Endowment Plans..

Well, when buying endowment plan, there are really plans out that that seems to be out to con our money.. Imagine, an endowment plan that gives you less than the amount you put in during maturity. The only good thing about it is that it does gives you a basic coverage in the event of death etc. At least not so bad ba.. But the whole point is.. how can the plan give you less than what you put in? This might be the case especially if the plan is bought at a high age and the plan is bought with cash back every 1-2 years. Please beware..

I had a very bad experience with AIA 'cos that's what my dad's endowment plan is. Firstly, his policy gives him a negative return and the potential returns on maturity decreases every single year. Yup, I saw it dropping every time my mum ask me to read, when I told her, she said no choice, since buy already better don't terminate. Then the policy price go up every 5 years, thanks to the 5 year level term coverage. The return, no matter how I calculate also very weird, I think it's about 1.5% or something like that. Confirm cannot even beat inflation one.

I'm not too sure about investment linked type of endowment plan but at least for those participating or non-participating endowment plan, please kindly do the following basic calculation on the returns.

Total yearly payment:

e.g. 2400 (*Please remember to add in all the riders it's normally not calculated as a set in the illustration)

Duration of plan:

e.g. 20 years

Total payment made:

e.g. 48000

Total Cashback: (if any)

e.g. 2000 * 10 (i.e. 2000 every 2 years) = $20000

Total value on maturity:

e.g. 48000

Total Profits:

e.g. $20000 (in simple calculation terms it's about 3.5% per year of interest 'cos we only divide by 10 instead of 20 as the money is not paid in 1 lump sum (Not bad ba at least better than fixed deposit.)

But this is only what our example illustrates. If your return is confirm to be what the document says it's supposed to be then it's still not too bad. At least it's a 3.5% per annual so not that pathetic. But do take note that if inflation is 3% and your return is only 3.5% it just means that your money didn't depreciates, maybe it appreciates by 0.5% per annual. So if inflation is 5%, it means that your money still depreciates by 1.5%. Do ponder over this.

Also take note and ask if the rider will increase in premiums along the years to ensure that the calculation holds in years to come. Please ensure that if your agent tells you it's level insurance they write it down at the document they pass to u and sign off as the proof.

Life Insurance

For Life Insurance, there's various types of them namely:

1. Whole Life Insurance (Such insurance comes mainly with a much high cost but it does entitles you to the "Cash Values" that it builds up. "Cash values" is the amount you will get back should you decide to terminate the policy. If you are into such cash values and wanted to make use of it to save up as well as to be protected, or you wish to be covered and protected for the rest of your life. Then, this is your option)
   
   • Non-Participating
     This is the cheapest in term of premium under this category as the sum assured is fixed, with everything is guaranteed as listed in the contract. So far, I haven't encountered any of such policies available in Singapore yet. If you have seen any, let me know as I'm interested in looking at what's available.
     
   • Participating
     This type of insurance comes with bonus attached that is given and "locked-in" every year on policy anniversary. Which means, once the bonus is given to you, it will remain as part of your "Cash Values" or Sum Assured for the life of that policy. They either gives you bonus calculated purely based on the Sum Assured or calculated based on both existing bonus and the Sum Assured. But of course with such features, comes with a slightly higher price than the non-participating one. During in economic downturn, insurers might not give you bonus but they can't take away your existing bonus. So it's pretty "safe" for in my opinion. But due to the "non-guaranteed" component of things, it's still slightly risky just that it's not as much.
     [If you prefer the insurer to take at least half of the risk (why half? 'cos about 1/2 is guaranteed and half non-guaranteed mah) on your behalf and wants to be insured for life with some upsides in terms of bonus when the insurer makes profit, this may be for you.]
     
     
   • Investment Linked
     This is the riskiest under this category. But it comes with clarity in the expenses etc. However, for such policy, I always felt that one is better off buying the Unit Trust itself along with a Term Insurance especially so for those endowment Investment Linked Policies. 'cos the charges of the underlying unit trust is slightly lower and 100% of what u invested goes into the Unit Trust 'cos the coverage will come from the Term Insurance of course. But, when it comes to whole life policy, then it's a different story.
     [If you are looking for the upsides of "higher" potential returns, savings and insurance coverage for life and don't mind risks, then this may be for you. But I still think that buying term and invest the balance is a wiser choice. Read more on buy term and invest the difference.]
     
     
2. Term Life Insurance (Such insurance is relatively cheaply available in the market but is purely protection for your dependents in the event of death and total permanent disability only, DPS [Dependants’ Protection Scheme] is an example of a cheap Term Life Insurance but it only covers from 16 to 60 years old.)
   The thing about this type is that it does not cover for life. Usually up to age 65 but who really needs coverage after age 65? Your kids / dependents should have been independent by then.
   

