Last year, I wrote about my favorite life insurance (Aviva SAF Group Term Life) for Singaporeans. It is still my favorite today and I just got an update that the maximum coverage allowable has been raised to SGD1 million. This will cost SGD1536.00 annually and I signed up for it with little hesitation. Based on my personal experience, I seldom need to pay the full premium each year because Aviva gives partial refund of the premium at their discretion.
For Singaporean NSmen with dependents, this is a no-brainer if the objective is to use minimum sum of money to provide maximum protection for the family. This plan is open only for NS men and I am not aware of other cheaper plans. Fortunately, the policy holder can buy protection for his spouse at even lower cost probably because the wife has no risk of death from military accidents. This is the only plan I know of that protects against military mishaps. Singaporeans who have been through NS will know that this risk is not really that low.
Much of what I wrote in my first article for this insurance plan still applies. So, I shall not repeat here.
By the way, I will bet very few insurance agents or fee-based financial advisers will recommend this product. This product is so value-for-money that there is hardly any room left to pay for commission. I do not get paid a single cent for recommending this product.
For more details, please refer to the Aviva brochure and judge for yourself.
http://www.aviva.com.sg/pdf/SAF_GTL_Brochure.pdf
PS: I do not collect any commission from Aviva. In fact, I have never collected any commission for my product reviews. Just a happy customer who wants to share with fellow Singaporeans on the kind of protection that they should have to protect their own family.
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Sunday, November 4, 2012
Sunday, April 8, 2012
Will fee-based financial advisory model lead to more financial literacy?
Recently, an insurance agent called me in my office. He was very polite, so I did not want to cut him off too quickly. He started off recommending whole-life insurance products. I was not interested. Then, he went on talking about savings and endowment plans. I still was not interested. Finally, I told him to email me the information so that I could end the conversation. Before hanging up, I told him I am interested only in insurance plans that offer purely protection and have absolutely no interest in savings-related or investment-linked insurance products. After all, insurance is all about protection. Savings and investment should be secondary considerations. This insurance agent never contacted me again.
Several years ago, an insurance agent came over to my home because I wanted to buy H&S (Hospital and Surgery) plans for my whole family. He spent the first half hour talking about critical illnesses and endowment plans which I have never express interest in. I listened patiently and politely since the agent took the effort to travel down to my home. I refused to buy any of the plans that the agent recommended because I prefer term plans which are cheaper. Before he left, I guess he could not hide his irritation and told me that the commission he earns from my H&S plans can at most pay for the transport he took to come to my place. I am not sure if this is an exaggeration. At least I know now that agents are paid a pittance for selling term-plans. So, in future, if I should need to buy products that an agent seems uninterested to sell, I will go to his office myself.
For the past decades, insurance sales is driven by commission. Commission-driven insurance agents plus financially ignorant or lazy consumers has resulted in Singaporeans overpaying for insurance protection and yet, remain under protected. How can Singaporeans have adequate insurance protection if the salesmen's main priority is to recommend savings or investment-linked products or expensive whole-life plans that cover death and 30 critical illnesses rather than hospitalization which is much likelier to happen? There is nothing evil in their actions because I will do the same thing in their shoes. If I were an insurance agent, I too will focus on selling products that pay me the most commission instead of selling the most appropriate product to the client. Client analysis means selling the highest-paying commission product that he can afford and probably likes, not necesarily the best product for his financial future. Hey, my own financial future comes first before my clients, right? Let us not be hypocritical. We are all like that.
Ravi Mellon(Managing Director, Monetary Authority of Singapore) made a dreaded speech on 26 March 2012 to the Life Insurance Association. Ironically, this much dreaded speech addressed to the financial advisory community is entitled "Putting the Customer First". Why should a speech from a regulator that puts customers first be received with such dismay? This really highlights the serious conflicts of interests between customers and financial advisers.
