I recommend coverage of $50,000 for critical illness up to age 65 or earlier. Some people think that this is not adequate. Insurance agents have advised them to insure for $200,000 or more.
Here are the reasons for my recommendation:
a) The cost of treatment should be covered by a medical insurance policy.
b) The loss of income should be for a period of up to 2 years. If the illness is serious, it is likely to lead to death. If not, the patient is likely to recover.
c) There is no need to insure for loss of income beyond age 65. By that time, the person is likely to have retired from work.
The cost of critical illness coverage, based on my recommendation, is quite low. This allows the bulk of the savings to be invested in a low cost investment fund, to earn a high yield. This money is needed for retirement. There is a stronger need for adequate savings for retirement (simply because more people are expected to retire, than to suffer a critical illness).
There is high cost in buying a whole life critical illness product. About two years of the savings goes to pay the marketing expenses. This should be avoided. I shall be working out a FAQ to explain the cost structure.
Sunday, March 9, 2008
A new product: BTID
1. Introduction
This is the code name of a new life insurance product called “Buy term and invest the difference”.
I hope to get a new insurance company to offer this product to the public. I am publishing the details, so that some of the existing large companies can copy it and introduce it to the public.
2. Features
The key features of this new product are:
- Good yield on the savings
- Flexible
- Adequate coverage at low cost
This can be achieved by designing simple products that
- Fair to consumers
- Easy to understand
- Have low operating cost
- Reduced marketing cost
3. Yield
The savings are invested in a diversified investment fund that have an expense ratio less than 1% per annum. It is invested in quality investments, comprising of equities and bonds, that can earn an average gross yield of 6% over the long term. After deducting expenses, the net yield should be at least 5%.
This yield will give a higher return, compared to life insurance products that currently earn 3% to 4% for consumers.
4. Flexible
The product offers the following flexibility:
- To increase or reduce the savings rate
- To make withdrawals at minimal cost
An important feature of this product is that there is no front-end load to pay for the marketing expenses. The transaction cost is low and covers the actual expenses. This makes it possible for people to make withdrawals at minimal cost or penalty.
5. Insurance Coverage
The insurance coverage will be bought in a separate policy. It covers a selected period of 20 or 25 years to provide the following payments on death or critical illness during the period of insurance:
- A lump sum payable on death
- A monthly income benefit payable on death for the remainder of the term
- A monthly income payable for the period of recovery from a critical illness
This insurance coverage should be adequate to meet the financial needs. To reduce the cost, the coverage should be taken for a period of 20 or 25 years. It should not extend beyond the age of 65, where most people are expected to retire.
These products are fairly priced, based on the actual cost of benefits plus a margin to cover expenses and profit. The cost is much lower than similar products now offered in the market.
Beyond the period of 20 or 25 years, there is no need for the insurance coverage as the invested savings will accumulate to a sufficient amount.
6. Low marketing cost
This product can be marketing at low cost through the following strategy:
- The product is easy to understand
- It offers good value to consumers
- Consumers are educated about the product
- Many consumers are willing to buy the product directly
- The product can be purchased through the internet, call center or sales office
With low marketing expenses, consumers do not have to pay a hefty front-end load.
7. Conclusion
This product will give great value to consumers. I hope that more insurance companies will offer this product, so that consumers can benefit from it.
Tan Kin Lian
This is the code name of a new life insurance product called “Buy term and invest the difference”.
I hope to get a new insurance company to offer this product to the public. I am publishing the details, so that some of the existing large companies can copy it and introduce it to the public.
2. Features
The key features of this new product are:
- Good yield on the savings
- Flexible
- Adequate coverage at low cost
This can be achieved by designing simple products that
- Fair to consumers
- Easy to understand
- Have low operating cost
- Reduced marketing cost
3. Yield
The savings are invested in a diversified investment fund that have an expense ratio less than 1% per annum. It is invested in quality investments, comprising of equities and bonds, that can earn an average gross yield of 6% over the long term. After deducting expenses, the net yield should be at least 5%.
This yield will give a higher return, compared to life insurance products that currently earn 3% to 4% for consumers.
