What Are Insurance For?

There are a lot of insurance policies out in the market, but do you know what is are the differences? Did you ask your agent what exactly are they selling you, the pros and cons? For layman, it might be difficult for you to understand those insurance terms, but it is important to understand, rather than waiting... Do ask your financial planner more about it, don't be shy.



Let me go through some types of insurances.

1. Traditional Whole Life Insurance Plans

This is a plan that usually has the under-mentioned features:

- usually covers against Death, Total and Permanent Disability (TPD) and the 26 (now change to 30) Critical Illnesses (CI).
- pays a lump sum upon claim and will terminate.
- Premiums to be paid are usually to the age 85 (this may varies) and comes with cash value.
- Some insurance companies offer the options to convert part or full amount of the surrender value to an Annuity Plan.

Note 1: This plan does not cover you against any hospitalization bills.
Note 2: Early termination will result in heavy penalty (getting less than what you have paid)

2. Limited Premium Term Whole Life Insurance Plans

This is a new variation to the Traditional Whole Life Insurance Plan by offering you with a Limited Premium Term.

What does it means?

It means that you do not have to serve the full premium term to 85 years old. You are given some options like 5, 10, 15, 20, 25 and to age 65. The benefits are the same as per the Traditional Whole Life and pays a lump sum upon claim and terminates.

3. Term Insurance

Term Insurance is usually a plan that covers against Death, Total and Permanent Disability and some companies offer the benefit of Terminal Illnesses. No cash value and there’s no penalty for early termination. And there’s also some variations in terms of the maximum coverage age (some to age of 65, 70, 80 as such). Some variations in terms of the premium term, e.g.

Yearly Renewable. You will get to renew the term insurance with each new policy year and premium will increase with age at each renewal.

Renewable every X years. This plan is the same as the above just that the renewable year is set as every X years. Premium will increase by then.

Renewable till age XX. This will cover you till your desired age and will renew by then.

Some variations in term of the structure of the Term Insurance:

Level Term. You will be covered with the same sum assured throughout.
Decreasing Term. Sum assured will decrease by the amount of (Sum Assured / Premium Term)

4. Group Term Insurance

This is another form of Term Insurance but related to those affinity group like e.g. SAF, Public Officer Group, SAFRA, NTUC Union as such. It’s usually tied some form of membership and will terminate upon the cessation of the membership. And also in terms of maximum coverage age, it’s usually lesser than that offered under the usual Term Insurance. Premium is usually tiered by age-group. There’s also no cash value and no penalty for early termination.

Any more insurance i miss out?
Do feel free to drop a comment.

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Do You Know What Is Your Net Worth?

What is Net Worth?

Your net worth is a measure of how wealthy you are.

A person may be cash rich, while another may be cash poor. But because the cash poor person owns a property, both of them could have equal net worth.

For example, the net worth of person A who are driving posh car and living in landed property might not be more than person B who owns a HDB flat that has already been paid off and did not drive any car. Why? This is because the liability of the person A definitely exceed his asset.

To calculate your actual net worth, you simply add up all your assets, and subtract from that sum all your liabilities.

More details how?




To calculate your assets, simply add up all your cash savings, CPF balances, insurance cash value (you may want to take the surrender value of all your policies). Then add the market values of all your shares, unit trusts and properties. The result is the sum of all your assets.

For liabilities, add up your mortgage balance (how much you still owe the bank or HDB), credit card balance, renovation loan balance, and car loan balance. Add other sums of money you still owe banks, financial institutions, CPF, HDB, relatives and friends, and you’ll get the sum of all your liabilities.

Then apply this simple formula:

Your Net Worth = Sum of Assets – Sum of Liabilities

And compare it with your target net worth, what do you have?

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What Is Traded Life Policy?

What does it mean?

A traded life policy, TLP is a life insurance plan that has been sold by the original policy owner to an investor, other than the insurer itself. It is also known as a 'second-hand' life policy, viatical or life settlement.

The original owner may sell his policy through an individual or firm because his health could have deteriorated and he prefers to cash out to pay for medical costs.

Take this as an example, a cancer-stricken policy owner may sell his term plan with a death benefit of $2 million for $1 million. When he dies, the investor gets $2 million.

He would have got nothing if he surrendered it to the insurer.

Why is it important?

The traded policy investor pays the subsequent premiums until the returns are realised when the policy matures or the original owner dies.

Currently, registered life insurers here do not buy policies from policyholders for re-sale. So the traded life plans sold here are generally policies bought from other countries. Distributors of traded life policies are not regulated by the Monetary Authority of Singapore, regardless of whether they are based overseas or in Singapore.

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Prudential Take Over AIA

(Photo courtesy of Yahoo! News)


Prudential confirmed on 1st March 2010 that it plans to pay US$35.5billion (S$50billion) to buy American International Assurance (AIA), the Asian life insurance arm of American International Group (AIG).



BRITISH insurer Prudential is set to dominate the life insurance scene in Singapore and much of Asia after a huge new takeover deal with its origins in the global financial crisis.

Prudential confirmed yesterday that it plans to pay US$35.5billion (S$50billion) to buy American International Assurance (AIA), the Asian life insurance arm of American International Group (AIG).

The deal will allow AIG to pay back some of its US$182.5billion debt to the US government, which bailed out the insurance giant at the height of the financial crisis in late 2008.

As a result of the planned deal, Prudential will become the largest life insurer in Singapore, Hong Kong, Malaysia, Thailand, Indonesia, the Philippines and Vietnam, said its chief executive Tidjane Thiam. It will also become the leading international player in China and India, he said.

In Singapore, the combination of Prudential and AIA will create a powerful giant with a combined agency size of 7,800 insurance agents and more than 3.2million policies.

The merged entity's closest rival here will be local insurer Great Eastern (GE) Life with just 2,700 agents and three million policies. Market observers said it was too early to tell if there would be job losses.

(source: www.straittimes.com)

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Ways To Improve Spending Techniques and Habits

Do you always have a lot of "Misc" item on your spending list and debts incurred by your credit card?

Over here, i will share some pointers that could help you deal with them:

1. Write down all the poor spending practices you have noticed (while carrying out your budget exercise) and change!

2. Write down how you plan to bring about the changes in each area.

3. Set up a separate savings account. Once you get paid, immediately transfer a portion, say 5% of your gross pay, to this savings account and this percentage should be increased gradually. Only access the funds unless emergency. Make it harder for you to touch these funds by not getting an ATM card.

4. Do not take on new debts, unless really neccessary.

5. Put all extra income towards paying off debts.

6. Review all insurance coverage for duplication, higher deductibles, etc.

7. Begin saving all pocket change, everyday.

8. Start doing things for yourself that you paid others to do previously.

9. Obtain a minimum of three alternatives and comparison prices before purchase.
Don't buy on impulse. Put items on an impulse list and wait 30 days to purchase.

10. Pay cash for everything

11. Wait for special sales - ask retailers when sales dates are planned.

12. Use a list for grocery and household items; make sure you stick to it.

13. Don't take a casual attitude towards money because it can bring about many financial consequences in the future.

14. Maintain good records. Keep receipts and make reminders about cash spending.

These are most of the pointers that i practice in order to start my path to money management. Do share your pointers with everyone out here.

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