In this section, only purely life component of the insurance will be addressed for. The critical illness part will be addressed under "Health / Critical Illness Insurance Coverage" section in the near future.

Study Loans - University

1. Before uni:
   
   • Guys:
     there's NS that feeds you, provide shelter but gives minimal pay (assume 24mths * ($450 - $100 of expenses) = $8400).
     
   • Girls - JC: you'll get about 6 mths worth of holidays ($4.8K), well, get an admin job or something that earns more since it's 6mths straight). Well there'll be a shortfall of 3.2K in our assumption. Please bear this in mind.
     
   • Girls - Poly: No holidays but you may want to choose to work for 1 year after poly before u get into uni so that you can save about $9600 even if it's - $1450 from the poly plan there's about $8150). Well for most courses, you'll save on 1 year worth of school fees ($6K) so it doesn't matter that much after all. Just that the holiday earnings in point 2 needs to deduct about 3 mths ba ($2.4K).
2. Assume that it's the same so we will just take $8K for our assumption.
3. During uni, there's holidays and lots of it. It's on the average about 4 mths a year worth of them, subtract the last year 2 mths. This makes it 14 mths, -4 mths of assuming attachment. Well then make it 10 mths.. but assuming that 2 of the mths you can't get a job so.. make it 8 mths. (8 * 600 as undergrads should have the ability to get more out of part time pay = $4.8K)
4. During attachment, you should be able to get about $700 - $1K worth of pay for about 3 mths. It's not a mistake it's just a buffer sort of thing just in case. (3 * 700 = $2100).
5. We are still short of $9100. Not to worry 'cos with the 6 - 1 year worth of grace period, you should be able to repay the debt within a year. Even without the grace period, you will only incur about $400 worth of interest from the bank loan in this case as compared to the CPF loan if you take it up. Yes.. Why we can get 9100 in 1 year. An average uni grad should be able to get a $30K annual pay job. What's $9100 is only 33% of it. You can spend the rest of that 47% after 20% of CPF. No worries.. :)

Whichever the case, overall it should be quite ok. Unless you really cannot get a job no matter what. In such case just lower your requirements further. Please dun da bao so that you dun waste money unnecessarily.

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Study Loans - Poly

1. Before you get into poly, there's a 3-6 mths break. Yes, make full use of this time to get a part time job, be it MacDonald's, KFC, sales girl / man at the boutiques or any other job that you don't mind doing as long as it's morally right, it should give you some experience in the long run and a step closer to your better future. (3 * 400 = $1200)
   
2. During poly, there's usually long holidays break. Yes, again, make full use of this time to get the earn more money, like the above step. (Assuming a 5 mth of job during the total of about at least 6 mths worth of holidays and $400 a mth. 5 * 400 = $2000)
   
3. During poly, there's also a 3 - 6 mth attachment. Yes, this will bring you some income, from 450 a mth onwards. (3 * 450 = $1350)
4. You should be about $1450 short after executing step 1-3 and have graduated. Yes, take this opportunity to get a job. You are graduated so get yourself a job. The application for job should start about 2 mths before your last exam. So that the holiday period can be a buffer in case you can't get a good job before it's time to pay off your bank loan.) I understand that the market is bad but it shouldn't affect low level employees like us too much.. 'cos it's always business as usual. At most you'll get a lower paid job but it's ok.. Suffer for about 3 mths and you're debt free!! (Assuming a $1.5K job with $1200 take home pay, you should be able to pay off the debt within 2 mths, assuming a $400 per mth expenses) After which, you can then quit and get the job u wanted more..

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Study Loans

Debts is a common problem in Singapore, especially so for those that didn't get scholarships or bursaries to pay off the majority of their studies and didn't get sponsorship from their company or parents. That's all I can think of now.. But if you are one of them.. This may give you a helping hand. This only applies for local govt schools such as poly and local unis.

Prevention Methods:

1. CPF Loans
   
   This is one loan that is preferred not to be taken unless you can't get a bank loan. Why? 'cos it charges you interest the moment you loan the money out, for every school fees payment term. The interest should be around 2.6% per year compound and the moment you graduate, you are already needs to pay about $320 worth of interest (estimated based on 2K sch fees a year with 3 years of studies and 2.6% interest rate) for poly and $1600 worth of interest (estimated based on 6K sch fees a year with 4 years of studies and 2.6% interest) for uni. And the interest continues to compound while you pay off the loan. Yes, some may argue that it's ur parent's money that you are borrowing and you are not worried. But why borrow from them when.. the same amount of money can sit in CPF and earn a similar amount of interest for free?
   