Some interesting nuggets from this speech that reveals why that insurance agent started off recommending whole-life insurance plans first;
Unfortunately, fee-based financial advice does not come cheap. These advisers charge by the hour and the average fee comes to around $3000 on average, $2000 at least (correct me if I am wrong). If a person has savings of around $10k-$30k, it does not make sense to go for fee-based advice because the fees are too significant as a percentage of the money being managed. This cuts off the lower-income and youngsters who still have not accumulate a meaningful sum of savings. This is still better than the present commission-driven model because no advice is still better than bad advice. Bad advice is unavoidable when there is a serious conflict of interest between advisers and clients.
I think fee-based financial advisory business will evolve to serve mainly the rich because that is the profitable way to go. What does it leave for the rest? When consumers want something but cannot afford or do not want to pay for advice, they will have to educate themselves. Perhaps the best thing to come out of the move towards fee-based financial advice is that more people will become financially literate in insurance matters.
By the way, do not expect members of the financial services community to educate you. They actually have an interest in keeping their clients ignorant. Ignorant customers are the easiest to do a rip off. There are knowledgeable people around who are generous in sharing their knowledge on financial forums. Below are some links that may be useful;
http://www.valuebuddies.com/thread-389.html
http://forums.hardwarezone.com.sg/money-mind-210/newbie-guide-how-find-good-agent-investment-insurance-2818607.html
Several years ago, an insurance agent came over to my home because I wanted to buy H&S (Hospital and Surgery) plans for my whole family. He spent the first half hour talking about critical illnesses and endowment plans which I have never express interest in. I listened patiently and politely since the agent took the effort to travel down to my home. I refused to buy any of the plans that the agent recommended because I prefer term plans which are cheaper. Before he left, I guess he could not hide his irritation and told me that the commission he earns from my H&S plans can at most pay for the transport he took to come to my place. I am not sure if this is an exaggeration. At least I know now that agents are paid a pittance for selling term-plans. So, in future, if I should need to buy products that an agent seems uninterested to sell, I will go to his office myself.
For the past decades, insurance sales is driven by commission. Commission-driven insurance agents plus financially ignorant or lazy consumers has resulted in Singaporeans overpaying for insurance protection and yet, remain under protected. How can Singaporeans have adequate insurance protection if the salesmen's main priority is to recommend savings or investment-linked products or expensive whole-life plans that cover death and 30 critical illnesses rather than hospitalization which is much likelier to happen? There is nothing evil in their actions because I will do the same thing in their shoes. If I were an insurance agent, I too will focus on selling products that pay me the most commission instead of selling the most appropriate product to the client. Client analysis means selling the highest-paying commission product that he can afford and probably likes, not necesarily the best product for his financial future. Hey, my own financial future comes first before my clients, right? Let us not be hypocritical. We are all like that.
Ravi Mellon(Managing Director, Monetary Authority of Singapore) made a dreaded speech on 26 March 2012 to the Life Insurance Association. Ironically, this much dreaded speech addressed to the financial advisory community is entitled "Putting the Customer First". Why should a speech from a regulator that puts customers first be received with such dismay? This really highlights the serious conflicts of interests between customers and financial advisers.
Some interesting nuggets from this speech that reveals why that insurance agent started off recommending whole-life insurance plans first;
- Take for example a whole life insurance policy. An FA representative could earn a basic commission of 50% of the policy’s annual premium in the first year, and another 40% of the annual premium during the following five years. (Whole-life premiums usually cost around SGD2000 a year)
- His supervisor would in turn earn overriding commissions throughout the first six years. There is typically a third tier comprising the agency managers who also get overrides.
- Total overrides during the first six years can amount to 70% of the policy’s annual premium.
- Together, the total commissions and overrides earned by the representative and his supervisors would be equivalent to about 160% of the policy’s annual premium.
