Buying term life insurance: Sharing some lessons.

I received this email in response to a guest blog (see related post at the end of this blog):

Hi AK,

On your latest blog on term insurance, you write that $50 a month can get  fresh grads $500K coverage. I am not sure if you meant to have CI coverage  included, if yes, the premium rate looks unrealistic in current market. To  share my recent term insurance purchasing experience -

It costs a male going 30, non smoking, for $1300 a year for death coverage of $1M, $200k for TPD and CI. This is after 30% discount from Aviva, the discount applies to the whole policy period, till 65. For a female going 25, it is $880 for the same coverage.

I got all quotes from major insurers and found this to be the lowest,  particularly with the 30% discount. If I were to opt for $200k death, TPD and CI coverage, the lowest annual premium is around $900. I feel  additional $400 premium to cover for $800 k death coverage is a bargain from Aviva, and $200k coverage is not sufficient, hence, I opted for this. Note that Aviva gave the discount to policy with coverage of $1m and above.

 
Lessons from this experience:

1. One has to get quotes from as many insurers as possible to know the market rates and to get the best rate.
 
2. Buy term insurance early. In this scenario, for the same coverage, the female got 5 more year coverage and pays less every year, and even less total sum, partly because she buys this term insurance earlier than the male! （I say partly here, female premium tends to have lower premium than male in same age etc.）
 
3. Another reason to buy early is that premium goes up every year due to cost and inflations.
 
4. Insurance industry is very competitive, take advantage if there is a massive discount!

What insurer did you get from? $100 a month is really cheap for that kind of coverage and I am quite sure it is hard to such rates now.

Regards, IIIW

I had clarified that the earlier blog post in question was a guest blog. It wasn't written by me.

We decided to share this email here as it could help many people out there who are looking to get term life insurance. Also, we could possibly get many more people to come forward to share their experience or perspectives.

Related post:
Term life insurance: Why buy term? How big a sum should I buy? How long a term should it be? How much does it cost?

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?