Want to know if you pay too much for insurance?

I said a few times before that we need insurance in life and, for most of us, we also need to invest for a more secure financial future.

However, insurance and investment should be kept separate to make the best use of our limited financial resources.

Buy insurance for the sake of insurance. Don't mix insurance and investment or we could end up paying too much for insurance.

Always ask:
Are you overpaying for insurance?

Many people are paying a significant amount from their hard-earned money for their insurance but are still severely underinsured. 

It is not unthinkable that we may need up to $1million coverage of life insurance or more. This is to provide for our dependents’ living expenses, children’s education and repayment of outstanding loans if an unexpected death occurs.

Find out about your life insurance coverage needs using this simple calculator: Click Here

While this coverage seems like it would need an enormous amount money to pay for, it does not have to cost a bomb.

For a 35 year old male, looking for $1million Death and Total Permanent Disability Coverage until 70 years old, the coverage costs $1,749 a year (less than $150 a month) to be paid for 35 years with term insurance.  

If we go with whole life insurance instead of a term insurance, it becomes very expensive. We will find that we are not able to sufficiently insure ourselves if we use whole life insurance. For the same 35 year-old male, $500,000 whole life coverage could cost S$8,250 a year to be paid over 49 years!

Paying more for insurance is not the same as having enough insurance coverage!

 

Compare what you are currently paying for your insurance policy against what is currently offered by the different insurers here. 

Are you overpaying for the amount of insurance coverage you have? Do you have sufficient insurance coverage for your loved ones?


Purchasing a term insurance is the only way to provide sufficient coverage affordably.

Recently, there has been a huge debate on DIYInsurance’s Facebook page with insurance agents attacking the stand for Term Life Insurance. 

In response, DIYInsurance, has written an e-book, The Case of Term vs Whole Life Insurance: A Comprehensive Consumer Guide to explain the stand of advocating for term insurance for consumers.

The must-read informative ebook details the purpose of insurance and how we can plan for our life insurance needs. It also highlights the commissions paid to insurance agents and why commissions from whole life insurance could lead to insurance agents promoting whole life instead of term insurance.

For a limited time only, download the free e-book here

Remember, no one cares more about our money than we do.

More about DIYInsurance:

DIYInsurance (Do It Your way Insurance) is Singapore's First Life Insurance Comparison Web Portal.

Launched in June 2014 by MAS-licensed financial advisory firm Providend Ltd , DIYInsurance empowers consumers to make informed decisions about their insurance purchases based on their own agenda. On the portal, users can easily compare insurance products across insurers. 

DIYInsurance is led by key people with around 2 decades of experience and has benefited more than 110,000 users with the most honest, independent and competent advice. All staff are salaried-based and not commissions-based. To provide greater cost savings, clients are rebated 30% of the salesperson’s commissions.

Wife wants to sell HDB flat to buy condo (Part 2).

Thanks ak.

Sorry, didn't make myself clear.

She's intending to sell current HDB to buy condo for own staying.

So rental probably not a big concern.

I'm just trying to consider when is a good time to do such "upgrading".

Sell HDB now will not lose but won't earn much.

But selling HDB during recession would save more if condo prices fall more so perhaps make sense to wait for recession.

Do you (just your own thoughts) think govt may lift ABSD if recession hits? 

Hi R,

The health of the rental market will determine the market prices of real estate to a large extent. So, if the condo rental market continues to soften, condo prices will continue to come under pressure. For own stay or rental, this is something to bear in mind.

Our home is a consumption item. It would not be wise to overstretch our finances to stay in a more expensive home and I know a few people who overstretched.

If we are able to afford a condo quite safely (i.e. it does not impact our balance sheet badly and it is not reducing cash flow to a trickle), then, good.

If I had to sink further into debt and if my monthly cash flow is reduced drastically because of this purchase, I would worry.

Of course, always think about the opportunity cost. For example, if I had to dispose of income producing assets in order purchase this condominium, I would think twice.

Staying in a condominium does not give any financial security.

Personally, I do not think that the ABSD will be lifted soon. When interest rates start rising in a sustained manner, maybe. Just a guess.

However, you might want to ignore all that I have said as keeping your wife happy might be worth the price to you.

This is where I should stop talking to myself.

Best wishes,
AK

Related post:
Wife wants to sell HDB flat to buy condo.

Wife wants to sell HDB flat to buy a condo.