Unfortunately, fee-based financial advice does not come cheap. These advisers charge by the hour and the average fee comes to around $3000 on average, $2000 at least (correct me if I am wrong). If a person has savings of around $10k-$30k, it does not make sense to go for fee-based advice because the fees are too significant as a percentage of the money being managed. This cuts off the lower-income and youngsters who still have not accumulate a meaningful sum of savings. This is still better than the present commission-driven model because no advice is still better than bad advice. Bad advice is unavoidable when there is a serious conflict of interest between advisers and clients.
I think fee-based financial advisory business will evolve to serve mainly the rich because that is the profitable way to go. What does it leave for the rest? When consumers want something but cannot afford or do not want to pay for advice, they will have to educate themselves. Perhaps the best thing to come out of the move towards fee-based financial advice is that more people will become financially literate in insurance matters.
By the way, do not expect members of the financial services community to educate you. They actually have an interest in keeping their clients ignorant. Ignorant customers are the easiest to do a rip off. There are knowledgeable people around who are generous in sharing their knowledge on financial forums. Below are some links that may be useful;
http://www.valuebuddies.com/thread-389.html
http://forums.hardwarezone.com.sg/money-mind-210/newbie-guide-how-find-good-agent-investment-insurance-2818607.html
Sunday, November 6, 2011
My favourite life insurance plan in Singapore - Aviva SAF Group Insurance for NSmen
4 Nov 2012: A new update for this plan has been written.
My favorite life insurance plan in Singapore for family protection in the event that I can no longer serve as a breadwinner for the family is the SAF Group Insurance for NSmen from Aviva. I am a policy-holder for several years already.
It is the best deal in Singapore that I know of that fits my criteria. It offers the best value for money per dollar for protection. For an annual premium of about SGD920, you are covered up to SGD600k. The coverage extends to high-risk activities like military training which I do not think is covered by other insurance policies.
There is an advance payment of 50% (limited to SGD100k) if the insured is diagnosed with a terminal illness. There is even a daily hospital cash benefit which pays up to SGD10 for every SGD50k assured. One thing I like about this policy is the partial cash rebate of the annual premium during good years. I know of no other policies that have a similar feature.
For parents with sons who are going for National Service soon, it is a policy worth considering. To my knowledge, it is the only policy that covers mishaps during National Service.
For more details, please visit http://www.aviva.com.sg/pdf/57660_SAF_Brochure.pdf and read the footnotes and the clauses yourselves. My brief summary cannot cover all the restrictive clauses that all buyers should be aware before buying.
If you know of a better deal, please tell me. I am confident none exists.
Please note that there is no savings or investment component in this insurance plan. In other words, you do not get back any money at the end of the day. This is why it is so much cheaper than the endowment, whole-life or investment-linked policies that insurance agents like to sell. It is a pure protection plan which is almost never recommended by insurance agents because it pays very little commission. So, if you want to buy this policy, do the agents a favor. Don't expect them to visit your home for this policy. If they do, it is reasonable that you will have to put up with sales talk for the higher commission products like the endowment, whole-life or investment-linked policies. Submit the application form yourself.
As a general rule, I never liked insurance products that mix investment or income. If I want income, I will go for fixed-income products like government bonds or fixed deposits. Insurance plans that offer income come with projected returns which cannot be relied upon. Ignorant customers can be easily taken in by the aggressive projected returns to lure them into buying. It is easier to analyze fixed-income products with guaranteed returns than insurance plans with projected returns. The insurer actually has an incentive to use unrealistic projected returns to boost sales. Consumers should be aware of this risk when assessing these kinds of insurance products.
My favorite life insurance plan in Singapore for family protection in the event that I can no longer serve as a breadwinner for the family is the SAF Group Insurance for NSmen from Aviva. I am a policy-holder for several years already.
It is the best deal in Singapore that I know of that fits my criteria. It offers the best value for money per dollar for protection. For an annual premium of about SGD920, you are covered up to SGD600k. The coverage extends to high-risk activities like military training which I do not think is covered by other insurance policies.
