Evaluating your life insurance needs in detail

Image from palisade.plynt.com

In my earlier post, I have told you some tips on how much insurance to buy (click here). Now I want to break it down into more details, so you can understand more and calculate your life insurance needs.

Let's start.

Scenario:
A male age 35, married, have 2 young kids.
He earn $100,000 a year.
Have a home loan of $1,000,000.
Have a car loan of $100,000.
We assume that this guy does not have any other loan or debt.

So how much life insurance does he need?

1. Calculate all debts that you have.
He have a total debt of $1,100,000.

2. Income replacement.
He will need to have a pay out that is huge enough to replace his income and plus a little bit extra to cover for inflation. Now we assume that the lump sum pay out can be invested at a return of 8% a year. So, to replace his income, he will need a $1,250,000 coverage ($100,000 x 100/8). Then by adding his salary in a year ($100,000) back to the policy, it will be quite a good buffer against inflation. Total coverage that he need is $1,350,000. This amount will have to be added up to your total debt.

3. Future obligations.
He has 2 young kids that he want to send to university in the future. The cost of education for a local university is estimated at $100,000 each. So he needs to set aside $200,000.

So for this guy, his life insurance needs is estimated at $1,100,000 + $1,350,000 + $200,000 = $2,650,000.

Now that he knows that this is the amount he needs, he should set aside 10% of his income to plan for his protection. From his budget, we can advise him on the different type of insurance that will reach his protection needs. We will not want him to have inadequate coverage or expensive coverage that he does not need.

This is important for you to know, so you know how much you need. Please plan accordingly so you buy the right insurance with the right amount.

Cheers! Have a good day.


Sources: www.investopedia.com/articles/pf/06/insureneeds.asp#axzz1aiykOJ6G

What are you doing with your money right now?

I'm guessing that majority of people in the world only put their money in the bank to earn interest. They feel that it is safe and no risk at all. True that it is safe in a sense, because you will not lose the money. But you must know that it is risky, because the value of your money may go down. This is due to inflation and inflation rate is usually always higher than the interest rate that you get in your saving.

Example:

Singapore 2011 inflation rate is about 5%.
Bank annual saving interest rate is 0.125%.

As you may know, inflation is the percentage increase in the price of goods and services. This is common sense, the number above means that prices have increase by 5% while your saving in the bank only grow by 0.125%. So your money is losing value! Big time! Sooner or later, you won't be able to buy anything, because your saving is actually decreasing in value.


Image taken from http://www.finehomebuilding.com

Have you heard about the 72 rule? It is a very simple formula which can tell you how much time you need to double up your money. Of course this is just approximation.

Example:

If you invest $5,000 at 8% interest per year, you will double your money in 72/8 = 9 years.

So if you invest $5,000 at 1% interest per year, you will only double your money in 72 years.


Now do you think you still growing your money in the bank? The facts said no. I am not saying that bank is not good. Bank is good for you to keep some of your money, for your house, personal, daily expenses and cash for emergency. But other than that, you should diversify and invest some of your money, be it a business, stocks, unit trusts, structured deposits, properties, gold, etc. Just try, rather than guaranteed losing value of your money in the bank. Think long term, think about the potential higher return. But let me say this, never ever put all your money for investment because there are risks involved also. You can earn more but you also can lose money. You should know that there are no perfect product. Therefore, use the money wisely.

Cheers! Have a great day.

Jelly belly cancer

As you can see from the article, this Indonesian is suffering from cancer. The doctor in Indonesia could not figure out what it is, but luckily the doctors in Singapore managed to diagnose it and treat it. The operation it self can cost up to $100,000. Not including other expenses such as the room, medicine, follow up and etc. He works as a general manager in Indonesia. I do not know how much he earns. But roughly on average, a general manager in Indonesia earn maybe about $80,000 a year. So he will spend about 1 to 2 years of his salary to pay for the medical expenses if he do not have insurance. To me, that is not a good financial planning. What do you think?