   
2. Bank Loan
   Well this is the loan that I recommends if and only if you are willing to get yourself debt free within the minimum time possible. Why? 'cos bank loans are the only interest free loans during your period of study. Further more, if you are willing to shop for it. You may get yourself something like another interest free period of 6 mths to 1 yr, depending on the economy and our govt's ruling.
   Yes.. This is the best loan you can get apart from a loan from your parents to pay off the study loans as soon as possible. But.. How to do it?

Yes.. how to do it is the main issue discussed in this article. If you want to do it and is willing to do it for all it takes.. This is what you need to do. But please pay off the debt with all your savings 1st only after u secure a job. To ensure that the bank is not mislead that you have the ability to pay off your loan so they can start charging you interest or bill you for the loan.

There are mainly 2 types of path you may want to take:
Poly
University

I'll talk about the cure part another day.

I M $avvy

http://www.cpf.gov.sg/imsavvy/infohub.asp

Financial Info Hub by CPF Board it has some of the stuff you will want to know about financial.

What you should know about the categories covered

• Cash Flow / Debt Management
  
  
  • Inflation (Covered)
    
  • How to manage your cash flow without getting in debt
    
  • Get out of Debts
  • Avoid Bankruptcy (Covered)
• Financial Planning
  
  • Plan for your kids (Covered)
  • Plan for yourselves
  • Protect your loved ones
    
  • Get the most out of recession
  • About recession (Covered)
• Housing
  
  • Housing Loan
    
  • Re-financing your home (Covered for overseas home)
  • Flats demand? (Covered)
  • Which type of housing should you get?
    
• Investment and Insurance
  
  • Life Insurance
  • Health Insurance
  • Endowment Plans
  • Stocks
    
  • Unit Trust
    
  • ETF (Covered)
  • Bonds
  • Money Market Fund
  • Treasuries Bill
    

I've plans to talk about those uncovered areas in the near future when I've enough / more knowledge about it

Singapore Medisave Approved Medishield Plans

MOH: Medisave-approved Insurance

Here's the summary:

We have 5 companies providing such Medishield Plans in order of my ratings towards them:

1. Great Eastern
2. NTUC (Provides Letter of Guarantee to Restructured Hospitals and Institutions)
3. Prudential
4. AVIVA (Does not absorb cost to obtain medical records to process claims)
   
5. AIA (Does not absorb cost to obtain medical records to process claims)

(I'll further rate them after having more details on their plans info, currently they are being rated by efficiency in claims i.e. cumulative returns rate and mean return rate.)

My ratings towards them in terms of pricing (Based on age 19 - 30, 100% coverage if possible):
(Medisave, Cash)

1. NTUC Enhanced Shield with Rider (Enhanced IncomeShield Advantage: $95, Rider: $147 or Assist Rider: $100)
   (Note: Rider (For Renewal only), now cannot be subscribed anymore. Assist Rider (Current for purchase) - you will pay for the 10% of the (co-insurance + deductible) part, up a maximum of $2500)
2. AVIVA (MyShield Plan 2: $104.39, MyShield Plus: $36.60), with free kids coverage if both parents holds the plan (other terms and conditions applies) But the catch is that it's only 100% co-insurance coverage, which means the deductible needs to be paid by urself. (Note: Deductible are charged at $1K - C, $1.5K - B2, $2K - B1 and $3K - A1/Private, plus another $3K if day surgery is required. It's usually higher than co-insurance itself unless the medical bill is really very high, i.e. > $10K - $30K, or even $60K if surgery is involved)
3. Great Eastern (SupremeHealth A Plus: $99 , Total Shield: $209.28)
4. Prudential (PruShield A Plus: $102, PruShield Extra: $219)
   
5. AIA (HealthShield Gold Elite: $149.80, Essential Rider: $201.20)
   

Please note that the above rates are all subjected to changes by the insurer. Also the rates for different age group varies, i.e. the premium increases with a higher age group. It's purely up to the individuals when it comes to which policy they prefer, my opinions are just on the good and bad points of things.
(Correct as at 8 May 2009)

Welcome..

Hi all,

A warm welcome to my new blog. I've decided to start a new blog to provide people with free financial advise via my blog of course.. Feel free to leave ur comments. I've requested to moderate the comments so. Leave me ur email or contacts if you would like me to get back to u on anything otherwise, just feel free to drop a comment and I'll post a reply to it as soon as possible. ;)