There is an advance payment of 50% (limited to SGD100k) if the insured is diagnosed with a terminal illness. There is even a daily hospital cash benefit which pays up to SGD10 for every SGD50k assured. One thing I like about this policy is the partial cash rebate of the annual premium during good years. I know of no other policies that have a similar feature.
For parents with sons who are going for National Service soon, it is a policy worth considering. To my knowledge, it is the only policy that covers mishaps during National Service.
For more details, please visit http://www.aviva.com.sg/pdf/57660_SAF_Brochure.pdf and read the footnotes and the clauses yourselves. My brief summary cannot cover all the restrictive clauses that all buyers should be aware before buying.
If you know of a better deal, please tell me. I am confident none exists.
Please note that there is no savings or investment component in this insurance plan. In other words, you do not get back any money at the end of the day. This is why it is so much cheaper than the endowment, whole-life or investment-linked policies that insurance agents like to sell. It is a pure protection plan which is almost never recommended by insurance agents because it pays very little commission. So, if you want to buy this policy, do the agents a favor. Don't expect them to visit your home for this policy. If they do, it is reasonable that you will have to put up with sales talk for the higher commission products like the endowment, whole-life or investment-linked policies. Submit the application form yourself.
As a general rule, I never liked insurance products that mix investment or income. If I want income, I will go for fixed-income products like government bonds or fixed deposits. Insurance plans that offer income come with projected returns which cannot be relied upon. Ignorant customers can be easily taken in by the aggressive projected returns to lure them into buying. It is easier to analyze fixed-income products with guaranteed returns than insurance plans with projected returns. The insurer actually has an incentive to use unrealistic projected returns to boost sales. Consumers should be aware of this risk when assessing these kinds of insurance products.
Friday, February 26, 2010
Family insurance
I felt good after buying all the basic insurance as mentioned in my previous posts. The comfort was dangerously misplaced. I am not protected until all my loved ones are protected. Out of love and duty, it is expected of me to fork out cash to pay for unexpected medical bills faced by my family members.
It was too late to raise insurance cover for my parents and parents-in-law. At their age, the health problems which they are genetically predisposed have surfaced. Pre-existing conditions are either not insurable or insurable at prohibitive cost.
The lessons learnt is to buy medical insurance early when you have a clean bill of health. Hence, I bought the best health insurance plans that I can afford for my children while they still have a clean health record. Make sure the health insurance policies are guaranteed renewable. Otherwise, the insurer can cancel it when health problems surface later. It will be terrible to lose cover at a time when you most need it. Like bankers who take away the umbrella when it starts raining, insurers may do the same in the name of profit. Don't give them the chance to do it.
By the way, travel insurance saved my family's finances. My father had a heart attack during a vacation in US when I was still in university. The operation would have severely damaged my parents' retirement fund had it not been for the insurance. So, don't forget to buy travel insurance on family vacation trip.
It was too late to raise insurance cover for my parents and parents-in-law. At their age, the health problems which they are genetically predisposed have surfaced. Pre-existing conditions are either not insurable or insurable at prohibitive cost.
The lessons learnt is to buy medical insurance early when you have a clean bill of health. Hence, I bought the best health insurance plans that I can afford for my children while they still have a clean health record. Make sure the health insurance policies are guaranteed renewable. Otherwise, the insurer can cancel it when health problems surface later. It will be terrible to lose cover at a time when you most need it. Like bankers who take away the umbrella when it starts raining, insurers may do the same in the name of profit. Don't give them the chance to do it.
By the way, travel insurance saved my family's finances. My father had a heart attack during a vacation in US when I was still in university. The operation would have severely damaged my parents' retirement fund had it not been for the insurance. So, don't forget to buy travel insurance on family vacation trip.
Saturday, February 20, 2010
Death insurance
Death is a risk that will not hit you when it happens, but it will hit your dependents. Buy death insurance if you are a breadwinner to protect your family. Do not buy death insurance for your children unless you intend to profit from their death. It is a waste of money for people without dependents to buy death insurance because nobody is worse off financially when they are dead.