Do you know that cancer is the no 1 killer in the world by 2010? Now it's already 2011. It's no wonder that we see so many cancer cases almost every other day. We in the insurance industry all over the world have paid out billions of dollars for hospital and critical illness claims to help our policy holders.

This is what's happening, the risks are very real. I am pretty sure that many of you knows someone who have suffered cancer before, be it someone in the family, relatives or friends. I am not saying that everyone will get cancer, but statistics have shown that many people have a chance to suffer from cancer in their life time. Globally, 1 in 8 died from it and in Singapore, 1 in 3 died from it.

No one knows who will get cancer, because it is partly genetics. So it does not matter you are healthy or not, smoking or not, young or old, etc. It may happen. Thus the need to protect yourself with a good hospital and critical illness coverage. You do not buy insurance expecting to get sick. But you buy insurance to make sure that your income is protected, your saving is protected, you and your family life style is protected.

Cheers! Have a great day.

How to protect your health and money?

Image from vitalityhealthinsurance.com

We are in an economy where it is unstable and a lot of uncertainties. We do not know where it is heading, but we do know that many people are holding on to their money. Some of course will take advantage of the downturn to buy more stocks at bargain prices. But majority are cautious because companies and businesses may collapse as well. So it is best that the money that you are holding are safe and protected against unforeseen event, such as falling ill.

Ways to help you protect your health and money:
1. Get your self and your family a good medical coverage. Make sure the benefits are enough to cover the hospitalisation cost. This is to make sure that you will not be burden with any medical cost.

2. See your doctor regularly, maybe once a year or once every 2 years if you are young. If you are older and have chronic illness, please do it more often. This is so that if any medical conditions detected early, it can be treated faster and will be less costly.

3. Many illnesses can be prevented now because of breakthrough in the medical field. Do not forget to be vaccinated to prevent illness.

4. Eat the right food, plenty exercise, enough sleep, stop smoking and do not be overweight. This will make sure that you are in the best condition to be healthy.

5. Set aside emergency fund for your medical purposes which may not be covered by insurance. It may also be for your living expenses in case you can't work when you fall ill.

I hope you all want to be healthy and save money. The tips above I'm sure many of you knows. But hopefully not just knowing, but you do it too.

Cheers! Have a great day.

Thai teen who lost legs

Read the full report at http://www.channelnewsasia.com/stories/singaporelocalnews/view/1158934/1/.html

Accident, accident, accident. It can happen anywhere, anytime to anyone. No matter how safe you think you are, there is always that risk for accident to occur. Just take a look at the article above, it is the Thai teen that make headlines few months back, when she fell down into the MRT track and lost her legs. Now she is still in the pursuit of suing SMRT to pay her compensation of $3.4 million.

In my opinion, she should not sued SMRT because she fell by her self. None of the SMRT staff pushed her down or the MRT platform suddenly broken which make her fell. I understand she needs money for her future medical and living expenses. But this is not the way, to blame other party for compensation. I have been riding MRT for many years, even without the barriers, I don't see people falling down. So she can't blame SMRT for not having the barriers either. There are enough signs and warnings to be cautious and be safe in the MRT station.

What irritate me the most is that her father is an insurance agent. Why didn't he insured all his family, including her? He should know better that accident can happen to anyone. He is not being responsible. He should take charge in insuring his family to make sure that if something unfortunate happens, they don't have to worry about future expenses.

Therefore, my advise to you, be responsible for your self and your family. Make sure that you are adequately covered. A personal accident plan is one of the cheapest plan available. Get it when you don't need it.

Cheers! Have a great day.

Life is short

As you all may know already, the co-founder of Apple and one of the most extra ordinary people in the field of technology, Steve Jobs have passed away. He is only 56 years old and he is survived by his wife and 4 children. To me, he had done a lot of things to improve people lives. People will always remember him for making life easier, more fun and interesting through his gadget creations.

