Life Insurance Tax Relief

Have you been over declaring your Tax Relief unknowingly?

Majority of the people thinks that their have paid a lot for insurance premium and when it come to declaration of Tax where there is this column for Life Insurance Relief, they feel "relief" that at least it is tax deductible but they are only half right!

An extract from IRAS Website on the subject matter as follows:

"You are not eligible for life insurance relief if your total compulsory employee CPF contribution in the previous year is $5,000 or more.

If your CPF contribution is less than $5,000, you can claim the lower of

• The difference between $5,000 and your CPF contribution.
• Up to 7% of the insured value of your own/your wife's life or the amount of insurance premiums paid, whichever is lower."

Conclusion:

Majority of the population are not eligible for Life Insurance Tax Relief unless you are self-employed without CPF contribution or low income earner where total annual CPF contribution is less than $5000 a year.

Note:

The current tax-filing system cannot detect whether you are eligible to enjoy Life Insurance Tax Relief and will not disallow any input in the Life Insurance Tax Relief column subject to a maximum of $5,000 even if you are not eligible. It is up to you to file and is your own responsibility to know how much to file. If you have been over declaring, you can write to IRAS to do an adjustment.

You can click on the following link to know more about the subject matter:

http://www.iras.gov.sg/irasHome/page04.aspx?id=208

P.S. Tax matter changes from time to time and I am not a tax consultant, hence please consult your tax consultant or IRAS if in doubt.

Best Travel Insurance

Comment from my article "Travel Insurance"

"Hi Eng Peng, good point about the need for travel insurance! Thanks for sharing. There are many travel insurances available in the market. Will you be willing to share more on the other aspects that we should evaluate on to determine which is the most appropriate insurance for our travel needs? Cheers! LeroyBlogsite: http://www.leroyang.blogspot.com/"

In response to one of my reader's comment, I decided to post a follow up article on the most appropriate travel insurance to consider.

In my personal opinion, the most important aspect to evaluate is the level of service in term of claim. Meaning speedy in response and the thoughtfulness in arranging emergency evacuation e.g. my mom's case. In my experience dealing with many travel insurer, I find the the following insurer are the better one and value for money (click to view brochure):

1. AIG Assist
2. Tenet TravelJoy
3. AXA SmartTraveller

Many times people ask me for a comparison but I must say there is always no apple to apple comparison in most cases. Insurer will always have a few features or benefits that are different to cater to their target market and that is one of the reason why they charge different premium.

For example, AIG has a special service call RED24 which is a world leading personal security advice and response provider. By monitoring worldwide security activity, their services provide the advice required to keep their members and loved ones safe at home and abroad. More detail can be found in their website below:

http://srvb.red24.info/affiliate/aigintl/about.php

Tenet is the leader in benefit innovation which many insurer take as reference. They are the first NATAS approved travel insurer (The current NATAS approved travel insurer is AIG) and first travel insurer to shorten the claim for Baggage Delay, Travel Delay and Flight Deviation from 12 hours to 6 hours. They are also one of the first to have Full Terrorism coverage and Unlimited coverage for Emergency Evacuation. If you wish to cover amateur sport, then Tenet TravelJoy is your choice as they offer extension coverage on hot-air ballooning, para-sailing, white-water rafting, snow-skiing and underwater activities which most insurer will exclude.

AXA offer the best value for money in term of their annual plan.

In conclusion:
Tenet will be my first choice of insurer if travelling Asia Pacific and the more develop countries follow by AIG for more exotic countries like Cambodia, Egypt etc. For frequent traveller that travel at least 4 times a year with minimum one week duration then AXA annual plan is the best choice. However, do not just take my words as you should always read the policy wording just like reading the prospectus of unit trust before you buy. You can find their policy wording in the following links:

1. Policy Wording for AIG Assist
2. Policy Wording for Tenet TravelJoy
3. Policy Wording for AXA SmartTraveller

You will also find the following link useful on the document require for Travel Claim provided by AIG:

Travel Claim Important Notice

***Revision Note***

- AIG Assist has been rename to Chartis Travel Guard (For simplicity purpose, only links was updated leaving the original blog post untouched)

P.S. Information for travel insurance changes from time to time. Please help us to maintain up-to-date information by leaving me a comment if there is any broken links or any of the information is not updated.

