Saturday, May 16, 2015

My Stubborn View on Insurance

Kudos to Peter Lin for writing this article about insurance and investments. I think it was a very well written piece with a fantastic analogy about jumping off a plane. I think it is good because it reminds people that they should settle their insurance before even thinking about investing. Many do not.

When you jump off a plane, you always, always, always want to make sure that you have a parachute. That is your insurance. Nobody ever jumps out of a plane without one.

I wouldn't say that I completely agree with his analogy (because I think that everyone should still have investments as a requirement, rather than an extra after-thought), but I think that it is good enough to drive home the important points. You always need insurance. Having investments would be great too.

Now, I know when it comes to insurance I'm very thick-headed and opinionated. I'm not trying to be arrogant or impress anybody with what I know. Who the hell gets impressed with opinions about insurance? You probably have to be an agent with really low self-esteem or low product confidence to be affected. Don't like what I'm saying? Close the damn window. I'm fucking anonymous and I don't sell any of this shit. What do I gain? For me, this is like taking a huge metaphorical dump. I just plop it all out, and gawd, does it feel so good to get it out of my system. Take my shit for what it is or don't take it at all. After all, this is the internet guys.

There are so, so, so, so, so many snake oil salesmen out there trying to hit their monthly target to win a prize so their face can be on newspaper and they can go overseas reward trip. If you don't know what you are buying, why the hell did you buy it in the first place? I have an unnaturally large understanding of insurance products, and I can personally say that I have zero godamn interest in this absolutely boring topic of personal finance. My only interest is not getting screwed over, which is why I care so much. The amount of material I have read on insurance is beyond ridiculous for anyone my age who has no business in the financial industry.

It would be wrong for me to brandish my opinions as objective. Insurance is highly subjective, because it depends on your personal preferences. Just like music, you can enjoy Justin Bieber. I just won't be your friend. I am just sharing what I think. If you don't agree, that's fine. Who cares? However, unlike sensitive topics, I can talk shit about the opposing view. What to see responsible freedom of speech in action? Well, this is it.

I believe everyone should have H&S insurance their entire lives. I believe that term life insurance is important from the start of work until retirement (NS for guys). I believe that TPD insurance is a cheap rider that helps you sleep at night. I believe that CI and early CI is dependent on your family history and is much more important for some than others. I believe that certain insurances are just necessary, like auto insurance and home loan insurance.

I believe that travel insurance should be necessary for most people. People who don't travel much should have it because they are more prone for shit to happen to them. People who travel a lot should have it because cost of insurance per trip is so low. People who travel between 1-4 times a year should consider a one-off travel insurance if they are unfamiliar with the trip they are taking.

I believe that whole life insurance is unnecessary in Singapore where there is no estate tax. I believe that "locking in lower premiums now" works exceptionally well for people who don't understand inflation and time value of money. I believe that ILPs and endowments are more of a shitty investment with some hints of an insurance, rather than an insurance product. I believe that both Personal Accident and Disability Income insurance is very largely dependent on lifestyle and job, and most white collar workers are unlikely to need such insurance.

Even though there are so many shitty products around, I still believe having a bad something is better than having absolutely nothing. Phew, lucky I said that right? Now anyone that has bought whole life insurance or ILPs is absolved and can sleep well tonight knowing that they didn't make the worst decision possible. Not the best decision for sure, but not the worst either. It's always a comforting thought knowing that you aren't the last.

I believe that it is better to be able to enjoy and use your assets accumulated in your lifetime, and ultimately have the decision to squander it all away or bequeath it however you see fit, instead of having it rot in an insurance policy, forever unable for you to enjoy, leaving it all only for your beneficiaries.

I have friends who are insurance agents, but unfortunately some of them really have no clue what they are selling. I read SillyInvestor's post about his sister who is an insurance agent, and I whole-heartedly agree with what his sister said, which is that "Not many can invest DIY, if you can, please go ahead". If you don't have the knowledge or skills to do it yourself, you best approach someone to help you. Getting a less-than-optimal insurance is better than having no insurance.

Although I think that our financial industry and system is crap, and jobs like insurance agents and property agents will be massively reduced in the future, I still think that there will always be a demand from people who just cannot be bothered and will pay for such services.

Can't be bothered to learn how to drive? Hire a driver.
Can't be bothered to learn how to cook? Everyday eat out.
Can't be bothered to do something? You pay more to get someone to do it for you.

To expect something to be done for you at the same cost as doing it yourself is just stupid. If you can do it yourself, congratulations, you save money, hooray! If you can't, you go out there, find somebody who can do it for you, and pay for the all the shit that you can't do yourself.

So, is the job of an insurance agent bad? No. Are there too many and is their reward system flawed? Yes. Hell, but that's the way for bankers too, isn't it? Which is why I like to ask people the question, who has a nicer car: you or your banker? Or any banker for that matter. (hint: it is confirm your banker) Now, that's food for thought, isn't it?

Lastly, I would like to touch on one final thing.

If you ask an insurance agent if you should buy whole life insurance or term life insurance, which do you think he would recommend?
If you ask your property agent if you should buy the property, what would he say?
If you ask your broker he has any stocks to recommend to buy now, what would he say?
If you ask your aircon guy if your aircon needs servicing every 3 months, what would he say?
If you ask your barber if you should have a haircut, what would he say?
If you ask the cashier at McDonald's if you should upsize your meal, what would he say?

Fuck la, stop asking stupid questions, can or not?

I am thinking if I should write another insurance-related post regarding "How much insurance do I need". I'll see if there is interest in a topic like that, if not I'll just put it on the backburner to write at my own leisure. I think it is one of the most important things about insurance, yet most people haven't a clue. Please don't say "rule of thumb is 10 times annual salary". Rule of thumb is used when you have no other information and need a quick estimate. If you actually bought insurance only using that, I shake my head at you for being gullible enough to trust whichever agent did for you such a sloppy job. I feel like chopping off people's thumbs with a cleaver when they say that.

Once again, I do not work in the finance industry. I don't get any commissions or kickbacks or referral fees or any money at all talking about insurance. I don't even like insurance. I don't sell insurance. I don't sell any financial advisory services. I don't sell anything. And I don't want to sell anything. Don't ask me to sell anything. I perfectly happy, sitting here in my rock house, throwing stones at glass houses. It is awesome.

PS. If you ask me about anything regarding insurance which I have talked about before, don't mind me if I'm too lazy to reply since you are too lazy to read.


  1. GMGH,

    All the power to you!

    The joy and bravado of youth!

    You are definitely warm-blooded ;)

    Just a small heads-up on term insurance:

    Term insurance is a great buy when we start work as you've mentioned - the moment we sign up and pay up, we immediately create an "instant" net worth for our dependents, in case we get recalled by our maker earlier than planned.

    We don't need term insurance till retirement.

    When our net worth has grown to the point where it is a few times the term insurance payout, that term insurance policy has served its purpose ;)

    1. Hi SMOL,

      Yes, I agree, to say that term insurance is needed til retirement is a bit too simplistic.

      Some people are able to build up a high networth early on in life. They might still continue working out of boredom or passion, so are not considered retired, but they no longer have a need for term life insurance.

      Thanks for the comment!

  2. Thanks for all the advice on insurance you gave in your blog. This is the type of information no one cares to share with you. This is the first place I have been able to read it in normal english. Thank you for making the time to write this blog and inform the public. Keep up all the hard work.

    Joshua Duncan @ Focus Insurance Atlanta


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