Archive for the ‘Insurance’ Category
Advantages Of Investments Structured As Insurance
Over the last few years, a type of insurance policy has been gaining popularity in Singapore. Where investors have sometimes find themselves putting money into ILPs with insurance cover for investment purposes, which I have discouraged in this POST, there is a type of ILPs which is meant for investments. They are commonly called the 101 Products, Insurance Wrappers or the Portfolio Bonds in Singapore. The development of this type of policies arises from tax considerations in Europe and US, since investment returns in the policy is deemed insurance proceeds and is treated differently for taxation. A variation of this in Europe is the Private Placement Life Insurance, which generally comes in larger quantum.
Investors pay premium, regularly or a lump sum to start, into the policy which will be used in investments into funds or other financial instruments. The policy lasts for a number of years at the choice of the investor. There is also the flexibility of stopping investments and drawing funds out of the policy after a certain time period of about 1 to 2 years.
Main Features that differ from a policy for Insurance purpose: (exact details may differ with different companies’ policies)
NO insurance charges. The reason for this is because there is negligible insurance cover. The policy gives an insurance Read More…
Case Study – Universal Life for Estate Preservation.
In event of a death of a wealthy patriarch, his estate has to be carefully administered. 80% of the time the time a passing of a patriarch is not anticipated and his/her assets not in the ideal state to facilitate either a transfer into an estate or division among beneficiaries.
Let us take a simple example of wealth of a deceased male HNWI, Mr Seah, of age 56 as such: $4.5 million worth net investments in 4 different businesses, 2 restaurants, a trading firm and a logistics company. 2 properties worth $3 million, one of which is residence of the family, and $0.5 million in cash equivalent. However, at the time of passing, Mr Seah is actively involved in the running of 3 of these 4 companies. He had taken out a personal guarantee on $3 million dollars on capital loans, trade and credit lines in total. The banks will require either a repayment of the loans or another guarantee on the original loans. The children, 2 sons are just 22 and 25 years old and fresh out of college. Though they are fully independent, neither of them are involved in the businesses as they started working in big corporations gaining experiences and exposure. As such, it is likely that the banks will not find the personal guarantees of them sufficient. Either that or sell their residence and the other property. If no alternative is found, the estate will have to sell of parts or full of the businesses for repayment of the loan. That will be a pity, as the restaurant and the logistics company is just about to take off after running for 3 and 5 years respectively.
Early Critical Illness Insurance, is it worth it?
On 27th August, I published a post on At Which Stage of Cancer Does Critical Insurance Pay? On 31st August, a story was published in The New Paper about a lady who got cancer and removed her breast but was denied claims on critical illness for the insurance policies she has. Article
In the New Paper article, Ms Tan had a condition of carcinoma in situ, where the cancer starts in the milk ducts of the breast. It was considered a non-invasive stage as the cancer had not spread into the surrounding breast tissue. In Ms Tan’s case, she had a mastectomy because the cancer cells were located in various parts of her breast. In other words, she had a few of the cases of carcinoma in situ. The insurance company denied her claim based on the the condition not fulfilling the definition in the policy.
During my earlier post, I mentioned that i was discussing this with a radiologist husband and staff nurse wife. They do admit that at this stage of cancer, the condition is not life threatening and with treatment, the patient is likely to continue normal life and working after 1-3 months.
‘Dr Wong Seng Weng, 40, consultant oncologist at The Cancer Centre, drew a distinction between cancers where the person’s longevity is compromised versus conditions which are treatable. He said: “DCIS, if diagnosed and treated early, usually the survival rate is 100 per cent. Usually life insurers pay out when a person’s longevity is compromised.” But this doesn’t mean that the cancer has to be very advanced, before a claim can be made, he clarified. Even if the cancer is at stage 1, the insurer can pay out if it is an invasive form that spreads, he said.’
At which stage of Cancer does Critical Insurance pay?
Recently I have met a client, a female who is concerned about payout in event of being diagnosed with cancer, which is the benefit under critical illness portion of her insurance policy. Being a head nurse and her husband, a doctor, radiologist to be exact, they are quite familiar with the medical terms in the small print. After consultation with them, I decided on a post.
Comparisons of ILP Insurance Charges
Thought of putting this comparison up on the website. This is still valid 1H2010. These tables show the insurance charges for Investment Linked Policies of different companies as they are printed with every benefit illustration. The insurance charges forms the major part of the cost to the policy holder, others includes administration fees, fund switching fees and so on.
There is really a difference in cost. It is not convenient to place it on the website. Contact me if you wish to know more.
Case Study – Universal Life Insurance for Estate Distribution
Universal Life Insurance can be used for dividing your estate equally as was done in this case. The same solutions apply for situations where other single major asset, such as property, forms the major part of your estate.
Mr Tan is approaching 65 and wishes to do some estate planning. His estate consisted of a business, valued at $8 million, a landed property worth $2.5 million and $2 million in cash. Mr Tan has a wife, two sons and a daughter. He is semi-retired from the business and handing the business over to the eldest son, who is the only one interested in running the business.
He is not worried about the wife, should he pass away, as she is close to the children and has ample savings. However, he is worried about how he can distribute the estate equally. The main worry is the business. Should he hand major ownership of the business to the eldest son, it will not be fair. Should he distribute the business equally, the two youngest children will be more interested to sell the business. This will dilute the ownership of the business and disrupt expansion plans the eldest son has. Secondly, it will be difficult to split the inheritance of the landed property.
Case Study – Universal Life Insurance for Estate Creation
The following is a real life case study.
Mdm Hayashi is 60 years old. She was the second wife of her deceased husband, late Mr Cheong, who was also her second husband. She married Mr Cheong when she was in her late forties and Mr Cheong in his early fifties. She has 2 adult children still in Japan from her first marriage and Mr Cheong has 2 adult children from his first marriage living and working in Singapore.
When Mr Cheong passed away 3 years ago, he left in his Will 55% of his assets to Mdm Hayashi and the rest to his 2 children. Mdm Hayashi’s current networth of $5 million is almost fully from this inheritance. Mr Cheong’s 2 children are both doing really well financially. However, it is Mdm Hayashi’s wish and the step children’s expectation that upon Mdm Hayashi’s passing, most of the wealth from Mr Cheong should be inherited by the step children instead of Mdm Hayashi’s Japanese biological children.
What can I do that Prudential cannot do?
Recently, I have been asked this question by a friend of mine. “What can you do that Prudential cannot do?” It is not an easy question to answer especially with when the public have preconceived impressions. Let me answer the question here.
Prudential is a huge company. If Prudential is willing, there is certainly very little that they cannot achieve. However, the insurance product provider with an asset management arm, is not interested in several aspects of wealth management business. For insurance companies, the sales force, insurance agents, are not under the companies’ payroll. Therefore, the sales force should not be mistaken for Prudential itself. I will rephrase the question to, “What can I provide that other Insurance Advisers, even other Financial Advisers cannot?”
There are a few areas:
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Why you should not get a Investment Linked Policy for investment reasons.
Firstly for those who have only a vague idea of what a Investment-Linked Policy (ILP) is do refer to this information sheet
For those who still have no idea or want an in depth understanding, you can study the ILP Guide
Purpose of the article is to show why you should not place priority on investment returns when purchasing Investment Linked Policy which is meant for insurance cover. (Portfolio Bonds and 101 Policies are also ILPs which give no insurance cover, as discussed HERE) Be wise not to jump into conclusions that all ILPs are bad and should never be bought. The merits of ILP for protection will be further discussed.