Travel Insurance

The recent unrest in Mumbai and Bankok highlights the need to buy travel insurance before making a trip and there is a sudden surge in the demand for travel insurance among my clientele which was not their usual habit despite my constant advice.

I am a firm believer of Travel Insurance due to my own personal experience and is also my first claim experience with the insurance company which happen to be a Travel Insurance claim...My Mom's claim.

This happen way back in 1999 when I was still studying Final Year in the Polytechnic and my parent went on holiday without me. They have a habit to call when they touch down whenever they travel, but I did not receive any call from them pass 3 days from the day they left and I started to get worried. Those days handphone was not popular yet and few will bring a handphone to travel because auto roaming service was not popular then too, so I practically can only wait for them to call instead of calling them.

My sixth sense was right when my Dad call on the 4th day with a sad voice asking me to stay calm for what he was going to tell me. I could still remember he said, "Son, your Mom has a stroke in the plane even before we touch down and she is currently hospitalised unconsciously in the local hospital". I got a shock of my life since I had never experience such life event and I always take for granted that such thing will not happen in my family, who will or want that to happen anyway? I was lost of word and Dad had to comfort me to stay calm and focus on my final year exam, then he put down the phone promising to keep me updated on Mom's medical condition. I though that will be my last memory of my mom and tears start falling heavily.

Eventually my Mom got better and was sent back to Singapore for treatment. I rushed to the Airport on the day they returned and tears start rolling again when I saw her in the wheelchair with the medical apparatus. There was a doctor with her and according to my Dad all those was arranged by the insurance company. They sent a doctor over to monitor my Mom's condition and flew her back in the business class as she need more space due to the bulky medical apparatus required, then she was sent to the hospital in the long limousines that I only saw in the movie and not in real life. Mind you I was really impressed by the service rendered even though I was in my saddest moment! The rest was history as my Mom had recovered now but the scene was still vivid in my mind.

The total bill for her hospital stay oversea, plus doctor sent to accompany her back in business class with the limousines sending her to the hospital and the local hospital bills all add up close to $50,000! That's a lot of money then when liquidity was low in the family as the economy had not fully recovered from the Asian Financial Crisis where most of my Dad's money was stuck in the stock market and money sent to support my younger brother oversea study expenses. Luckily my Dad is a firm believer of travel insurance as he always says, "Since you have already spent so much money in the travel, what is another small amount to buy a peace of mind worth?". The travel insurance he bought for that trip was only $50 dollar while the claim chalk up to around $50,000 and could be even more for more severed cases! Isn't it a beautiful product? Since then, our family became advocates of Travel Insurance ensuring we spread the gospel to everyone we know.

After the emotional sharing, now is the logical sharing...

Many people have the doubt of whether should they still buy travel insurance if they had charge their air ticket with their credit card which will also provide insurance coverage. Some also think that there is a duplicate since most of the baggage lost or flight delay can seek compensation from the airlines.

The answer is a definite YES! Many do not know that the travel insurance coverage from their credit card is not comprehensive although some cards can cover up to $1 million coverage in the event of accidental death but terrorism is usually excluded, so read the terms and condition carefully. Most importantly, not one card that I know of as of now offer EMERGENCY MEDICAL EVACUATION & REPATRIATION coverage which is the main reason why you buy Travel Insurance! One of the definition for the coverage from one insurer is as follows:

"If you suffer a Disabling Injury, Sickness or Disease indemnifiable
under this Policy which, in the opinion of the Appointed Assistance
Company, is necessary to evacuate to the nearest registered medical
institution for medical treatment or return to Singapore, we will pay
for the reasonable cost of transportation and en-route medical care
and supplies including the assignment of a doctor &/or nurse to
accompany you, air ambulance, regular transportation, rail, road or
any other appropriate means necessarily incurred;"

Whatever insurance we buy must have the objective to insure what we cannot afford or feel pain to lost (eg. the big bills like my Mom's case) so that we can transfer our risk to institution with bigger financial strength like the insurance company with a small fraction of premium. The more observant people will ask is there a need for travel insurance then if we had a Personal Accident Plan with emergency evacuation? The answer is still YES as Personal Accident Plan will only cover if the incident is due to accident, what if we fall sick and not due to accident? The answer is obviously a "No", and Personal Accident Plan also does not cover other things like Trip Cancellation, Delayed or Damaged or Lost baggage etc...

