Buying Life insurance and others

Buying life insurance is to provide future cash flow when one suffered total and permanent disability, or when one is critically ill or when one passed away. You do not wish to burden your loved ones with expenses and loss of income as a result of unforeseen events. Another reason for buying life insurance can be for investment returns besides the protection.

What are necessary life insurance plans?

First start with buying a medisave-approved comprehensive medical insurance plan to cover hospitalisation for critical illnesses.

Consider buying whole-life policy when you are still young. Premiums are paid regularly and premium amount is low when one starts young. These policies come with profit share in the form of bonus declared every year based on performance of Life Participating Fund of the insurer.

Consider buying Endowment policies. These policies provide insurance protection and a savings plan. One important one is when you have a young child, take up one such plan to provide for education tuition fees and expenses, such as tertiary education. This plan forced you to save for the future and the payout at maturity (say 20 years later) will cover for future education fees.

One can also buy endowment policies as an investment asset class, instead of common investment instruments, such as equity, bonds and fixed deposits with the banks. You need to pay a lump sum up front and choose a maturity period such as 10 years to withdraw the premium paid and bonus earned. These plans offer better return than fixed deposit rates and less volatile than stocks and bonds.

Some may consider buying into Investment-linked insurance policies. The investment components include various types of unit trusts managed by professional managers. This policy also offers protection on life of the assured. The risk of this type of insurance policies is potential loss in value of these investments. Of course the upside is rise in value of investments. One can pay a lump-sum amount upfront and let the insurance company grow this premium amount during a fixed maturity period.

What else do I have? I have CPF – Dependant’s Protection Scheme, CPF approved Eldershield Plan, Home Protection Plan, Motor insurance and Travel Insurance.

Talk to your insurance company agent, whom you are comfortable with, for more details.

Copyright © 2012, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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3 Responses to Buying Life insurance and others

  1. ken says:

    i refer to your post in july – Disappoint​ed with Endowment Insurance Policy.

    • limkimtong says:

      Not all insurance policies from different insurance companies are alike. Some performed better than others.

      • ken says:

        i wonder how much better?

        as a general principle, endowments are not a good investment option.
        the high costs incurred and the less than ideal returns over a long investment horizon suggests that one could do better investing one’s money elsewhere.
        plus if one is trying to cash out early – beware! the policy never starts to earn anything till years later since much of what is paid in the early years goes into commissions for the agent.

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