. one must be "siao" to save on H&S

    Of course, no need to get the best possible one with all the whip cream on top, yet IP also got different tiers ok. But I seriously think everyone need IP. and that extra dollars hardly considered a "stretch" in fiances unless you cannot even feed your mouths.

    I can stay private, but I choose to stay Govt, because I scare I hit limit, what is so "wasteful" about it? If no way I will hit limit but I am misinformed, then that is not the PRODUCT problem but "misinformed" problem.

    People think buy and hold long term equity sure "bao jia" and beat bonds somemore, that is a "misinformed" problem and not a "equity" problem

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Note I never said to be "giam".

      It's what we NEED and can AFFORD ;)

      My travel insurance example asks the question whether selecting the "cheap" option that hedges against "annoyances" or "frustrations" is what we really need? Medical repatriation cover is not "cheap" ;)


      Siao and scare are highly emotive words.

      Once you have calmed down, can you see the contradictions between "hardly consider a stretch" and "I scare to hit the limit"?

      You are right. "Wasteful" is an opinion. Some people don't mind paying for a first class plane ticket but sits in the economy class. Happy can oredi!

      Interesting you have taken out the personal responsibility part out of the ownership discussion.

      There are quite a few financial bloggers out there who were quite open about their early mistakes in letting themselves to be "sold to" insurance products that were either inappropriate or unnecessary...

      Once they saw the "truth" on what they NEED and can AFFORD, they shared the recovery steps they took to right the situation.

      Of course, it came with some pain...

      Delete
  5. SMOL,

    Once you have calmed down, can you see the contradictions between "hardly consider a stretch" and "I scare to hit the limit"?

    No contradiction, I look at IP plans, the lower tiers are "very affordable" in my opinon, when I say affordable I mean most working people can afford it.

    Between the tiers you want to "save" money, and when the touch wood moment come, you are really going to be "stretched"

    I did return one of my endowment policy.

    I was sold to for my first life policy. But I see its place in my overall "wellness"

    I told my sis, I close eyes can beat the pathetic returns given by the A company in terms of endowment savings.

    But the other 2 savings plan, while the yield is nothing to shout about is rather decent in my opinion.

    Uni - plan is forced saving for my son.

    I dun think I over-bought anything

    I also have CI accident etc, but not really big sum of money in terms of prenium and also payout. I believe insurance has its place of usefulness.

    I even have Early CI payout, I approach my agent to tell him I wanted it, because reading the definitions of 30 critical illness, I told him I could only get the money when I am dying..but early CI defintion is looser

    I have no doubts with some arrangements in terms of term plan or DIY or self investment, we could get a "better deal"

    But the way it is being "communicated" by you, it is like is a "bad" deal...

    You know me, straight talker, no hard feelings

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Always a pleasure bantering with you ;)

      Delete
  6. I must be hiding in my shell for too long - what sort of travel insurance are people buying if it can't even pay for medical evacuation?! I thought a basic NTUC plan already caps evacuation at half a million if I'm not wrong.

    I'm a believer in travel insurance - it usually takes up 1-2% of my travel budget. I once dislocated my elbow on an isolated resort island, and the nearest local sinseh (he isn't even a doctor) is one hour away via a boat + car ride. I was extremely lucky - a trained paramedic was giving first aid certification on the island to the resort staff (what are the chances!), and the sinseh managed to fix my elbow, but it could have been much, much worst. Hedge against the risk of a contingent, uncertain loss indeed.

    For H&S, I could probably afford the private hospital plans but went with the restructured hospitals A ward instead to save some moolah in the long run. The older age premiums are .. eye-watering. My primary motivation for getting the plan was the higher claim limit of $400k vs $150k otherwise, but to be honest I have no idea what a catastrophic medical event would really cost me. That's why I appreciate folks like FrugalDaddy and BullyTheBear who share their experiences.

    Can afford - just buy lah?

    ReplyDelete
    Replies
    1. Kevin,

      1) Try figuring out why people buy "more expensive" travel insurance from a travel agent, tour operator, airline, cruise operator, etc; when they can get better deals and bundled benefits from insurance companies directly...

      But then, we have "investors" who buy stocks based on tips, why are we not surprised people also buy travel insurance without looking at the fine print or doing a price comparison between 3 shops?


      2) That's the thing about "affordability"!

      If its only "affordable" when we are young, and when we get the premium shock at our advanced age, how to "downgrade" to more affordable medical plans when we have got used to the idea we deserve the "best" for so long? Try telling our love ones we have to downgrade their plans?

      I rather start with the basics and add the bells and whistles as I accumulate more means as I progress through life. Better to under promise and over deliver ;)


      We are often driven by our emotions - fear of illness and death; greed for life and material comfort. Financial considerations are sometimes just a cover...

      If we accept illness and death as part and parcel of living, and is conscious what if tomorrow never comes, perhaps the best "hedge" is ....

      LOL! I think I've lapsed into spirituality again...

      Delete
    2. Why do people buy expensive travel insurance.. Perhaps lazy to spend the extra effort? Too busy? For the convenience? One stop can settle everything, how nice!

      Below age 50, still considered "affordable"? I think many people neglect the fact that premiums above age 50 scales up significantly, right when we need money the most. Add on the fact that there is withdrawal limits that one can use on a private shield plan, the cast outlay can be rather brutal.

      Not advertising or promoting any particular insurer, but Av*va is very honest, haha. Their premium table includes a column for cash outlay - god knows how many potential cash cows (like me) got scared away by it and bought a lower plan.

      Starting small is a good plan for many, I suppose =)

      Delete
  7. Hi Jared,

    Since my poor background n parents nver teach or buy insurance for me, I do not have a personal H&S plan bcos I was ignorant not to buy one until I was hospitalized for two weeks. Subsequently I started to research and know more BUT go so many insurance co all also cannot buy!

    Now that is regret!

    being a suay guy, I also bought accident insurance n so far I had already claimed many times.

    I think insurance is extremely IMPT but the premiums n extent of its coverage depends on individual - how much we can afford!

    Eventually no right no wrong! But all I can say is the standard of public hospital had risen so much as I recently visited a relatives!

    ReplyDelete
    Replies
    1. Rolf,

      Aye.

      Securing what we need and can afford is clarity.

      Grasping at straws in blind fear is being sold to.

      To say private medical care is superior without personal verification is not being fair to the honourable doctors and nurses working in public hospitals...

      Its a bit like saying civil servants are 2nd class to private sector workers!?

      Delete

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