Eldershield: What does it shield us from?

Often, we meet really nice people in life. Sometimes, we meet really nice people who might even influence the way we think. 

One such person for me is a fellow blogger, LP, and he is the blog master of Bully the Bear. A few years ago, I was wondering whether to opt out of Eldershield but he persuaded me not to.





How did he persuade me?

To save anyone who might be interested from having to scroll through the many comments generated by that blog post written in 2011 (yup, when I turned 40), here it is:

"Hi Ak,

"My opinion is that u should buy. 

"Firstly, it doesn't cost much, so 400 per month (should be claim out) is sufficient to hire help to take care of u.

"Of course u can argue that your passive income is more than sufficient to create your own elder shield, but this is just extra protection at low cost. 

"Secondly, I wish to appeal to your sense of public charity - help contribute to the pool of money so that those poor elders can insure against this risk at lower premiums. 

"These people do not have passive income at all, most likely.

"So how? :)"

I decided not to opt out of Eldershield after that.





Recently, he had an exchange of comments in another blog on the matter with my more recent blog post on Eldershield in mind (see related post #2) and I would like to share it here:

LP:
With your first hand experience in eldershield, would you advice a person with say a passive income stream of 7k per month to get a plan that pays 300 per month only upon hitting certain set conditions?

N:
Regardless of the amount of passive income, eldershield is a form of hedging or insurance to insured against the unexpected. So instead of taking up the basic of $400 per month, one should top it up to $1k per month simply using cpf, w/o forking out of pocket, cash. So, yes, eldershield is still applicable, but a higher payout amount, with a higher premium should be the plan.



LP:
Regardless of amt of passive income? Are u sure?

The pt of having eldershield is to provide a supplement to the financial needs to take care of an elderly with the conditions laid out in the plan. If there's already a stream or a sum of money to cover this possibility, the need is no longer present. So why buy something that you no longer need?

Buying an eldershield plan doesn't shield you from getting hit by the 6 activities of daily living as laid out in the plan. It shields you from the financial cost of caring for such a person. If you can cover that cost, there's no need to buy the plan. That's what I think.








LP makes so much sense. I have always thought of him as a strong voice of reason in the world of investment and personal finance bloggers (whenever he decides to blog).

Hmmmm... OK, maybe, I should terminate my Eldershield policy on Monday.

Kidding!

Related post:
1. Eldershield. Opinions, anyone? 
(Great comments!)
2. Eldershield: Is it really necessary?

Consider terminating whole life insurance policies.

An exchange with a reader inspired this short blog post.

My dad who is almost 70 recently told me that he was trying to reduce his expenses and he asked if he should still pay almost $500 every quarter for his one and only whole life insurance policy. It amounted to almost $2,000 a year as a recurring expense.

Unnecessary recurring expenses are like financial chains.

I explained to him that he has no dependents anymore and that it is OK for him to terminate the policy. He said that we would get more money from the insurance company if he should pass away while the policy was still in force.

My dad is right, of course, but I told him our family don't need the money. We are no longer dependent on him financially.

I think he might already have thought of terminating the policy but was unsure because he would have liked to leave more money for his family when he leaves this world. I persuaded him that the product had already done its job and that it had become a luxury, a "nice to have" item but not a "must have" item.

My dad terminated the policy shortly after and got back a 5 figure sum as well. However, the most important thing to note is that my dad's cash flow improved by quite a bit after this. His financial burden is now lighter.

Need or want?

For many years now, I am a big advocate of buying insurance for the sake of insurance. Buy when there is a need. It is like buying anything on a need to have basis in life.

We might want something but we should think if there is a need for it. This is premised on the fact that money is a scarce resource for many of us. Some of us realise this while some of us don't.

Beware of marketing efforts to create an impression that something is a need for us when it could really be a want. To be fair, however, something could be a need for a person but a want for another.

Related posts:
1. Matt terminated his whole life insurance policies.
2. Term life insurance: Why buy term?
3. Money management: Needs and wants.
4. Eldershield: Is it really necessary?
5. Enhanced Incomeshield for my mother.