In conclusion: "Never leave home without a Travel Insurance even if you just travel to Johor Bahru!"

Will AIA Bankrupt? - Part 2

Even much assurance from the media and MAS, client who holds AIA policies is still very concern. I decided to post a follow-up topic on this issue. Please bear in mind that this is only my personal opinion and might not be suitable for your circumstances.

I personally hold AIA policy and I am not surrendering due to the following reasons:

1. I normally will not act when the dust is not settled which I think is the most dangerous thing to do. It is like lost in the Jungle and the more you panic, the more lost and wrong decision you will make. But, now is pretty clear that I will not surrender because AIG is bailed out by US govt and US govt is the biggest stake holder now which means unless US govt is also collapsing, else the company is safe.

2. You may also lost faith in the US economy and government, but there are still many countries holding a lot of US currency, so they cannot allow US to fail too. It will take time for the rest of the countries to find an alternative solution with their US currency.

3. Now knowing the chance of AIG collapsing is minimum, let's also discuss what is the worst case scenario if AIG really collapse.

First of all, MAS explained that there are regulatory requirements, ensuring that all insurance companies maintain statutory insurance funds, including an investment-linked fund. This fund is segregated from its head office and other shareholders' funds.

If you are surrendering your Term policy, no issue because there is no cash value anyway meaning you do not get back any money if there is no claim. (Read my blog to know more about Types Of Insurance), your only concern will be "Are you be still insurable?" or "Do you still need the coverage?". If the answer for is NO, you can terminate your Term Policy.

However, when it comes to your Participating Policy (e.g. Whole Life, Investment-Linked and Endowment) meaning you will get back some money in the event of no claim, then you should consider if your cash value had breakeven? Participating Policy normally took 20 to 25 years to breakeven from your premium paid. If not your plan had not breakeven, you will not get back your capital anyway so what is there to hurry into a lose-lose situation? Perhaps you might be thinking that if you surrender now, you can still get back some instead of none in the event of AIA goes bankrupt. Well that is a valid reason but again let's consider my point 1, 2 and 3 to evaluate the chances. If you still feel uncertain, I rest my case because nothing is more important than peace of mind and to be able to sleep well at night.

4. I am not AIA agent and I do not need to put in good words for them. I am just a policyowner of AIA which I still have faith in and most importantly I am a believer of diversification. I own insurance from various company for their different coverages and features, which also provide diversification of insurance fund performance. That could be another reason why I am not as worried compare to those who only own AIA policy.

P.S. I have found this interesting link from MAS website where they post all their replies to the media as follows:

http://www.mas.gov.sg/news_room/letters_to_editors/letters_to_editors_index.html

You can also read the Insurance Act put in place to protect the consumer in the following link to see if you are comfortable:

http://www.mas.gov.sg/resource/legislation_guidelines/insurance/sub_legislation/FG(Amdtm)Regs.pdf

If any of the link is broken, you can inform me or do a google search yourselves.

*Revised 5 Oct 2008*

Found this interesting link where Dr Money commented on this issue in The New Paper on Sun, Sep 21, 2008 Titled "One in a Billion"


*Revised on 3 May 2008*

Found this interesting link from Mr Tan Kin Lian's blog on this topic: http://tankinlian.blogspot.com/2008/09/is-your-money-safe-with-aia.html

Types of Insurance and Coverage - Part 2

Confused by all the plan out there and bombard by your advisor with all the bombastic words or terms?

Here is what I have promised to deliver - Simple example and layman term to understand the complex product. In order to provide you with a clear picture so that you can make an informed decision, I'll break this Topic into 5 Parts, so read on.

