COMMENT POSTED IN MY BLOG:
My friend was involved in an accident of no fault of hers for her "under warranty car". Her insurance doesn't list her car's authorised dealer as a supported workshop. In the end the repair was not well done and she had to return to the workshop for small fixes. So I think checking the list of motor workshop the insurance covers is important too!
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REPLY:
It is the duty of the insurance company to arrange the repair to an appropriate standard. An unsatisfactory repair of this nature is not common, and may happen with any workshop (including the authorised distributor's workshop).
Many authorised distributor sub-contract the work to a third party workshop anyway, even though they charge high repair cost (of two to three times of the market rate).
To ensure that the premium rates are kept at an affordable rate, we should not allow the distributor to use their warranty clause to charge high repair cost.
Monday, July 9, 2007
Front end charge for regular premium ILP
A visitor to my blog commented that he had to pay 20 months in front end charge on a ILP policy. I do not advocate ILP with such high front end charges.
There are ILPs with lower charges in the market. You can see a listing from Dr Money's website.
The sophisticated investor can adopt the "do it yourself" approach and avoid all front end charge. For the majority who are not so familiar with investment, you can find an ILP product with modest charges, and enjoy the benefit of an adviser.
You can also deal directly with the insurance company. NTUC Income has a business center.
There are ILPs with lower charges in the market. You can see a listing from Dr Money's website.
The sophisticated investor can adopt the "do it yourself" approach and avoid all front end charge. For the majority who are not so familiar with investment, you can find an ILP product with modest charges, and enjoy the benefit of an adviser.
You can also deal directly with the insurance company. NTUC Income has a business center.
How the world has changed in a decade!
Although a decade seems short, so much can happen.
Just 10 years ago it was still possible to imagine a world without Internet access. Just six years ago, it was possible to visit the World Trade Center in New York or board a plane without removing your shoes.
Just 10 years ago it was still possible to imagine a world without Internet access. Just six years ago, it was possible to visit the World Trade Center in New York or board a plane without removing your shoes.
Increase in air fares
I travelled a few times this year and made by own booking through the internet. Recently, I found that the price of the air tickets had gone up, and that the planes are more full.
The increase in air fares is due to two reasons:
* cost of fuel has increased (leading to higher fuel surcharges)
* the airlines had increased their fares due to high demand and lower capacity
The delay in the delivery of air buses had led to a shortage of planes. As travel increased, the planes are getting more passengers. This has given the chance for the airlines to increase their fares.
Lesson: I have decided to reduce my travel this year, due to the high prices. I will do my business by telephone through Skype.
The increase in air fares is due to two reasons:
* cost of fuel has increased (leading to higher fuel surcharges)
* the airlines had increased their fares due to high demand and lower capacity
The delay in the delivery of air buses had led to a shortage of planes. As travel increased, the planes are getting more passengers. This has given the chance for the airlines to increase their fares.
Lesson: I have decided to reduce my travel this year, due to the high prices. I will do my business by telephone through Skype.
Find the right motor insurance
Dear Mr Tan
I own a car and is compulsory to buy motor insurance. Who should I buy the insurance from? Who offers the best rates?
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REPLY:
You have the following options:
1. get your insurance agent to find out who offers the best rate on each year's renewal
2. search for the best rate by yourself
3. find a low cost insurer, and stay with them for many years
Many people adopt method 1. The disadvantage is that the agent may find you an insurer that pays them the highest commission. However, if you have a trustworthy agent who can look after your interest, this method is suitable for you.
It is quite troublesome for you to adopt method 2. Apart from finding the lowest rate, you have the trouble of submitting a new application to switch the insurance company. You are also not familiar with their claim practice and service quality.
It is best to adopt method 3. A low cost insurer has the following characteristics:
* sell insurance to you directly (and save on the 15% commission payable to the agent)
* have an effective system to manage the claims (and avoid paying high repair charges)
Usually, the low cost insurer will ask you to allow them to handle the repair of the vehicle. This gives them the ability to avoid paying for inflated charges. By managing the claims well, their can continue to offer competitive rates and benefit all their customers.
A well managed insurer will have have transparent practice on their handling of the claims (to ensure a high quality of repair and customer service). You can read their practice FAQ.
NTUC Income fits into this description. You can contact their business center or see an insurance agent.
I own a car and is compulsory to buy motor insurance. Who should I buy the insurance from? Who offers the best rates?
----------------------------
REPLY:
You have the following options:
1. get your insurance agent to find out who offers the best rate on each year's renewal
2. search for the best rate by yourself
3. find a low cost insurer, and stay with them for many years
Many people adopt method 1. The disadvantage is that the agent may find you an insurer that pays them the highest commission. However, if you have a trustworthy agent who can look after your interest, this method is suitable for you.
It is quite troublesome for you to adopt method 2. Apart from finding the lowest rate, you have the trouble of submitting a new application to switch the insurance company. You are also not familiar with their claim practice and service quality.
It is best to adopt method 3. A low cost insurer has the following characteristics:
* sell insurance to you directly (and save on the 15% commission payable to the agent)
* have an effective system to manage the claims (and avoid paying high repair charges)
Usually, the low cost insurer will ask you to allow them to handle the repair of the vehicle. This gives them the ability to avoid paying for inflated charges. By managing the claims well, their can continue to offer competitive rates and benefit all their customers.
