Realisations of a Financial Adviser
Limited resources, unlimited needs
All of us have plenty of financial needs. Insurance for protection, investments for our retirement & kid’s education, paying our mortgages, car loans and so on. But our resources are limited. If you are a male aged 35 and need to provide your family with a monthly income of $3,000 for 20 years in the event of your unfortunate demise, you will need about 600,000 cover. If you intend to retire at age 55, Table 1 shows the comparison for the various types of plans.
The truth is, how many can afford paying more than $6,000 or $10,000 per year, just to cover his individual death needs? In the above example, we haven’t even considered his medical, his spouse, and his children insurance needs yet. We can discuss all the merits of whole life with cash values and so on, but if we cannot even fully cover our needs, what’s the point?
TABLE 1: Types of insurance plans
About temporary and permanent needs: “But term plans are temporary. It will cease after a certain period. So when you need insurance most, you don’t have it” So say the proponents of whole life plans. Let’s look at some of the common protection needs and whether they are permanent or temporary (Table 2):
From table 2, it becomes clear that most of our protection needs are temporary, with the exception of providing for hospitalisation costs and maybe say, alternative medicine. Insuring against high hospitalisation cost can be done effectively using a good hospitalisation & surgical plan that pays the first dollar that you incur. To provide for the need of alternative medicine in the event of a critical illness, you can buy a small term plan that covers critical illness till age 90 or 99.
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All of us have plenty of financial needs. Insurance for protection, investments for our retirement & kid’s education, paying our mortgages, car loans and so on. But our resources are limited. If you are a male aged 35 and need to provide your family with a monthly income of $3,000 for 20 years in the event of your unfortunate demise, you will need about 600,000 cover. If you intend to retire at age 55, Table 1 shows the comparison for the various types of plans.
The truth is, how many can afford paying more than $6,000 or $10,000 per year, just to cover his individual death needs? In the above example, we haven’t even considered his medical, his spouse, and his children insurance needs yet. We can discuss all the merits of whole life with cash values and so on, but if we cannot even fully cover our needs, what’s the point?
TABLE 1: Types of insurance plans
*This is a packaged plan by one of the insurers.
About temporary and permanent needs: “But term plans are temporary. It will cease after a certain period. So when you need insurance most, you don’t have it” So say the proponents of whole life plans. Let’s look at some of the common protection needs and whether they are permanent or temporary (Table 2):
From table 2, it becomes clear that most of our protection needs are temporary, with the exception of providing for hospitalisation costs and maybe say, alternative medicine. Insuring against high hospitalisation cost can be done effectively using a good hospitalisation & surgical plan that pays the first dollar that you incur. To provide for the need of alternative medicine in the event of a critical illness, you can buy a small term plan that covers critical illness till age 90 or 99.
source>>
Best wishes
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