Even if you have no children, do consider buying death insurance for the sake of your parents especially if they are highly dependent on your monthly allowances. After having children of my own, I realized that raising children for protection in old age is an almost sure-lose investment. I resolve to be at least a break-even investment for my parents in the worst case. Hopefully, I can be a multi-bagger investment to them. Hence, my interest in managing my own money
With the above considerations for my beloved ones, I maximized my death insurance coverage until I am worth more dead than alive. Too much death insurance can create new risks. However, I am lucky to have married a good woman. I have no fear that she will murder me. I believe my children love me enough not to rejoice by my coffin. I have absolutely no worries with my parents. Even very selfish people become selfless when it comes to their children.
Death insurance is the cheapest among all the kinds of insurance plans. So, it was not expensive for me to maximize my death coverage. You can even use them as a cheap form of insurance for family protection.
My subsequent paragraphs may be offensive to some. You are free to ignore if you disagree.
Death insurance can be used as a form of cheap disability/health plan to protect your family. If you are disabled at a young age or get diagnosed with a terminal illness that will cost a bomb to treat with low chances of survival, you may consider suicide but make sure your insurance covers suicide first! This way, not only do you avoid becoming a burden to your family, you can also provide a lump sum to support for their future living expenses. They sorely need it after losing a breadwinner. If it is honorable to die in war for your country (a group of strangers who can be unappreciative), then it is even more honorable to die for your family (people whom you love and love you back).
Even if you have no children, do consider buying death insurance for the sake of your parents especially if they are highly dependent on your monthly allowances. After having children of my own, I realized that raising children for protection in old age is an almost sure-lose investment. I resolve to be at least a break-even investment for my parents in the worst case. Hopefully, I can be a multi-bagger investment to them. Hence, my interest in managing my own money
With the above considerations for my beloved ones, I maximized my death insurance coverage until I am worth more dead than alive. Too much death insurance can create new risks. However, I am lucky to have married a good woman. I have no fear that she will murder me. I believe my children love me enough not to rejoice by my coffin. I have absolutely no worries with my parents. Even very selfish people become selfless when it comes to their children.
Death insurance is the cheapest among all the kinds of insurance plans. So, it was not expensive for me to maximize my death coverage. You can even use them as a cheap form of insurance for family protection.
My subsequent paragraphs may be offensive to some. You are free to ignore if you disagree.
Death insurance can be used as a form of cheap disability/health plan to protect your family. If you are disabled at a young age or get diagnosed with a terminal illness that will cost a bomb to treat with low chances of survival, you may consider suicide but make sure your insurance covers suicide first! This way, not only do you avoid becoming a burden to your family, you can also provide a lump sum to support for their future living expenses. They sorely need it after losing a breadwinner. If it is honorable to die in war for your country (a group of strangers who can be unappreciative), then it is even more honorable to die for your family (people whom you love and love you back).
Medical and income disability insurance
After I have decided on term insurance plans, I still have to think about what term plans to buy. A starting point is to think about the risks that can happen in your life.
The types of insurance plans discussed here applies to the Singapore context. Foreign readers can skip this post. I will not discuss about specific plans. Everyone has to analyze their personal situation on their own and choose the best-fit plan. I will talk in terms of broad principles to get readers started. I am also not an expert on insurance. Experts out there, please point out any errors or mis-information that I make.
Falling sick with an illness that requires hospitalization and surgery is a very scary thing because doctors are so expensive. There is no point in being saved by a doctor from a heart attack, then suffer another heart attack on seeing his bill. You might consider dying in the second round.
Protection can be obtained through a hospitalization plan and a normal health plan with a co-deductible component. The latter can be bought using Medisave and I bought the best plan (most expensive). Since you cannot touch CPF money until retirement, you might as well use it to buy the best insurance that money can buy. In this way, you use untouchable money(CPF) to protect touchable money(cash) because the chances of forking out cash is reduced by better coverage.