Hi ak,

My wife had been hankering me about buying a condo coz her sisters all have multiple condos. All renting to service loans. I just feel we are late to the properties game and don't want to get caught in a bloodbath.

In order not to pay ABSD, she thinks we should sell our current flat. But the market is so bad now I don't know whether we could sell at all.

Her argument is if we wait for market to worsen,  though we may get the condo cheaper but our flat price would also drop. So there is no best time.

What would you do if you are in similar position?

Thanks.
R

Hi R,

1. Fact. Rental market is getting softer and softer. Even if prices of condos come down a bit more you could be setting yourself up for disappointment as vacancy rate continues to go up and rental market stays soft.

2. If I could, I would have bought a BTO HDB flat. If I had a HDB flat, I wouldn't sell it, especially not because I want to avoid paying ABSD on a second property if I am going to buy one.

3. When a crash happens, condo prices will drop more than HDB flat prices in absolute dollar terms. 

OK, now comes the difficult part.

If I were in your shoes, my stress level is probably through the roof because I am not the type to throw pragmatism out the window to please my other half.

Good luck. :)

Best wishes,
AK

See Part 2: here.

Related posts:
1. Disastrous property investments.
2. If we are not rich....

Wonder why some will never be rich? (He blew $700K in 1.5 years after receiving inheritance.)

If someone makes a lot of money (legally and ethically), it is probably also good for the economy and the people around him. 

Multiplier effect. 

That's something I remember from Economics. 

People like that are usually looked upon as rich.






Some might not be very good at making a lot of money or might not have the inclination to make a lot of money. 

Does this mean that they cannot be rich? 

Regular readers know my answer to this question.






No matter how much money we make, if we spend more than we make, we are in for some trouble. 

However, this might not be the case for some lucky people.





A reader shared this story:

From the comments section: here.

"His whole life is about showing off his consumer goods, BMW, branded watches, holidays, etc.... all his money came from my parents who indulge in him...

"When my sister-in-law died, he inherited the insurance money .... and blows $700K within 1.5 years.

"He called himself not good in managing finance but in reality is addicted to spending money and refuse to accept responsibility..."






How do you feel?

What do you think?

In another blog post, I said: 

"Of course, sometimes, people need to suffer a fall before they are aware of their financial mortality."

Some people are lucky enough not to have to suffer a fall. 

So, they live within an illusion of financial immortality.


The operative word here is not "immortality". 

The operative word here is "illusion".





Wonder why some will never be rich?

Having the right philosophy in life will guide us on the right path when it comes to money matters.

Remember the 3 attributes of a wealthy peasant: HERE.






Related posts:
1. From rich to broke.
2. If we are not rich, don't act rich.

Should we aim for financial freedom and have no social life? (How much material wealth is enough?)

UPDATED:
Reader:
"Hi AK,  I have been a reader of your blog since 2014 and I start to do invest. 

"Sometime I am worry that my investment would fail and become failure in life. 

"Since then I try to avoid having girl-friend because I scare that one days I mind be a liability to wife and girl-friend.

"should I continue to invest for financial freedom and be frugal and give up on society life."

AK:
"This is very personal. No one can advise you on this. Do what you feel is right for you."

Please don't ask me questions like this. I also blur.











------------------------------------------------------

AK said...

This is something I have thought about before.

I am not sure but I don't think I will feel sad or jealous if I were to attend gatherings where friends show off how well they are doing materially. 

They made their choices in life and I made mine.





I don't avoid social gatherings per se but I am very selective these days.

I have grown to enjoy my own company a lot more as I grow older. 

I like a quieter and simpler life.

Having fewer relationships in life promotes quiet and simplicity. 

However, no man is an island and I only maintain relationships which matter more to me.










When it comes to money, although we are all made differently, all of us need money in this modern world of ours.

However, it is good to remember that we only need so much money in life. 

This simple fact is lost on many as they pursue more material wealth than really necessary.





How much is enough?

How much is more than necessary?

The answers would differ from person to person, of course.

Whatever the answers might be, materially, we want to be comfortable while, financially, we need to be secure. 

Achieving this will give us peace of mind and I am sure we will feel happier then.

If we have achieved this, it is enough.




...

Related post:
A story about a lady in my life.

Just be a better saver and forget investing for some.

