Monday, April 16, 2007

How Much Do You Know About Insurance?

We have often been very afraid at the sight of "Insurance Agents", simply because of an impression created by most of the agents as hard-sell salesmen. I will not comment on this issue because many a times even myself will shun away from such people because of the way they try to make me buy things that i do not really need. This creates a very strong stereotype on everyone representing an insurance firm regardless of what they intends to do. How many of us actually bother to spend sometime to think about what an insurance is all about and why we need it? As far as i will like to think, i seriously believe that an insurance is very close to a need rather then a want product, simply because it provides for protection of our assets as well as our dependants.

Hard selling of policies is pretty much a thing of the past although many still do so. There is seriously a significant difference between an insurance agent and what we call a financial planner. An agent simply tries to sell what the company wants them to sell at all costs, while a planner actually does a thorough analysis on their clients needs before recommending suitable products for them. Everybody needs some planning at some stage whether you like it or not, and believe me that you will not be able to plan anything for yourself because the discipline is too often too difficult to maintain. Please do not think that i am trying to convince you to buy something from me, but believe my knowledge and research is pretty much sufficient to make you trust in what i have said. I am a certified financial planner, but believe me when i say that i am trying to educate you on what you "NEED" to know. Its really not about how much you have to spend on a policy, but how much you need to prepare yourself for the worse situation. Unless you are some GOD or deity from somewhere, i do not believe you will be able to know when it is going to come at you. Below is an extract of what i have found, which is a research conducted by NTU with regards to how financially prepared are families in Singapore.

Protection Gap in Singapore Remains Wide
NTU Study finds families in Singapore are financially ill-prepared
for loss of breadwinner

Singapore, March 29, 2007

The loss of a loved one can trigger an emotional roller
coaster ride. It can also bring an unexpected financial toll on those who are left behind.
The bad news is that the majority of Singaporeans are not adequately protecting their
dependants from the ensuing financial burden in the event of their untimely death. The
sad news is that many don’t feel the urgency to do so.

These were the findings in two separate projects commissioned by the Life Insurance
Association of Singapore (LIA).

These findings are in line with the harsh reality that death claim payouts in Singapore
have averaged around $37,000 in recent years, significantly below what is deemed to be
sufficient to ensure that families can continue a similar living standard in the event their
breadwinner passes on.

The two projects which were independently conducted in the last quarter of last year
comprised a face-to-face consumer poll by Saffron Hill Research and an analytical study
by Nanyang Technological University (NTU).

Key Findings

Of those polled,

• Two-thirds had some form of insurance, of which 26 per cent had no idea how much
they are covered for;
Almost half (46 per cent) think they are well-covered in terms of sufficient coverage
for their dependants;
• There is a high level of indifference about getting additional coverage among those
who are in a more vulnerable situation
• Of those who do not think they are well covered (54 per cent), as many as 70
per cent of them said that they have no intent to purchase higher coverage
• Of those who do not own a policy (29 per cent), some 73 per cent of
respondents said they had no plans to buy insurance

Reasons For Non-ownership

Among non-owners, half of whom were from the lower income group (household income
of less than $3,000), price was the key deterrent (49 per cent). While some said they did
not have the means to purchase life insurance, others said it took a back seat to “more
urgent necessities” such as a car and credit card loans.

Further analysis of the results revealed that there was the lack of understanding of how
much is needed to pay for premiums to ensure adequate coverage. The survey found
that while some consumers baulk at being advised by their financial advisers that they
need up to 10 times their annual salary for adequate protection and feel this figure is
overly inflated, some nonetheless said they would be prepared to pay 10 to 20 per cent
of their income towards monthly premiums.

“This is a silver lining,” said LIA’s Deputy President Richard Shermon, who had overseen
the project. “At least we can address the affordability factor through better education
and quality financial advice.”

*The complete article is available HERE.

The above is just an abstract of the report and i believe it will bring you to the attention of why there is a need for protection ahead of all other luxurious committments. Probably this is a reason why i ventured into this industry in hope of educating more people about it. Anyway, if you think that you will need some ideas or comments, you can always contact me by dropping me an email at Financial Planning is a free service provided by most of us FPs, and if after any analysis that there is no need on your part then there will also be no obligations to make any policy commitments.

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