The rich use plenty of tricks to build wealth, but “the most common one is something that most regular Americans don’t even know a thing about: investing in permanent life insurance policies.”
Risk Management, or are you just a reckless risk taker?
Just as there are different medication for different ailments, there are also different insurance policies for different purposes. Considering that we have extensively covered the topic of wealth management over the past 4 years, we will focus solely on policies for wealth protection in this article.
Insurance is one of the basic methods of risk management which works by transferring your financial risks to an insurer. And given how everything in modern life from the simplest thing such as a meal, to bigger matters such as a tertiary education, all require money, it is unthinkable for anyone to not see the necessity of the concept of risk transference, and hence insurance.
1 Hospitalization Insurance
Be it due to illness or accident, most medical policies will cover the cost of the hospitalization. If you still have the mindset that only old people or really unhealthy people will require to be hospitalized, then you are grossly mistaken. Because statistics has shown that the age group with the highest hospital admission number actually belongs to patients under 25 years old who are supposedly to be the healthiest*.
*Figures obtained from SingStat SG population trend 2018 and MOH’s hospital admission rates
2 Death Insurance
While some may see it as the least important since you do not directly benefit from it, but most of us tend to see it as the most important as it is our final gift to our loved ones and community. With an adequate amount of death coverage, we can continue to provide our loved ones with a decent standard of living, even in our absence. Even if we are unable to give our loved ones the ‘rags to riches’ experience while we are alive, but we absolutely have the power to ensure that they do not fall into financial distress, when we die.
And for those of us who are passionate about certain causes, we can continue to contribute to them even after death. Take for instance a client who donates $10 every month to an animal shelter, bought just $200,000 of death coverage, to ensure that the shelter would stand to receive $500 per month in perpetuity, when she dies. That is 50 times more than the $10 she’s donating while still alive!
3 Total and Permanent Disability (TPD) Insurance
While it may not necessarily shorten our lifespan, but it will most definitely reduce our quality of life. Even when we are able to get back to work again, it may be of a different job scope and lower salary. A TPD coverage that adequately matches on-going commitments such as outstanding debts, policy premiums, tertiary education fund for our children, can significantly lower the stress of financial strains during an already trying time. of A permanent injury or illness can make returning to work difficult or impossible. For that reason, TPD insurance should also be part of your portfolio as it can provide you and your family with living expenses, debt repayments (mortgage or credit card), medical and rehabilitation costs and even your retirement savings. With all these being taken care of while you are still unable to work can take away the feeling of worry and provide you and your family a lot of reassurance.
4 Partial Dismemberment Insurance
While usually less severe than TPD, partial dismemberment can still leave us out of action for months. And because it is often the cheapest type of insurance (<$180/yr), there really is no reason not to have it. The payout ranges from 1% to 150% of the chosen coverage amount as shown in this table:
5 Early/Intermediate Stage Medical Conditions, & Critical Illness Insurance
Between disability and illness, almost everyone fears illness more, and for good reasons too.
1) We are more likely to develop health issues, than to sustain some degree of disability. In fact, 1 in 4 persons in SG will develop cancer in their lifetime, and 17 people die from cardiovascular/heart disease and stroke daily.
2) Unlike physical injuries which tend to be obvious and immediate, most illnesses are unfortunately detected only when they have become serious enough to present with symptoms.
3) One health issue can often lead to other health complications. For instance, diabetics have higher risks of high blood pressure amongst other things.
4) While the limitations of a wide range on the disability spectrum can be resolved through the use of prosthetics, many of today’s health issues require lifetime treatment, or even organ transplant. For instance, diabetics may have to depend on lifetime dialysis or wait for kidney transplants, when their conditions worsen.
5) Illness can shorten our life expectancy.
How much am I worth, be it dead or alive?
There are 3 main types of factors that can help us to determine the amount of coverage appropriate at a given point in time.
Remember! You should re-evaluation your policies regularly.
A) #TRIGGERED by a Life Event
B) Personal Factors
C) Family Factors
You should be concerned whether your coverage is outdated, insufficient, or completely missing.
You should also ensure your coverage is not redundant, and that you are not overpaying for your coverage.
Chloe and her team are here to assist you.
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