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!"
Showing posts with label Risk-Management. Show all posts
Showing posts with label Risk-Management. Show all posts
Tuesday, 9 December 2008
Monday, 20 October 2008
Making an Investment
I was gathering info to write my next article on Investment and came across CPF website on this topic where they even have comic version on how to diversify your investment! Wow! I feel sorry for what many people had missed by not visiting CPF website regularly. It already have a whole mountain of gold to dig with many information that will affect our way of investment regardless in Property or Equity Markets.
CPF recently also launch a new website call IM$avvy where you do a quick test to see how your financial knowledge measures up, ask Dr $avvy on every thing you always want to know about personal finance and most importantly you can find the latest news on personal finances and CPF saving.
This will be the most regular website that I will visit from now on!
CPF recently also launch a new website call IM$avvy where you do a quick test to see how your financial knowledge measures up, ask Dr $avvy on every thing you always want to know about personal finance and most importantly you can find the latest news on personal finances and CPF saving.
This will be the most regular website that I will visit from now on!
Tuesday, 12 August 2008
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.
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.
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