These 5 Part Series are written in a way where you can analyze for yourself base on the non biased information provided ( Both Benefit and Limitation are highlighted). You can then determine for yourselves whether this Financial Product suits your circumstances, characteristic and requirement. I will also provide a summary in Things to Consider to further simulate your thinking.

Note: My 5 Part Series on "Types of Insurance and Coverage" are NOT written with the objective to provide answer but rather provide simulation for your thinking and to analyze.


Part 2

We shall explore the first 2 Types of Insurance Plan in this Part 2 of 5.

1) Term Insurance

Description:

I call this a TOTO plan. It "Strike" which pays if something happen to you (depending on the Types of Coverage you add to this plan) and the insurance company will take your "Bet" which is your premium if nothing happen to you. Generally you can buy this plan for a certain number of years e.g. 5, 10,15, 20, 25 or even up to 99. (Just like your TOTO, you can buy your favorite numbers for just one day or you can buy for one week and even lifetime!)

Benefit:

a) The most economical Type of Insurance - Low Cost, High Insured Amount. Most of the time cost only a fraction e.g. 1/10 of the other Types of Insurance with the same insured amount.

b) Mainly for someone with a budget issue or for boosting temporary coverage e.g. covering the extra liability of 20 to 25 years when there is a new born baby in the family or just personal income protection up to retirement age e.g. Age 65.

Limitation:

a) No surrender value or cash value. Meaning you do not get back any money if you terminate the plan by choice (e.g. you write in to terminate or the term of coverage ended) or by mistake (e.g. forgot to pay premium). It is very common that people terminate this plan by mistake because they were either too busy with their life and forgot to pay the premium even after the grace period which insurance company normally offer or might have change bank account number without re-activating their GIRO instruction. All it takes is just one carelessness out of the 20 or 25 years of term that you chose to cover and the plan is terminated!

b) Inflation will shrink the value of the money. E.g. $100,000 in 25 years down the road is only worth about $29,530 of today purchasing power base on a modest 5% p.a. inflation rate (Current inflation rate is already more than 6%). Just like you can buy a bowl of noodle 25 years ago at less than $1 but now you will need averagely $3.50 to buy a bowl of noodle.

Things to Consider:

There are various Types of Term Plan available in the market e.g. Decreasing Term or commonly known as Mortgage Insurance, Increasing Term, Natural Premium Term and Level Term for your consideration which I'll explain one by one:

a) Decreasing Term or Mortgage Insurance is a Term Plan that will reduce in Insured Amount yearly base on the selected inflation rate but premium remains the same throughout the Term of Coverage. Commonly use for covering the outstanding loan of a property. This is the lowest cost term plan compare to the rest of the Term Plan.

b) Increasing Term is a Term Plan that allow increase in Insured Amount yearly with increase Premium to hedge against inflation. For people who still prefer Term for their overall planning but wish to keep up with the inflation as "Buy Term Invest The Rest" (BTITR) is getting popular.

c) Natural Premium Term, which is also know as Yearly Renewable Term, is a Term Plan that will increase in Premium yearly while the Insured Amount remains the same. This feature can also be found in an Investment Link Policy. For people who do not want to pay anything more than they need and calculate to the last cents worth, this plan might suit them in some circumstances. ( Read: http://www.waynekoh.com/2008/08/saf-group-term-insurance.html )

d) Level Premium Term is a Term Plan that both Insure Amount and Premium remain the same throughout the Term of Coverage. This is the most commonly available term plan in the market where most agent / adviser will market due to easy explanation and for the client to understand. For everyone who find a standard no frill Term Plan is the solution to their Financial Planning and Risk Management.

Is "Buy Term Invest The Rest" (B.T.I.T.R) a good strategy? We will discuss this in future article and not here.

2) Endowment

Description:

Endowment is basically a "Saving Plan" where you choose a Period or Term to save e.g. 5, 10, 20 or even 30 years and will pay you a lump sum of money (Normally capital plus interest) when the Period or Term ends.

