In choosing an insurance policy, there are quite a number of technicalities for consideration. The following are some of key considerations :
1) Type of insurance
Term, wholelife, health, auto, etc.
2) Renewability
If the insurance policy is not renewable guaranteed, there is a possibility that it may be cancelled in the future.
3) Premium rate guarantee
Some insurance policy may come with guaranteed premium rate. However, due to the higher life assurance cost as one grows older, the premium rate for some term insurances tend to be age-band.
4) Type of Coverage
Death/Crisis cover/TPD/PA
The list goes on and on. For life insurance, I would prefer term insurance to whole life insurance. The reasons have been explained in my earlier posting (Why do we need insurance?). Personally, I feel that life insurance is meant to mitigate the risk of loss of income in the event of death/disability/terminal illness. This protection is especially important when you are the sole breadwinner. With our limited funds, we would like to get the maximum protection value for every dollar spent on the premium. This is what term insurance could offer.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Saturday, February 27, 2010
Friday, February 26, 2010
Insurance: Why do we need insurance?
There are many reasons for buying an insurance policy. It could be an insurance for your car, house or yourself. No matter what is the reason, the very first step to choosing an insurance policy is to understand the underlying purpose of getting one in the first place.
Basically, buying an insurance is about risk management. When you get an auto insurance, you are trying to transfer the risk of potential liability or potential damage to your car to another party. This party will get a premium for insuring your car while you will get a peace of mind by knowing that somebody will provide coverage in the event of an accident.
Once you are able to understand that insurance is about risk management, it will become easier to choose an insurance policy that is suitable for you. The general guidelines for choosing one could be summarized as follows:
1) What is the risk to mitigate or transfer?
Life insurance (e.g. whole life, term life, etc) - to mitigate the risk of loss of income in the event of death, disability or terminal illness.
Health insurance - to mitigate the risk of medical cost
Car insurance
Home insurance
etc
2) How long do you need to mitigate or transfer this risk?
3) What is the size of the risk that you need to mitigate or transfer?
This is basically the coverage that you need.
Nowadays, there are many perks being tied to insurance policy such as investment return, savings, etc. If you understand the underlying principle for getting an insurance, it will become easier to know whether these incentives are suitable or relevant to you. Just bear in mind - Make everything as simple as possible.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Basically, buying an insurance is about risk management. When you get an auto insurance, you are trying to transfer the risk of potential liability or potential damage to your car to another party. This party will get a premium for insuring your car while you will get a peace of mind by knowing that somebody will provide coverage in the event of an accident.
Once you are able to understand that insurance is about risk management, it will become easier to choose an insurance policy that is suitable for you. The general guidelines for choosing one could be summarized as follows:
1) What is the risk to mitigate or transfer?
Life insurance (e.g. whole life, term life, etc) - to mitigate the risk of loss of income in the event of death, disability or terminal illness.
Health insurance - to mitigate the risk of medical cost
Car insurance
Home insurance
etc
2) How long do you need to mitigate or transfer this risk?
3) What is the size of the risk that you need to mitigate or transfer?
This is basically the coverage that you need.
Nowadays, there are many perks being tied to insurance policy such as investment return, savings, etc. If you understand the underlying principle for getting an insurance, it will become easier to know whether these incentives are suitable or relevant to you. Just bear in mind - Make everything as simple as possible.
Disclaimer: The content in this blog contains purely my personal opinion and it is in no way a substitute for professional financial advice. You should seek advice from a professional financial advisor with any question regarding your financial matters.
Thursday, February 25, 2010
Purpose of this blog
Hi,
I am Robert and I am working in Finance/IT industry. I have great passion in learning and understanding financial products like insurance, stocks, unit trusts, etc. In this blog, I would like to share with you my understanding of these products and would very much like to seek constructive feedback from all of you.
I am Robert and I am working in Finance/IT industry. I have great passion in learning and understanding financial products like insurance, stocks, unit trusts, etc. In this blog, I would like to share with you my understanding of these products and would very much like to seek constructive feedback from all of you.
Subscribe to:
Posts (Atom)