Tuesday, October 11, 2016

GMGH Insurance Review 2016

This post is partly inspired by the latest post by AK about a jobless guy stuck with $30k of annual insurance premiums, as a follow up to my first post in 2015 that was inspired by Derek, and also something related to what reader SH has emailed me about.

In September 2015, my spreadsheet was sort of organized, but in a kind of haphazard sort of way. The information is there, but I thought I could do better.

My 2015 insurance policies

Since then, my friend actually gave me a template that she used when working through her insurance needs with her agent. I modified the template a bit and updated it with my policies and premiums, and viola, there we go! (best opened into a new tab or into another screen for reference)

My updated 2016 insurance policies

I am very happy when I look at my insurance overview and see that I have no policies that have cash value and my only policies which last my lifetime is my H&S insurance. This follows my personal view on insurance very well and I am happy that I have modeled my actual policies to be line with my views.

Since then and now, my insurance premiums have effectively doubled (108% increase), but I'm not complaining about it, and you're going to see why.

Annually, my insurance burden is $1550.20. However, a portion of it can be paid by CPF OA (DPS) and CPF MA (Integrated Shield Plan). After taking out the CPF portion, the cash portion is $1141.20, which works out to be a monthly burden of about $95.10. That's about $100 a month.

Some people might say that $100 is not cheap on an absolute basis, which I agree. I used to pay less than $50 a month, while I know quite a few people my age paying $300-600 a month, and of course others like that man that wrote to AK paying in excess of $1000 a month.

So if my insurance premiums have doubled, why am I okay about that? Well, my coverage has EXPLODED!


My death / TPD coverage has increased by 4.6x.
My CI coverage has increased by 4x.
My early CI coverage has increased by 2x.
My PA coverage has increased by 2.6x

An interesting thing to note about the personal accident policy by Aviva is that it is now an independent policy, as opposed to be tagged onto the death/TPD policy that covered SA + $25,000. I always found that weird and unnecessarily confusing. It's nicer and cleaner to me that each insurance policy is distinct. I really dislike bundle pricing when I might be paying for something that I might no necessarily want.

Although looking at my insurance coverage now, the AXA DPI that I bought looks expensive and unnecessary, especially since the death and TPD premiums by the MHA group insurance is very low, this actually is a perfect supplement because the AXA DPI allows me to add on Critical Illness coverage and this covers until age 65. In the later years, the MHA CI premiums become really really expensive, so I am planning to drop coverage halfway and just rely on the AXA DPI rider for my critical illness coverage.

At first look, I'm sure the reaction of many people is "WA LAO WHY SO MUCH?". In all honesty, I do know that I am not only over-insured, I am grossly over-insured.

However, the funny thing about insurance is that if you're over-insured, that's fine, as long as you can afford it. You just pay more premiums for additional coverage that isn't essential, but it is a bonus to have. And that's what I'm doing.

The problem comes when you do it the other way around, when you are under-insured. You end up being a burden to your dependents, and that isn't something that I would like.

The good thing is that this problem, like many problems in life, is easily solved by throwing money at it. If you can afford paying to be over-insured, it is fine and there isn't anything too bad about it. Sure, it isn't optimal, but it isn't like your extra $100 is going to make a significant difference in your life. However, if you're barely scrapping by, you'd want to make sure that your insurance coverage covers or exceeds your needs. You also have to review very often because you don't want to be in a situation where you are wasting premiums on unnecessary coverage, or to be under-insured.

In all honesty, this actually applies to whole life insurance as well. As much as I am against whole life insurance, if it is something that you can afford to have, why not? Just pay 4 times more premiums for the same amount of coverage during the necessary years, and then just be committed to paying premiums every month until you die. Is it optimal? Hell no. Is it a problem if you have money? If you can afford it, no, then it is not a problem. Plenty of problems go away by throwing money at it. However, like I said, not everyone has enough money to throw at all their problems and this is why it becomes prudent to manage your cash flow. When the monthly cash flow commitment to this beast becomes crippling and overbearing, you would be extremely regretful about this decision. Sadly, there isn't a painless way to solve that problem once you get stuck in it. Perhaps the only way is to "repo" away your insurance and get a slightly better return of capital as opposed to the surrender value option. But that's a different story for a different post.

Anyway, back to the topic of me. I am pretty happy with the new MHA insurance which is drastically reducing insurance costs to an already super cheap insurance option. Honestly, any "financial advisor" out there that fails to mention this insurance is a jack off and is just fucked up. If you've noticed, I've toned down my language in recent months, but it is really important and necessary to highlight this emphasis. Don't blindly trust financial advisors, ESPECIALLY IF THEY ARE YOUR FRIENDS. Instead, why not trust GMGH, your friendly neighbourhood financial advisor? (it's just a joke, click the link). You probably don't need maximum coverage and it shouldn't be your sole and primary insurance policy, but it should be owned by every eligible person. It is not a comprehensive solution, but it is disgustingly cheap that if you DON'T get it, you're already a sucker.