Benefit:

a) Force Saving for those who need a little penalty to help them resist the temptation of spending away the critical sum of money which they had finally accumulated.

b) Mainly for people who are risk adverse but wish to have better than bank saving return over a period of time with a specific purpose on the use of the maturity money e.g. To accumulate enough fund to start a business, go on a dream vocation or buy the dream car at age 40 but more commonly use as Education Funding for the child.

Limitation:

a) The most Expensive types of insurance where you pay the highest premium to get a low Insured Amount. If Protection is your concern, then this plan is definitely out of your consideration as you can insure a much higher amount with a Term Plan, Whole Life Plan and even Investment-Link Policy with the same premium.

b) The main bulk of the bonus is only given at the end of the Period / Term and Insurance company have the right to adjust the bonus rate or even remove it totally due to adverse economy. That is the reason why it is so important to ensure this kind of plan to have a high guaranteed return than the variable bonus.

Things to Consider:

There are various Types of Endowment Plan available in the market e.g. Pure Endowment, Anticipated Endowment and Single Premium Endownment for your consideration which I'll explain one by one:

a) Pure Endowment is a standard no frill type of Endowment where you can only get back your money with interest at the end of the chosen Period / Term. Any early termination of the plan will substantially set your financial position back by many years as you might not get back your capital even!

b) Anticipated Endowment is a modified Endowment Plan where you can start receiving money call "coupons" from 2nd years onwards base on 5% or 10% of the Insured Amount depending from company to company. Some company pay "coupons" every year from 2nd years onward, some pay every two years. Some even pay every five years but not as common and useful compare to the prior. The "coupons" paid can usually be re-invested or be withdrawn anytime to provide flexibility for people who like to play safe so that they will not be caught in the event of poor cash flow.

c) Single Premium Endowment is basically an Endowment Plan that accept single lump sum to be invested instead of investing regularly. This is different from paying premium in advance which most types of insurance plan allows. For people who had inherited a sum of money or wish to set aside a lump sum of money for retirement without taking taking too much risk. This type of Endowment generally break even faster compare to Pure Endowment and Anticipated Endowment.

Is Endowment the best plan for Education or Retirement? We will discuss this in future article and not here.

Types of Insurance and Coverage - Part 1 (Overview)

Confused by all the plan out there and bombard by your advisor with all the bombastic words or terms?


Here is what I have promised to deliver - Simple example and layman term to understand the complex product. In order to provide you with a clear picture so that you can make an informed decision, I'll break this Topic into 5 Parts, so read on.

These 5 Part Series are written in a way where you can analyze for yourself base on the non biased information provided ( Both Benefit and Limitation are highlighted). You can then determine for yourselves whether this Financial Product suits your circumstances, characteristic and requirement. I will also provide a summary in Things to Consider to further simulate your thinking.

Note: My 5 Part Series on "Types of Insurance and Coverage" are NOT written with the objective to provide answer but rather provide simulation for your thinking and to analyze.


PART 1


There are basically only 5 types of insurance and coverage, but don't mix up between the Insurance and the Coverage.


5 Types of Insurance are:

1. Term


2. Endowment


3. Whole Life


4. Investment-Link


5. Annuity

5 Types of Coverage are:

1. Death


2. Disability


3. Dread Disease or Critical Illness


4. Hospitalisation


5. Accident

Private Shield Plan Comparison

Tired of finding a good review for shield plan in Singapore?

Why not D.I.Y yourself? I've manage to compile the best private shield plan information and also a comparison done by Ministry of Health for your convenience.

There are only 5 company providing Private Shield Plan in the market currently namely:

1. NTUC
2. AVIVA
3. AIA
4. Great Eastern
5. Prudential

Click on the company's name to get more information on their shield plan. You can also find their policy wording and comparison in Ministry of Health website by clicking the following link:

http://www.moh.gov.sg/content/moh_web/home/costs_and_financing/schemes_subisdies/Medishield/Medisave-approved_Insurance.html

P.S. Website might change from time to time so please drop me a comment if you find any broken link.

(Revised on 21 Apr 2010)