A well managed insurer will have have transparent practice on their handling of the claims (to ensure a high quality of repair and customer service). You can read their practice FAQ.
NTUC Income fits into this description. You can contact their business center or see an insurance agent.
Avoid high front end charge
Hi Mr Tan,
Thanks for sharing your insights in this blog. Your views are valuable for a young man.
I'll wish to seek your thoughts in recommending ILPs to your visitors. For one, I think that they are expensive. I bought one whole life ILP this year, and it has a distribution cost of 20 months premium paid over 3 years.
Should I opt out of the policy due to the high cost? Moreover, the funds to choose from are very limited as compared to what's available on the market.
I'm doing my own investing for my retirement fund, and will think that with persevered learning, I will gain more doing my own investing (ie buy term and invest the rest of my savings).
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REPLY:
I agree that a front end charge of 20 months is far too high. I do not recommend any high cost product.
A similar plan from NTUC Income had a front end charge of about 6 months. This is used to pay commission to the adviser, so that they can advise the client over the years.
If you are knowledgeable about selecting the right fund and does not need an adviser, it is better for you to invest in a unit trust and avoid the front end charge entirely.
For your existing ILP policy, if you have just taken the policy recently, it is better to terminate the policy and save on paying the balance of the front end charge.
Read these FAQs
Financial Planning for the Young
Do I need an Insurance Adviser?
Thanks for sharing your insights in this blog. Your views are valuable for a young man.
I'll wish to seek your thoughts in recommending ILPs to your visitors. For one, I think that they are expensive. I bought one whole life ILP this year, and it has a distribution cost of 20 months premium paid over 3 years.
Should I opt out of the policy due to the high cost? Moreover, the funds to choose from are very limited as compared to what's available on the market.
I'm doing my own investing for my retirement fund, and will think that with persevered learning, I will gain more doing my own investing (ie buy term and invest the rest of my savings).
---------------------
REPLY:
I agree that a front end charge of 20 months is far too high. I do not recommend any high cost product.
A similar plan from NTUC Income had a front end charge of about 6 months. This is used to pay commission to the adviser, so that they can advise the client over the years.
If you are knowledgeable about selecting the right fund and does not need an adviser, it is better for you to invest in a unit trust and avoid the front end charge entirely.
For your existing ILP policy, if you have just taken the policy recently, it is better to terminate the policy and save on paying the balance of the front end charge.
Read these FAQs
Financial Planning for the Young
Do I need an Insurance Adviser?
High expense to treat a premature baby
I know of a recent case. A baby was born premature. The cost of treating the baby in a private hospital is estimated to be $60,000 to $90,000. It is a lot of money.
There is insurance to cover this incident, but the cost is likely to be $500 to $800. Many people feel that they do not need this insurance, until something happens. Then, it becomes a big burden.
I recall that the risk of a premature baby is probably 1%. In some cases, the cost is modest. But, for severe cases, the cost could be as high as indicated above.
Lesson: Buy insurance to cover this risk. Treat it as part of the total cost of having a baby. Add it to the gynaecologist fee and delivery charges.
There is insurance to cover this incident, but the cost is likely to be $500 to $800. Many people feel that they do not need this insurance, until something happens. Then, it becomes a big burden.
I recall that the risk of a premature baby is probably 1%. In some cases, the cost is modest. But, for severe cases, the cost could be as high as indicated above.
Lesson: Buy insurance to cover this risk. Treat it as part of the total cost of having a baby. Add it to the gynaecologist fee and delivery charges.
Cost of insurance
Dear Mr Tan,
How much will it cost, if I insure for $100,000 under a term insurance, and I do not need to have any savings in the policy?
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REPLY:
If you buy a term insurance for $100,000 for 20 years, you pay a monthly premium of $5 to $18, depending on your entry age and gender. The premium is lower for a person who starts at a younger age. It is also lower for females.
If you buy a decreasing term insurance, where the sum assured reduces yearly over the term, you get a reduction of between 20% to 40% of the premium.
If you wish to insure for accident only (to cover death and permanent disability), you have to pay a premium of about $7 a month.
You can find out more from this FAQ.
You can shop around and ask for a quote from several insurance companies. You may be able to find a lower premium rate than what was indicated in my FAQ. Always be ready to compare.
How much will it cost, if I insure for $100,000 under a term insurance, and I do not need to have any savings in the policy?
------------------------------
REPLY:
If you buy a term insurance for $100,000 for 20 years, you pay a monthly premium of $5 to $18, depending on your entry age and gender. The premium is lower for a person who starts at a younger age. It is also lower for females.
If you buy a decreasing term insurance, where the sum assured reduces yearly over the term, you get a reduction of between 20% to 40% of the premium.
If you wish to insure for accident only (to cover death and permanent disability), you have to pay a premium of about $7 a month.
You can find out more from this FAQ.
You can shop around and ask for a quote from several insurance companies. You may be able to find a lower premium rate than what was indicated in my FAQ. Always be ready to compare.
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