With my current coverage, I'm happy that I'm paying chump change to have a level of insurance coverage that is borderline disgusting and excessive. Buy a product with coverage like this through one of your agent-friends and I can guaran-damn-tee you that the first product they show you will have premiums of at least $1000 a month.

I'll probably do another review of my insurance next year or once I complete my next health check-up. I've becoming more and more appreciative to the fact that I actually am pretty healthy and it is something to be thankful for. All this insurances are just... insurances. I hope I never had to pull out these policies.

And that is exactly how insurance should be like. Something you wish you never had to use, as opposed to something that you are hoping to "strike". This isn't 4D or TOTO and I really wish people would stop treating it like that.

13 comments:

  1. Very nice template, thanks! I'm making a copy of it :)

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    1. Sure J, no prob! I think it's the best template I've seen so far because it gives a nice overview with just enough information for a snapshot review, that's why I adapted it for myself too, hehe.

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  2. hi GMGH,

    I was sorting out my thoughts on insurance coverage. And I looked at you being able to get death/TPD 100k coverage till 70 years. How is that build into your portfolio? Suppose you got a 1mill Aviva and 100k AXA till 65 years, how does the 100k from 65-70 fits in? Would you be able to advise please?

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    1. Hi Ren,

      Sorry for the late reply. You're right. The cost of being insured from 65-70 is actually quite a large sum. I will probably amend my sheet for my next post.

      Basically after 65, I'll probably not have any life insurance. If I see a bleak and abrupt ending during the years of 65-70, perhaps I will keep the MHA insurance to "game" the insurance, but it is quite unnecessary.

      TL;DR - Error in worksheet. After 65, no more life insurance.

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  3. Hi GMGH, I've just entered the workforce and am reviewing my insurance plans and stumbled on this post of yours! Thanks for sharing!

    DIYinsurance seems to recommend disability income insurance quite a bit. I don't even know what it was till 5 minutes ago and noticed that you don't have disability income insurance for yourself too. Is there a reason why not? Would love to hear (and learn) from you! :)

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    1. Hi Anon,

      Sorry for such a late reply, I didn't see your comment.

      Personally, I feel disability income insurance is more important if your income producing powers come directly from your physical abilities.

      Take for example, a stock analyst or a telemarketer. Theoretically they could still do their job, but perhaps with some modifications to make things easier for them. However, their income producing skills are still largely intact.

      If you are a painter and your lost function of your master hand, your income producing ability is pretty much gone.

      I don't really believe that disability income insurance is something that everyone should have. It should depend the nature of your job and your lifestyle - the risks of getting disabled, and the effect of a disability to continue doing your job in a somewhat similar capacity.

      I hope this helps.

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  4. Perhaps one of the most secure feelings we can have is knowing that some of our most valuable assets are safe and secure through the purchasing/investing of insurance. Whether it is your home, automobile, business, or a mix of all that you are insuring, be sure to choose the best company that is available on the market.

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  5. Hi GMGH, I don't think there are other plans that are as affordable as the Aviva MHA/SAF plans.

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    1. Hi Anon,

      I think you are right. The MHA plan for life and personal accident is the cheapest I have ever come across. It's a shame that quite a large number of people don't believe in term insurance since "you get nothing back at the end of it".

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    2. I used your template to did a comparison of the policies that I am holding and was shocked to see the difference in coverage. I am cancelling my ilp ($3000 a year) and am thinking of buying an Aviva term policy till 65 years old at $1,227 a year for Death and TI $1mil coverage, TPD $260k coverage, Early CI and CI at 100k coverage.

      At a 2% interest rate environment I will be able to have $108,320 savings, hard cash!!!! ($3000 - $1227 a year) or $460,534 using a portfolio to achieve 8%. The ILP would never be able to guarantee anything close to that. Only worry is that... I will have "no protection" after 65 years old.

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    3. *to do

      I am envious that you are able to buy the MHA policy :)

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    4. Hi Anon,

      Of all the things I've taken away from NS, the best things so far is the group insurance.

      I've gotta say that your plan still sounds pretty good! Once my H&S plan goes through, I'll be doing an update, together with my extra early CI policy. My annual premiums look set to be about $2000+, but I'm pretty much set until 65!

      If you invest well and end up with a large sum, you would be able to "self-insure" for any mishaps. Unless you expect to still be working past 65, the "protection" offered by policies still in place is an illusion since you technical have no income lost. It is more about the expenses of treatment, which a good H&S shield plan should help relieve most of that burden.

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    5. Yes, I agree with the self insuring part. After all, whole life plans "remove" their multiple pay out after 70 years old.. which means they pay out 25k-50k after 70 years old. This amount can be easily saved from now till 70 years old.

      Have you heard about the Aviva mymultiplepay plan?

      I am thinking between these 2 options after I cancel my ILP
      1) $1227 for
      a) Term (65 years old)- Death,TI 1mil (BasePlan)TPD 260k (from BP) Early CI 100k (not from BP) CI 100k (from BP); or

      2) $1,496 for
      a)Term (65 years old) - Death,TI 1mil (BasePlan)TPD 260k (from BP) and b) Mymultiplepay 100k CI/Early CI

      Thank you in advance if you have any insights on that :)

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