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Top 5 Mistakes When Buying Insurance in Singapore Part II
Once I meet up with a prospect who just got married, and so I asked how is marriage life? He gave an unforgettable replies, “do you know what woman and insurance have in common? They are both expensive and difficult to understand.” This is part 2 of the original Top 5 Mistakes When Buying Insurance in Singapore part 1 article on Top 5 mistakes when buying insurance in Singapore.
1. Using Life Insurance as an Investment Tool
Do not treat life insurance as an investment and looking from the perspective of getting market returns. Life insurance is to protect your future.
2. Not Planning for Your Future Medical insurance Premium
One of the most common mistake is, most people always concern about their surrender value on their whole life insurance policy, as it has not break-even after 10 years. Stop worrying about the surrender value on your whole life insurance, as relatively, traditional whole life insurance takes about 20-25 years to break-even (depends on what age the policy is obtained) but most importantly we obtain it to leverage on the sum assured and not the surrender value per se. What we should really concern about and most often neglected, is out future medical insurance premium. This premium increases as we aged, there is no option in limited premium payment term, where whole life and income protection insurance provides. And we will have to continue to service it even after we retired. As long as we need the medical insurance coverage, which we do eventually. Therefore you might want to start planning for your future medical insurance premium by starting with a saving plan now. The maturity from the saving plane, will be able to help service your future medical insurance premium during your retirement thus, it will not bundle your retirement living-expenses funding. Start saving now while currently you are still earning an income.
3. Over Insuring Yourself
You may ask how could over insuring ourselves even possible? Yes this is one of the mistake we made when buying insurance. Have you ever receive telemarketers from banks calling you, promoting you on insurance and simply charge to your credit card, with attractive pricing, without the need to meet up? Often banks will promote accident insurance as they do not require any medical underwriting, thus can be sold through phone call. Most people end up obtaining this type of insurance every time they receive this telemarketing call from the banks, because the transaction is so smeeless. And ended up with more accident insurance than they require. To prevent over insuring yourself, know what your needs are. The rule of thumb is, for life insurance coverage will be 10 times of your annual income, for income protection insurance will be 5 times your annual income. Seek help from your friendly financial consultant to help you with your financial planning needs.
4. Did Not Declare
Do not make this mistake of not declaring your medical history. As this will delay claiming process and might gives the chance for insurance companies to decline your claims and/or your policy.
5. Did Not Update and Review Policy Regularly
Another common mistake, is that some do not make time to review their policies, and obtain latest update about insurance in the current market. As you journey through life, your lifestyle changes, it can be getting married, having children or obtaining a property, it is recommended to review your financial planning strategy. Getting latest insurance updates will help you be up to date with the latest plan available in the market. As our mortality rate increases, illnesses that are not covered by insurance companies in the past, might be available now. For example, in the past income protection insurance did not have early stage illnesses insurance, but is available now. And retirement plan that can provide a guarantee monthly income till beyond 100 years old, is unheard of in the past, where now it is available.
One Last Thing
If you have children, there is an article for you, Best Children Education Saving and Best Tips on Raising Financially Smart Children. I also created Best Top 10 Financial Tips 2019 some useful tips for your financial planning, before year end, and help you on your money management for the coming new year. And another 16 Financial Tips for your reference, hope it will help you in managing your financial seamlessly.
Note: Opinions expressed are solely in Mr. Chan Kong Meng’s personal capacity and neither express the views or opinions of Prudential nor represent any professional advice in Mr. Chan Kong Meng’s capacity as a PACS representative.