Without CI coverage, could we become a burden?

If we have a good H&S policy, why do we still have to get coverage against critical illnesses (CI)?

Well, if we should die quite quickly from these critical illnesses, then, that is the end of story for us.

What if we did not die and were left weakened? What if we were unable to work or if we should wish to seek alternative treatment? Could we become a burden to our family?

Having said this, depending on our circumstances, we might not need CI coverage for life. OK, some might still want it but that is something else.





Here is a recent conversation with a reader:

Reader:
My insurance agent told me he has max up his critical illness (CI) coverage in his whole life policy as he claimed we need money to cover sickness after 70 years old...

I told him hopefully I will be managing my finance so well that I should have at least 300K by then :) and shall I detect with sickness and I may just managed to stay for another 10 years.

Do you mind to develop a bit why you persuade your father to give up his whole life ? Don't you worry they may need the money if they are sick, especially during the golden year?

AK:
We buy insurance because we need to transfer risk. At 70, what kind of risk should my dad be transferring?

My dad has Medishield which will be upgraded to Medishield Life by end of the year, hopefully. So, he has H&S coverage and, really, that is all he needs.

In retirement, we should have developed some form of retirement funding so that we have regular income without having to work.

If we still needed CI coverage at 70 or older, I can only assume that it would be because we could not afford to stop working and still needed an earned income. That is depressing.






Buy what we need and not what the insurance agent wants us to buy.

Related posts:
1. Getting covered against critical illnesses.
2. Retiring before 60 is not a dream.
3. Consider terminating whole life insurance.

UOB, Prudential and what is financially manageable?

As investors, we recognise that we could make investment mistakes. So, it is important to size our positions appropriately so that if an investment turned out to be a mistake, it would not sink our entire portfolio.

It is partly about making losses financially manageable. So, what is financially manageable?

Well, a more prudent way of interpreting whether something is financially manageable is in terms of cash flow. I know we could also interpret whether something is financially manageable by how much we have in savings.

Well, it is nice to have more assets (and cash is an asset) than liabilities but if we should be in a situation that requires us to draw upon our assets to fund commitments, then, we could find ourselves in trouble in future.

So, before we commit to anything financial, ask if our cash flow is adequate and not just whether we have enough savings to see us through especially if it is going to be a long term commitment that is quite demanding.

What led me to say all these?

A couple of readers sent me a link to this article:
Admin executive paid yearly insurance premiums higher than annual pay.

A 57 year old Mdm. Han bought a Prudential endowment policy from UOB a couple of years ago. She now discovers that the maturity benefit is not 100% guaranteed. She might get a sum that is actually lower than the total premiums she would have paid at maturity.

Pertinent question:
How did she get the impression that the maturity benefit is 100% guaranteed?

It also baffles me why she would commit to a $40,000 annual premium when her salary is about $30,000 a year. She might have been persuaded by the free air-fryer and steamer.

Pertinent question:
Was a thorough fact finding session conducted with Mdm. Han or was someone just in a hurry to sell a policy with a fat annual premium?


I don't have the answers to these questions, of course, but these questions aside, if Mdm. Han had asked the important question "Is this financially manageable?" and knew how to answer the question, she would have avoided such a situation.

Please note that I am not even talking about whether the insurance product is suitable for Mdm. Han. That is another topic altogether.

Related posts:
1. Misled into earning 6.3% interest in 4 years?
2. 6 point response to an expensive lesson.
3. A true story about life insurance and grapes.