Are your existing insurance plan suitable?

Thank you, audience for a well received posting on

·         In search of higher income and better standard of living. What's missing?

·         Tug of war - Bull vs. Bear Ends. Financial market plunges. What's next?

I had lots of emails and queries regarding suitability. We have talks/seminar on investment suitability, Client Knowledge Assessment, Product Suitability, etc but what is insurance suitability?

First of all, I am impressed/surprised that most Audience picked up this insurance jargon ‘suitability’. Congrats!

Hence, the common question is what did I mean by the above title?

In Singapore's context, the following is just ONE example...Take for e.g. Mr. Chan who wants to start off an insurance plan for his daughter Age, 19.

His preference is to cover the child for Sum Assured of S$ 300,000 for

1.    premature death

2.    total & permanent disability (TPD)

3.    terminal illness (TI)

4.    critical illness (CI) or major illness coupled with early stage dread disease benefit

5.    AND cash values of S$ 100,000 at age 64/65 thereabouts.

The operative on (5) is ‘AND’ and this is where the word suitability is in question.

If (1) – (5) were my client’s preference; the above plan from MOST insurers will NOT meet the client’s preference.

Let’s go through the above case one by one.

Should premature death occur or TPD or TI or CI was to be diagnosed, S$ 300,000 would be paid out as the event accelerates the basic plan benefits.

The question of concern is

·         What would happen to the Cash value at age 64? Upon claim of any of the above,

·         would the life assured be guaranteed of another insurance plan,

·         would the life assured buy an endowment plan (for retirement funding)

·         Would the life assured receive the Cash value at Age 54/65 then???

If the Cash value is not important, then why did you choose a whole life plan? Wouldn’t a term plan lower the cost of the premium? But, please don’t come and say that term plan has no cash value. Know your needs; is it protection you’re looking for?

What is the probability for claims one to four?

·         Death – once

·         TPD once

·         TI once

·         Major illness – more than once

·         Early stage detection – in addition to more than once, early is earlier!

You be the judge! Is the plan well designed to fulfil the needs of Mr. Tan.? Is the plan suitable for his daughter?

How could the above be avoided?

You can’t, now!  By ‘insurance’ statistics, most of you subscribed to the above plan. The possible source of the problem is you ‘employed’ an insurance agent or a financial planner who does not have a single idea of what financial planning is ALL about. Some might understand but may not have recommended products that are suitable but of convenience!

Fortunately, this gives me an opportunity to highlight any solutions that are not suitable for their clients! So, did your insurance agent earn his rightful commission or should professional fees be paid for highlighting this plan that is not suitable for the client?

If you’re in this situation how this could be rectified. The choice is go back to your insurance agent or financial advisor. If you wish to have a fresh opinion, you may contact financial practitioners who know what risk management is all about, preferably 15 years or more! It can be made right!

Hence, what’s missing?

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