The text-book on risk management says that there are three ways of managing risks, namely:
1. Loss control, i.e. loss prevention and loss reduction
2. Loss financing, i.e. retention, insurance, hedging, transfers
3. Internal risk reduction, e.g. diversification
Retention - set aside a sum of money to meet small or frequent losses, e.g. to pay for visits to the neighbourhood doctor.
Loss prevention - measures taken to reduce the frequency of the loss, e.g. keeping a vehicle in good condition.
Loss reduction - measurs taken to reduce the severity of the loss (if it arises), e.g sprinkler system to reduce the impact of a fire.
Insurance is one way of managing risk. It should be reserved for large and infrequent losses.
Friday, February 8, 2008
Managing your personal risk
What are the key financial risks faced by a young person?
1. Chance of death during the next 30 years: 2%
2. Chance of critical illness during the next 30 years (not resulting in death): 3%
3. Chance of surviving for 30 years without critical illness: 95%
Many people spent too much money insuring against death and critical illness, which has a 5% chance of occurring. They overlook to insure against the 95% chance of suriving for 30 years and NOT HAVING ADEQUATE SAVINGS for retirement.
It is important to allocate savings to earn an adequate rate of return in a diversified, low cost fund. The savings should NOT be invested in a high cost financial product that takes away more thn 50% of the yield.
For the protection against premature death or critical illness, you can buy a decreasing Term insurance policy with a rider to provide a modest amount cover for critical illness.
1. Chance of death during the next 30 years: 2%
2. Chance of critical illness during the next 30 years (not resulting in death): 3%
3. Chance of surviving for 30 years without critical illness: 95%
Many people spent too much money insuring against death and critical illness, which has a 5% chance of occurring. They overlook to insure against the 95% chance of suriving for 30 years and NOT HAVING ADEQUATE SAVINGS for retirement.
It is important to allocate savings to earn an adequate rate of return in a diversified, low cost fund. The savings should NOT be invested in a high cost financial product that takes away more thn 50% of the yield.
For the protection against premature death or critical illness, you can buy a decreasing Term insurance policy with a rider to provide a modest amount cover for critical illness.
Critical illness
Dear Mr. Tan,
My annual income is around $50,000. Recently, I was recommended to buy a critical illness policy for $300,000 (to cover six years of earnings), but the premium cost about $600 per month, which takes away 15% of my salary. I cannot afford to pay so much, but I need the coverage. I need critical illness to cover my medical expenses and loss of income due to serious illness. What is your advice?
REPLY
You can buy a 30 year Decreasing Term policy to cover $300,000 for about 1% of your salary. If you save 10% of your salary and invest it in a diversified low cost fund to earn a good rate of return, you will be able to accumulate more than $300,000 over 30 years. By that time, you do not need any critical illness insurance.
You can cover most of the expenses of critical illness through a Shield policy, or the group insurance policy provided by your employer.
The chance of a critical illness occuring for a young person is very small. If you wish to cover against the occurence at a young age, you can buy a 20 year critical illness rider to cover $50,000 and pay a low premium. After 20 years, you would have accumulated more than sufficient savings to meet any loss of income.
Thsi is more cost effective than spending 15% of your income ona critical illness policy. This policy is costly due to the high commission earned by the agent, and the high charges levied by the insurance company.
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
My annual income is around $50,000. Recently, I was recommended to buy a critical illness policy for $300,000 (to cover six years of earnings), but the premium cost about $600 per month, which takes away 15% of my salary. I cannot afford to pay so much, but I need the coverage. I need critical illness to cover my medical expenses and loss of income due to serious illness. What is your advice?
REPLY
You can buy a 30 year Decreasing Term policy to cover $300,000 for about 1% of your salary. If you save 10% of your salary and invest it in a diversified low cost fund to earn a good rate of return, you will be able to accumulate more than $300,000 over 30 years. By that time, you do not need any critical illness insurance.
You can cover most of the expenses of critical illness through a Shield policy, or the group insurance policy provided by your employer.
The chance of a critical illness occuring for a young person is very small. If you wish to cover against the occurence at a young age, you can buy a 20 year critical illness rider to cover $50,000 and pay a low premium. After 20 years, you would have accumulated more than sufficient savings to meet any loss of income.
Thsi is more cost effective than spending 15% of your income ona critical illness policy. This policy is costly due to the high commission earned by the agent, and the high charges levied by the insurance company.
Read this FAQ:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html
Dance: Giselle in the Park
27 to 30 March 2008
Fort Canning Park
Performance from 7.30pm (Gates open from 5pm for picnic party)
Rendezvous with the romantic characters of Giselle under a canopy of stars for an unforgettable and immersive experience of this hauntingly beautiful classical ballet.
Giselle tells the story of a love between a village maiden, Giselle, and a nobleman, Albrecht. Mesmerized by Giselle’s beauty and innocence, Albrecht disguises himself as a peasant and promises eternal love to Giselle despite being betrothed to a Duke’s daughter.
When Giselle discovers his deceit, she loses her mind and dies, turning into a wili (a female spirit). Will Giselle forgive Albrecht for his betrayal or will she seek revenge? Join us as we follow this heart-wrenching love story that is bound to capture the hearts of many.
This special performance of Giselle will also mark the start of SDT’s 20th Anniversary celebrations.
Ticket Prices: $26 (free for children under 6)
Available at:
All SISTIC outlets
SISTIC Hotline: 6348-5555
SISTIC website: www.sistic.com.sg
SDT office at 6338-0611 or ticketing@singaporedancetheatre.com as well as at the door on performance nights.
Sweet Sixteen tickets at $16 per ticket (SISTIC booking fees applies.) available to all full-time students and NSmen. The label on the ticket will read as “Sweet Sixteen”. Sweet Sixteen tickets will not be available at the door.
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