this post was submitted on 26 Jun 2023
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Thoughts on this insurance? My current company's insurance coverage is very good, but it might not be the same once I jump ship. I'm thinking that maybe I can go with this insurance for a few years, then purchase a better plan later. Is this a good idea?
Almost all the popular insurance plans you can get on that market are kind of fixed payment format. Every month (or year) you put in a fixed amount money into a fund. The cost of insurance of that month is taken out, the balance is invested in various financial products.
When you are young, the cost of insurance is very low (lower likelihood of problems like cancer and heart problems in a 25 year old vs 65 year old), so most of the monthly contributions are put into investment.
As you get older, the cost to insure becomes higher. When you're really old, the monthly cost of insurance is so high that they start to use money in the fund.
That's how insurance is kept at a fixed cost for the whole program, despite you getting older and more problematic.
Which is also why people say to start insurance early, because when you start contributing early you get used to making regular payments, and you are investing money for your future insurance.
In a way, you can say this insurance in this form is both to spread the financial risk of illness over a larger population, and also to spread the financial impact of insurance over your lifetime.
So for noobs like you and me, it is better to just do it.
For the financially savvy types who really know what they are doing, they can choose to purely insure on a year-to-year basis with no investment done inside. This means that insurance payments are cheap when they are young, and VERY expensive when they are old.
In light of the above, no. Start your policy now and it will be a way to capture your contributions to start investing and saving up a fund. This money will then be used to partially contribute for your future insurance costs.
All policies have a maximum total amount that you can claim. So if you are hospitalised or whatever now, use your company's insurance first. Keep your own claims budget for when you need it.
I see many people saying investment linked policies are bad though... And ILPs especially have very high commission fees which throws people off. Should I be wary of these? I do plan to start my own financial investments pretty soon too 😥
TBH, for me the benefits of ILP outweighs the fees.
If you don't do ILP, you can do term insurance (insure-as-you-go, but I couldn't think of that term earlier). Then you need to manage your own investments. Which is a lot of knowledge, time, effort I and many people just don't have.
I guess if you're already got a long, long term plan for investments you can look into this seriously. Put in money into your own investments, and only pay a bit for current insurance. Then let that money grow, but be aware that in your later years you're going to have to pay a HUGE premium for you term insurance as you get more susceptible to ageing problems.
Yeah I'm aware of that... But I probably start it too late either. The latest I intend to start is 5 years later, and if I seem my financial stability good enough I'll start earlier
I guess people saying ILP are scams made me really paranoid. And I realize that even ILP can't protect from rising costs and you might still have to increase the amount you pay. Most people came out saying it wasn't worth it anymore and just stopped?
They're not scams per se, it's just their dividend payouts don't really come higher than market returns. Which makes sense then if you just go straight to an index fund. But we don't have those. The closest we have are mutual funds that acts like index funds.
Investment i do believe is something you ought to decouple from insurance. And seeing your answer I just want to emphasize that because your early 30s is the absolute last best time to get a good rate on your premiums so if you need to prioritize, priority should go to insurance (you're likely not to have chronic conditions, so they can't deny you coverage for preexisting etc. You want them on the hook for having to cover your diabetes for example, not give them the opportunity to deny this + you have to pay higher premium because higher risk)
Maybe some people have a wrong expectation of insurance. Eg, if pay monthly then everything can settle.
So when things don't happen as they thought, they feel cheated and vent to the world.
I sound like an insurance salesman. I'm honestly not ok. I do a totally differnent line of work.
That sounds fair... I guess it's all about the ezpectations. And no I'm not you are an insurance salesman haha 😂
Investment-linked policies also have different types and they will ask what's your risk appetite and how soon do you want to see returns.
I'll say this much: with few exceptions, not a single fund can beat the market overall. Some years you'll do better, some years you'll do worse. Consider it as a way to park excess money, but if you're eligible for the Amanah Sahams, take those instead.
Eh, shouldn't I treat investments and insurance apart tho ? 😅
I'd say so, but ILPs will be a dominant part of a typical agent's sales pitch so if you don't prep you might get caught up by their catalogue. But at least you got that clear!
Thanks for the great insight by the way! The one thing that bothered me is the base plan was life insurance and TPD, which wasn't what I really wanted(I'm mainly looking for medical insurance). I guess I just need to think what I really and get a plan that I really need, then only add riders as years go on.
+1 on not shopping around for insurance every few years - your premiums do get recalculated when you switch (i.e. you can't say I got such and such rate from precious package). So if you can afford a good package go for it. If your company offers a package that's also good - but pursue your own. The company insurance thing is an American norm that got exported (make money mah) but one consequence is that it's meant to keep you tied to a company (because in the US especially the risk of having no cheap coverage is real - this is not the same for us luckily). So think of the company plan as a benefit, but not your actual insurance. If you have both, simply use the company one first so your personal premium won't be affected (because no paperwork to induce them to recalculate your risk).
With this insurance package it's a good option but it does assume even as b40 you can get online. So there's this dimension. But insurance coverage is definitely an issue (especially for a society like us that prefer to privatize a range of social protection instead of expanding the public spending here) so i can see why this is being in the regulatory sandbox (IE they're testing to see if this can be viable - it's not quite as experimental as a pilot so that's good).
Would i say this is good tho? Based on the video, it depends. A lot of the stuff they want to cover is basic stuff but most people in the market they target don't even have that.
I see... It's just that I prefer not to jump too fast into purchasing insurance and I don't want to spend too much and get over insured :( I'm still doing research on what's the best way to move on
One way to keep your head straight and not be tempted by all the riders (extra package) is to shop for the one that can give life + medical basic coverage of up to 99 years with a monthly premium you can tahan. That's it. You can always add the riders later. But if you want to consider, consider the one with the women health coverage - that's always a good rider.
Of course, the most ideal scenario is to not think about this at all because we all get universal public health coverage with decent service. But we know that's a sector that's dying of a thousand cuts (to the budget)
(And you'll always be over insured... Since it's an industry of probabilities they are counting on you not getting hit by a terrible accident. Idk if that pov helps lololol)