I know of many Singaporeans who are covered for the 30 critical illnesses but not covered for hospitalization. This is unsafe as the chances of getting hospitalized is much higher than getting the 30 critical illnesses. Buy this first, then consider critical illness protection.
As a working adult, my most valuable asset is my ability to earn a living. Therefore, it makes good sense to insure against losing it.
I bought an income-disability plan which will pay me a percentage of my salary should I be unable to work due to accidents or disease. Even if this money is not sufficient to allow my family to live as comfortably as before, at least I will not become a burden to them should a disaster hit.
The types of insurance plans discussed here applies to the Singapore context. Foreign readers can skip this post. I will not discuss about specific plans. Everyone has to analyze their personal situation on their own and choose the best-fit plan. I will talk in terms of broad principles to get readers started. I am also not an expert on insurance. Experts out there, please point out any errors or mis-information that I make.
Falling sick with an illness that requires hospitalization and surgery is a very scary thing because doctors are so expensive. There is no point in being saved by a doctor from a heart attack, then suffer another heart attack on seeing his bill. You might consider dying in the second round.
Protection can be obtained through a hospitalization plan and a normal health plan with a co-deductible component. The latter can be bought using Medisave and I bought the best plan (most expensive). Since you cannot touch CPF money until retirement, you might as well use it to buy the best insurance that money can buy. In this way, you use untouchable money(CPF) to protect touchable money(cash) because the chances of forking out cash is reduced by better coverage.
I know of many Singaporeans who are covered for the 30 critical illnesses but not covered for hospitalization. This is unsafe as the chances of getting hospitalized is much higher than getting the 30 critical illnesses. Buy this first, then consider critical illness protection.
As a working adult, my most valuable asset is my ability to earn a living. Therefore, it makes good sense to insure against losing it.
I bought an income-disability plan which will pay me a percentage of my salary should I be unable to work due to accidents or disease. Even if this money is not sufficient to allow my family to live as comfortably as before, at least I will not become a burden to them should a disaster hit.
Thursday, February 18, 2010
Insurance agents serve themselves first
Knowing the importance of insurance for protection is a start. Knowing what kinds of insurance to buy is the difficult part. The first insurance product I bought was a bad buy for me. Having zero knowledge, I was totally reliant on the insurance agent who was not incentivized to give good advice. He was paid on commission. Therefore, he will sell what pays him the most commission which may not be a suitable product for me. In fact, it probably will not be a good deal for me because the high commission will be priced into the insurance plan.
It is hard to blame the insurance agent. But I certainly blame the incentives that drove him to the bad behavior. He has to earn a living after all. I would have done the same if I were in his place.
My objective of buying insurance is purely protection. Insurance plans that mixes investment or saving with protection are not suitable buys for me because they substantially raise the premium. To maximize protection for each dollar spent, I should have bought term insurance plans instead of the whole-life plan (my first buy). Term insurance holds another advantage for a know-nothing like me then. If I had made the wrong choice (likely if one knows nothing), I can cancel the plan and go for another one without incurring penalty charges. Not so for the whole-life plan. I wanted to cancel that plan in 2008 when there was a "bank run" on AIA(subsidiary of AIG) in Singapore. I end up still paying for the whole-life plan to avoid heavy losses which I will incur upon cancellation.
I am not dismissing the whole-life or endowment plans. One thing bad about term plans is that they become more expensive when you grow old and stop at a certain age. Not so for the whole-life plans.
However, I will consider them if there is spare money left in my budget after I am covered with adequate protection from the term plans. This is especially important for people like me with limited budgets.
Based on my mistakes, this is how I would advise those who are getting started with insurance. Buy term plans to ensure adequate protection first. If there is spare money left in the budget, then consider the more expensive plans. Otherwise, you end up paying a lot and still suffer from inadequate protection. This is a not an uncommon problem given the combination of insurance agents without the right incentives to sell suitable policies and ignorant buyers who provide a ready pool of suckers (which I hope this post can reduce).
