Saturday, November 03, 2007

So how to tackle the insurance agents?

I thought maybe I should provide some (even though still imperfect) answers to my questions in the last post.

On insurance, if the agent cannot help you then who can? For my own journey, I talked to other agents, then I talked to friends, and find out more from the net and newspaper and talked to experienced folks to try to get to the truth.

At first I thought surely there would be some good agents out there. After all, some agents do earn big bucks by selling insurance right? Sooo, I called up pple, asked for appointments, but soon realized that they were all the same. They are TRAINED to sell you the useless stuff, and TRAINED to "taiji away" the difficult questions.

Whenever I asked about term insurance, they would say,

"Oh, but they only cover you until 60 you know?"
"But after 60, my kids are grown up, I don't need too much insurance." I say.
Then they change topic, "But if you buy this life plan, it's like a savings plan, you still get your money back, plus 3-4% per year."
"But meanwhile I pay $2,000 per yr for the next 20 yrs to earn 3-4%? And get covered for $50,000?"
"$50,000 coverage will grow to $50,512 over time! Ok what about this investment link product, it is very good blah blah blah"
What the heck...

I even got one agent who claimed to have advised millionaires on how to buy insurance and still give me stupid recommendations. So in the end, I gave up. I started talking to friends and read up. And here are some conclusions that I gathered.

Use less than 10% of your annual salary on insurance, I recommend 5%. But agents will quote you 20%, saying its MAS regulation. I find it hard to believe. I don't spend 20% of my annual salary on ANYTHING, not even mortgage! 20% on insurance? WTF!

But for 5% you have to try to maximize coverage, it has to be at least 5 times your annual salary to be meaningful. So this is tough job for 99.999% of all insurance agents. Try to find one who can do that, someone young, willing to work hard and help you. My experience: no agent can, so you gotta do it yourself. And that is to buy SAFRA insurance, one of the cheapest around.

Don't get swayed by the agents. They try to bend your rules, like 5% is not enough! Or you cannot see it that way, bcos this 20% will go to your savings blah blah. They should follow your rules, not the other way.

Don't buy investment linked products, usually you overpay for commission and stuff. If you want to do investment, do it separately.

Agents like to blackmail emotionally. Like if you die, your family how? Your kids so young how? And they will say, "I know one friend, cancer, no insurance, pay $200,000 etc". Stop them. I KNOW it's a disaster to die without insurance. But tell me the facts. The premium, the coverage etc. And Get me the cheap value-for-money policy, damn it!

So the ideal scenario, if your annual household income is say $60,000, spend $3,000 on insurance, buy minimal life (you need life policy to get term), say $20,000 and get lots of term, say $250,000. So you spend $3,000 to get insured for $270,000. That's probably an ok deal.

Not sure if most rational people are doing this. Pls comment ok!


  1. hi,
    agree with you and i had a Safra-Aviva term policy too.

    but, what do you mean by "you need life policy to get term"? you can just buy term from Income or Aviva without getting a life policy. why waste more $ on a life policy?

    please advise.

  2. hi,
    Safra term can only insure up to a certain amt, I think it's $150,000 or something. If you need more coverage, you need to get additional term from the insurers like AIA or Great Eastern. And to buy those, you need to get some life policy.

    Also there are other term policies like hospital, accident etc. You need life to get those.

    I am also trying to find out if there is really an optimal solution. And could that really be no life policy just all term. But my findings tell me that having some life has its benefits. Not sure if that is optimal though.

  3. I did the term way using NTUC's iTerm (500k SA) and had a 100k CI piggybacking on it. Yearly premium is less than 5% of my annual take home. Now looking for DI and also some home insurance.

    The advice given by Eric Tyson (Personal Finance for Dummies) holds true. Always insure the big items that will hit you hard financially. The other stuff are not worth it. Insure cheaply.

  4. Hi all,

    I also believe in the term policy as the correct way of insuring! Really hate the emotinal blackmail that I've heard...WTF? Aye!

    How did you guys go about buying term policy then? Direct sales or insist on the agent to sell you term?

    glad to find like-minded people here!


  5. Hi genie, thanks for the contribution, seems like term really do make more sense.

    Hi fishman, nice to see you here again, the SAFRA term is probably direct sales.

    Not sure if agents would sell you term w/o life. Usually you buy some life and the term comes in as well.

  6. Hiya

    My insurance retail therapy was also pretty painful.

    In the end I got a life policy.

    I dont think you need a life to get H&S and accident coverage. (this is from what I remembered but I stand corrected)

    And the best thing is, I have an uneasy feeling I cld be underinsured. There is still accident policy, income protection, plus doubts over whether do I have a decent H&S plan etc etc etc.


  7. Hi!

    If you don't need life to get hospital and other insurance then that's good news! Should grab them while they are on offer!

    As for truing to insure a lot of things, I will just reiterate genie's advice: Always insure the big items that will hit you hard financially. The other stuff are not worth it. Insure cheaply.

    I guess it really makes sense!


  8. This is how I determine my insurance need:

    1. How much do I gave my dependents now, if I die, how much must I leave behind to continue to give them that income stream.

    2. How much critical illness coverage do I need should I fall critically ill. (I do not believe in having FULL COVERAGE)

    3. If I get temporary injured, do I need an income to sustain? or would I be paid by my company?

    Life insurance gives an average of 3-4% return. Can I beat that return?

  9. A very concise and good checklist. Thanks a lot! So how much will you spend as a % of annual income? If you don't mind sharing?

  10. Insurance agent/Financial Advisor/ Planner or whatever you call it here. Haven't been following your blog for quite a while

    I agree with mostly what you say although I believe whole life still should plays a role (probably not as much as touted)but let's not go into a debate.

    Actually Disability Income may be considered as well since term has a fixed coverage while liabilities should reduce with time while disability income provides coverage until your intended retirement age. Before DI kicks in, you have your 3-6months emergency fund to tide over.

    As for Critical illnesses, I would use 2-3 yrs of annual expenses(income if you want to be kiasu)for loss of income during prolong treatment and additional expenses associated with illnesses/loss of mobility.

    Its not The perfect plan as many factors has to be considered as well. You probably save on a lot of charges and commissions sine you;ve put in effort to under financial knowledge. Cheers!

  11. The Aviva SAF Group Term insurance allows Singaporeans to cover up to SGD1m from death and accident. The price is below $1.6k a year. I have bought one myself to cover up to SGD1m. It is the cheapest term insurance that I can find in Singapore. It also covers military accidents which are highly relevant for native Singaporean males with NS duties.

    Below are 2 articles I wrote about this favorite insurance plan of mine (you may remove the links if you do not like links in your blog comments)