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.