The cause of his death might be pancreatic cancer. Pancreatic cancer is one of the deadliest cancer and it have a very high mortality rate. This year, about 38,000 Americans will be diagnosed with this cancer and 34,000 will die from it. Pancreatic cancer is actually treatable, but the bad news is that this cancer is very hard to detect because there is no reliable screening test for early detection. Also the symptoms are often vague and easily confused with other diseases.

I believe Steve had the best treatment that the world can offer. Maybe he even lived longer than he should because of the advancement of medicine and technology. Yet it still can't cure the sickness. There are still many limitations that doctors are facing. But to able to live a little bit longer, it's good enough for many people.

Steve has a net worth of US$8.3 billion. His family will not have to worry about their future living expenses. His life is short, but he made a lot of impact to the world and he never forget his family. His relative said "Steve died peacefully today surrounded by his family. In his public life, Steve was known as a visionary; in his private life, he cherished his family". How wonderful is that?

What about you? Have you provide enough for your family? Are their financial future secured? Life will always end in death. The only thing we don't know is when. Make sure you make your life worth while. Make an impact to other people and never neglect your loved ones.

Steve once said, "No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true."

Cheers! Have a great day.

Source: apple.com, http://pathology.jhu.edu/pc/basicintro.php?area=ba, channelnewsasia.com

Basic insurance plans

I have posted a lot of information about insurance, current news and trends and testimonies from news article.

Now that you know all that, some of you might be interested to plan.

So what plans should you have?

To me, to get you started just make sure you have these 2 plans:

1. Hospital/medical coverage. Why? It is because the risk of getting sick is the highest compared to other risks, such as dying or being disabled. Being sick and hospitalised can cost a lot of money, really! It cause many people to become bankrupt. So make sure you have enough hospital coverage, so that you can have peace of mind and be sure that your savings is always protected from unexpected medical bill which can cost hundreds of thousand dollars.

2. Life coverage that includes disability and critical illness. Why? It is because your life is always precious. You have abundance opportunity and earning potential into your future. But many people are now in financial hardship because they do not protect them self. Tragedy may happen to anyone. It is wise to protect your earning ability, because you and your loved ones may depend on that. So this plan will make sure that you and your loved ones have peace of mind. Because no matter what, your financial future is secured.

These 2 plans will really help you and your family. You may not see it now, but maybe in the future. What is so hard of having these 2 plans? Nothing! It's so simple and affordable and it can save you. But many people choose to think of many useless things, such as they are invincible and that bad thing only and always happen to other people. They always think about the premium they have to pay, but they never think about the cost that they have to pay if something happen to them.

Just imagine that your life is a ship and insurance is your life boat. You may not need it now, but don't you think it's better that you have it?

Cheers! Have a great day.

Singapore Medical Tourism

Please read the full article at http://www.channelnewsasia.com/stories/singaporelocalnews/view/1156836/1/.html

In summary, tourism receipts from medical travellers last year hit an estimated S$940 million, a jump of about S$200 million compared to the year before. What this means is that more people are getting sick and the medical bills are getting higher and more people are coming to Singapore for treatment. This explains the big jump only in the span of 1 year.

The article also showed you that treatment such as liver transplant can set you back by S$300,000. This may happen to people who like to drink lots of alcohol.

Can you imagine if you do not have insurance? It does not matter whether you have the money or not to pay the bill. Don't you think it's better that we, the insurance company pay your bills? So that you can have peace of mind and focus on your recovery when you are sick, rather than focusing on the high hospital bills.

With just a small premium each year, you can get a very good hospital coverage. You are actually maximising your money to work harder for you.

If you don't have insurance, you don't even know how much you have to save for in times of emergency. Because medical bills can range from few thousand dollars to hundreds of thousand dollars. But with insurance, you only have to pay the fixed premium each year and you know that you are covered.

So make sure you have the right hospital coverage. You will have peace of mind, you will not worry about any medical bills and your cash flow will also improved.

Cheers! Have a great day.