4. Flexible
The product offers the following flexibility:
- To increase or reduce the savings rate
- To make withdrawals at minimal cost
An important feature of this product is that there is no front-end load to pay for the marketing expenses. The transaction cost is low and covers the actual expenses. This makes it possible for people to make withdrawals at minimal cost or penalty.
5. Insurance Coverage
The insurance coverage will be bought in a separate policy. It covers a selected period of 20 or 25 years to provide the following payments on death or critical illness during the period of insurance:
- A lump sum payable on death
- A monthly income benefit payable on death for the remainder of the term
- A monthly income payable for the period of recovery from a critical illness
This insurance coverage should be adequate to meet the financial needs. To reduce the cost, the coverage should be taken for a period of 20 or 25 years. It should not extend beyond the age of 65, where most people are expected to retire.
These products are fairly priced, based on the actual cost of benefits plus a margin to cover expenses and profit. The cost is much lower than similar products now offered in the market.
Beyond the period of 20 or 25 years, there is no need for the insurance coverage as the invested savings will accumulate to a sufficient amount.
6. Low marketing cost
This product can be marketing at low cost through the following strategy:
- The product is easy to understand
- It offers good value to consumers
- Consumers are educated about the product
- Many consumers are willing to buy the product directly
- The product can be purchased through the internet, call center or sales office
With low marketing expenses, consumers do not have to pay a hefty front-end load.
7. Conclusion
This product will give great value to consumers. I hope that more insurance companies will offer this product, so that consumers can benefit from it.
Tan Kin Lian
Car Loan
Hi Mr. Tan,
I have just booked a new car and am shopping for a loan. I found that over the past few years, banks & finance companies have outsourced their car loans to car dealers. This produced an unhealthy situation in which buyers cannot get good advice from the car dealers because they
are not held responsible for the advice they give and commission bias their advice towards longer & higherloans.
My calls to banks and finance companies draw blanks as call centre staff don't have details of the deals struck with the various car dealers and are afraid of getting intoany details.
Do you know of any place that can offer a fairer simple interest loan secured by the car. Is there a government body that could look into this situation as car buyers end upbeing ill-advised.
REPLY
I am not aware that the banks and finance companies do not deal with the public anymore.I suggest that you bring this matter up with the MAS. I will ask my blog readers to tell us if they know of any financier wiling to provide a car loan.
I have just booked a new car and am shopping for a loan. I found that over the past few years, banks & finance companies have outsourced their car loans to car dealers. This produced an unhealthy situation in which buyers cannot get good advice from the car dealers because they
are not held responsible for the advice they give and commission bias their advice towards longer & higherloans.
My calls to banks and finance companies draw blanks as call centre staff don't have details of the deals struck with the various car dealers and are afraid of getting intoany details.
Do you know of any place that can offer a fairer simple interest loan secured by the car. Is there a government body that could look into this situation as car buyers end upbeing ill-advised.
REPLY
I am not aware that the banks and finance companies do not deal with the public anymore.I suggest that you bring this matter up with the MAS. I will ask my blog readers to tell us if they know of any financier wiling to provide a car loan.
Invest in Foreign Currency
Hi,
I have no experience or knowledge about investing in financial product but was keen in doing so. I wish to invest in foreign currency and like to ask you how it works and how can I start?
I have around 10k for investment and hope to have a decent return every month. Is it possible?I dont mind taking some risk if find that is worth doing it.
REPLY
Please read these FAQs
http://www.tankinlian.com/faq/foreign.html
http://www.tankinlian.com/faq/duali.html
I suggest that you attend the 2 day workshop that is mentioned in my blog. You can ask the lecturer to deal with your question of investing in foreigh currency.
I have no experience or knowledge about investing in financial product but was keen in doing so. I wish to invest in foreign currency and like to ask you how it works and how can I start?
I have around 10k for investment and hope to have a decent return every month. Is it possible?I dont mind taking some risk if find that is worth doing it.
REPLY
Please read these FAQs
http://www.tankinlian.com/faq/foreign.html
http://www.tankinlian.com/faq/duali.html
I suggest that you attend the 2 day workshop that is mentioned in my blog. You can ask the lecturer to deal with your question of investing in foreigh currency.
Subscribe to:
Posts (Atom)