It is hard to blame the insurance agent. But I certainly blame the incentives that drove him to the bad behavior. He has to earn a living after all. I would have done the same if I were in his place.
My objective of buying insurance is purely protection. Insurance plans that mixes investment or saving with protection are not suitable buys for me because they substantially raise the premium. To maximize protection for each dollar spent, I should have bought term insurance plans instead of the whole-life plan (my first buy). Term insurance holds another advantage for a know-nothing like me then. If I had made the wrong choice (likely if one knows nothing), I can cancel the plan and go for another one without incurring penalty charges. Not so for the whole-life plan. I wanted to cancel that plan in 2008 when there was a "bank run" on AIA(subsidiary of AIG) in Singapore. I end up still paying for the whole-life plan to avoid heavy losses which I will incur upon cancellation.
I am not dismissing the whole-life or endowment plans. One thing bad about term plans is that they become more expensive when you grow old and stop at a certain age. Not so for the whole-life plans.
However, I will consider them if there is spare money left in my budget after I am covered with adequate protection from the term plans. This is especially important for people like me with limited budgets.
Based on my mistakes, this is how I would advise those who are getting started with insurance. Buy term plans to ensure adequate protection first. If there is spare money left in the budget, then consider the more expensive plans. Otherwise, you end up paying a lot and still suffer from inadequate protection. This is a not an uncommon problem given the combination of insurance agents without the right incentives to sell suitable policies and ignorant buyers who provide a ready pool of suckers (which I hope this post can reduce).
Wednesday, February 17, 2010
Insurance before everything else
When I just entered the workforce, one of the pleasant problems I faced when I received my first paycheck was what to do with the money. I chose to save it. Many would say that was prudent. However, on hindsight, I think that was wrong. I should have used it to buy insurance. In fact, I would go so far as to say that insurance should be the first item to spend on when one starts to have an income. Insurance before everything else.
Even if I had faithfully saved for the next five years, an accident or disastrous medical condition could have wiped out all my savings and plunge me into debt. Or worse still, drag the rest of my family members into debt. What is the point of saving all that money then? I should have used a small portion of the savings to buy some term insurance plan to protect against such disasters.
I used to have a colleague who does not believe in insurance because he thinks it is a waste of money. Most people do not gain from the insurance because the probability of the bad event happening is very low. While he was right about the probability, he completely missed the point. In insurance, one should not think in terms of probabilities. One should think in terms of consequences.
I would think of insurance as spending a small sum of money which I can afford to lose today to protect against disasters which I cannot afford to pay tomorrow.
I will not feel any sense of loss even if I shall never make any insurance claims. This is because I regard premiums spent on unclaimed insurance as charity. Insurance can be viewed as a tool that allows the lucky(no insurance claims) to help the unlucky (entitled to claims). In return, the lucky people of today will be assured of help should one day their luck turns.
Buying insurance is one of my favorite ways to do charity indirectly as I can help myself while helping others as well.
Even if I had faithfully saved for the next five years, an accident or disastrous medical condition could have wiped out all my savings and plunge me into debt. Or worse still, drag the rest of my family members into debt. What is the point of saving all that money then? I should have used a small portion of the savings to buy some term insurance plan to protect against such disasters.
I used to have a colleague who does not believe in insurance because he thinks it is a waste of money. Most people do not gain from the insurance because the probability of the bad event happening is very low. While he was right about the probability, he completely missed the point. In insurance, one should not think in terms of probabilities. One should think in terms of consequences.
I would think of insurance as spending a small sum of money which I can afford to lose today to protect against disasters which I cannot afford to pay tomorrow.
I will not feel any sense of loss even if I shall never make any insurance claims. This is because I regard premiums spent on unclaimed insurance as charity. Insurance can be viewed as a tool that allows the lucky(no insurance claims) to help the unlucky (entitled to claims). In return, the lucky people of today will be assured of help should one day their luck turns.
Buying insurance is one of my favorite ways to do charity indirectly as I can help myself while helping others as well.
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