• 
  
  

  Reader: I am currently 28 years old earning annual income of around 240K. Not sure whether doing SA contribution of 7K per annum and SRS 15.3K per annum is a wise move for my current age? Main purpose is to get income tax relief as much as possible since I am in high bracket tax payer and this contribution might be able to save quite a lot on income tax
• 

  
  

  Assi AK: As long as you are paying a lot in income tax, it makes sense to do MS Top Up to SA and to contribute to SRS. You don't really need to invest. Just be a good saver.
  

• 
  
  

  Reader: But it is a long long way to go before i can see the money again for CPF at 55 yo and SRS at 62 yo. what if i die before that? Lol
• 

  
  

  Assi AK: The money goes to your loved ones. ;)
• 
  
  

  
  
  

  Reader: i dont get to enjoy the hard earned money then
• 

  
  

  Assi AK: You cannot have your cake and eat it too. You have to question what is more important to you.
• Reader: I plan to have financial freedom like u by investing for income
• 

  
  

  Assi AK:  Everyone is different. Dun be like me. ;p
• 
  
• 
  
  
• Reader:  I can save around 150K a year after deducting all the expenses including income tax. Slowly buying solid dividend stocks to hopefully get sizeable passive income like u
  
• 

  
  

  Assi AK: Sounds like a good plan.
  

• 
  
  

  Reader: I seriously think your strategy is good that's why i follow
• 

  
  

  Assi AK: If this is more important to you than getting income tax relief, well, you have your answer. :)
• Reader: I am super conservative and not risk taker as well
  
• 

  
  

  Assi AK: If you are investing, you are taking risk.
• Reader: Haha true
  
• 

  
  

  Assi AK: The only risk free way to building wealth is the CPF. ;)
• Reader: CPF top up is risk free but not sure worth the wait and lock up of cash
  
• 

  
  

  Assi AK: Well, you know my answer to that. You have to decide for yourself if you believe me. ;p

Related posts:
1. Want to create another stream of income?
2. Should a young person contribute to CPF or SRS account?
3. Should I top up CPF-SA, CPF-MA or SRS account?

Invested in a cash rich company with no future?

Reader says...

I attended an AGM recently. It was a China company. Basically, no one from the management attend. 

No Chairman, no CEO, no executive director. 

The only person there to conduct the meeting is a newly appointed independent director (2016). 

We were there to review financial period 2015, hence the director replied to most of the questions was that he was not with the company. 





The company secretary (representative from a secretarial services)  and auditor was present. Oops, by the way, the auditor has flagged in the annual report on going concern.

Can the meeting be held without anyone from the management to answer shareholders' queries? I tried to check the requirement online, but I can't find regarding who must attend. ACRA requirement only mentioned minimum number of members.

The accounts of the company raised a lot of questions on the flow of underlying cash. The company was cash rich (and still is till today). 





However, over the past 1-2 years, 85% debts has no chance to recover. The company even subsidized their partners (distributors) when they wind up the business. The reason provided by the auditor is to "maintain relationship".  

I wonder why a company would still want to keep relationship if the business partners did not even pay up in the first place. Besides that, the company "invested" 3 times of their 2014 profits in a strategic program. 

The AR stated paid 36 million to an academic professor for consulting work.

I checked with the independent director regarding several huge unjustified spending. 

He said that day to day operation is not covered within the scope of corporate governance.

I have sent an email and also called SGX personally. It seemed that everyone is pushing away. 


SGX asked me to contact share registrar, and shares registrar asked me to contact company secretary. 





I feel that SGX has done a bad job letting companies (mostly China companies) to public list in Singapore without due diligence. It does not speak of a first world standard. I wonder if shareholders of fraudulent companies can sue SGX for negligence. 

Imagine, how many retirees has invested their life saving to these mostly China companies.

Maybe I should check with MAS. A bad company, with no integrity listed in Singapore is no different from con man. 

MAS should set up stricter rules to protect the investment community.

Do you have any advise or info regarding above subject? 

Although I am vested in the company, and I know my action will lead to company suspension, but I would prefer to blow this up so that SGX can do a better job, exercise due diligence tracking companies in future. 

Of course, certain companies should not be listed in the first place. My only concern is that the other shareholders may be affected by my action.

Looking forward to your reply.

AK says...

There are so many red flags here and I think you know it too.

If we have invested in a company that is doing badly due to factors which are not within the control of the management but there is a chance of recovery, we can hope. 


If we have invested in a company that is doing badly due to a dishonest or incompetent management, then, I think there is no hope.





When I feel that there is no hope, I take whatever is left on the table and move on.

Best wishes,
AK

Related post:
Where did I go wrong?