Thursday, September 25, 2014

Diversify.... Your Insurance? What?!

Lately I have been devouring a ton of information regarding insurance. If you would like to read how a normal Joe thinks about insurance, you can thumb through some of my older posts:

CPF Life and Annuities
ILPs and Endowments: Investments, NOT Insurance
My Full Insurance Throwdown

So, while I was surfing the interweb for more information about insurance to read up on, I stumbled upon this article titled, "Diversify your Life Insurance". After reading it, I found some more solid advice on this topic from an article written back in 1991! Did they even have the internet back then? Haha! Lastly, a more "modern" piece from Fidelity about mixing group and individual life policies.

However, I'll just write down the key takeaways that I picked up. Feel free to comment below if you found other important points.

1) Diversification in case your insurance company fails (AIG anybody?)
2) Add additional coverage without affecting existing coverage
3) Ability to selectively choose and reduce coverage when it is no longer needed
4) Adding additional coverage on an existing coverage may be cheaper because of economics of scale
5) Mixing group and individual policies can give you the benefits of both worlds

I honestly have to say that after reading these articles and then slowly understand the reasoning behind it, it does make sense to diversify your insurance, especially if the cost of increasing coverage with your existing insurer is very close to the cost of taking up a new policy with a different insurer.

Currently for Death, TPD and CI, I am covered by the SAF Group Term Life Insurance, which I have extensively researched much earlier in the year to be pretty much the cheapest term insurance out there. Why? Probably because it is a group insurance policy and not an individual policy.

After reading the above articles, I feel that I ought to consider getting at least another individual policy to maximize my "diversification" benefit, so I actually have a list of a few products on my mind. Except for DirectAsia (which has no CI option), I looked for insurers that provide guaranteed renewability with CI.

DirectAsia (Death + TPD) - Online application, annual renewability up to age 65, 5 year premium guarantee, no frills.

Manulife ChoiceCover (Death / +TPD / +CI) - annual renewability up to age 70, no-frills.

Tokio Marine Enhanced Term (Death + TPD + TI + DD) - renew every 5/10 years until maximum coverage age of 85.

Aviva MyProtector (Death + TI / +CI / +TPD) - renew every 5/10 years until maximum coverage age of 99, optional riders, increase coverage at life events.

AXA TermProtector, AIA Secure Term Plus (Death + TI / +CI / +TPD) - renew every 5/10 years until maximum coverage age of 99 (AXA) or 85 (AIA), optional riders.

My personal opinion on these plans? Tokio Marine, AXA, AIA and Aviva are all carbon copies of pretty much the same plan. However, only Aviva has provided the option to increase coverage during a life event, while the other do not. Tokio Marine is the least flexible of the 4, since TPD has to be included. How to choose? Well, I think I should compare a AXA/AIA plan with Aviva and see if the option to increase coverage during a life event is expensive. If the difference is insignificant, then why not Aviva? If AXA/AIA is much cheaper, then I would have a problem and need to think if the option is really worth it.

For the annual renewability choices, I think Manulife offers quite a compelling choice! Perhaps Death+CI for me through Manulife? I will need to check what is the minimum sum that can be assured, as well as find out the renewal process.

(OT: Over the past 2 days, I did get calls from both TM and Manulife regarding the retirement products that I inquired about. The lady from TM doesn't seem to know anything, I feel quite dubious about her. The guy from Manulife seemed amazingly nervous, but I think I got him to calm down and he understands what I want from him. They are both working on quotes for me, which is all that I want so I can sit down and do the mathematics myself. However, I think just due to the fact that the lady from TM was so clueless, I am learning more towards the Manulife product! But I digress...)

Finally, for those people who have been shaking their head the entire post and thinking, "Why doesn't he get Whole Life insurance instead of Term Insurance? Doesn't he know he doesn't get back anything at the end?", I would kindly like to direct readers to a previous post that I wrote that deconstructs quite simply why I prefer Term Insurance. I view insurance as a form of protection, not an investment. That is why I am okay receiving nothing at the end. This is just necessary expenses for me to have piece of mind through proper protection.

I wonder what sort of insurance protection people have out there? Is this the first time you are hearing about diversification of insurance? Any simple comments about the products that I mentioned would be greatly appreciated, since it would give me personal insight about the specific product.

Anyway, probably no posts from me for a while, I am heading overseas tomorrow for a work trip! Ciao!

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