This week we have a most interesting case study that came about from a reader reaching out to us. We receive questions about Life Insurance regularly via email, but this is the first time we are answering it via a blog post.
Big shout out to Nicole, who has been a great sport! This post is dedicated to you, and others like you who take responsibility for their insurance cover.
The current insurance polices that I own cover the basics (Hospitalization, Life Insurance that covers TPD, CI, Death, and female illnesses). Can I increase their current coverage/sum assured? Or do I buy another product with higher coverage/sum assured?
Also what does it mean to buy insurance without an agent? Am I disadvantaging myself without going through agents?
Before we got down to answering these questions, we sought to understand her situation a little better. After all, we’ve been doing this long enough to know that people don’t wake up one morning wanting to increase their cover – without any underlying motivation.
Even for my own mother, I had to sit her down (i.e. corner her) for 3 times before she relented to upgrading her shield plan. And I had to pay for it too. But I digress.
When asked about her motivation, Nicole replied:
Being a single by choice, I worry about what if I become disabled, become too ill or too old to work. Hence the thoughts of increasing coverage, getting personal accident and retirement insurance. I’m in mid 30s but I feel like I am not doing enough in this aspect. I wonder what do others do?
We can’t be too sure what others do – but we are dead certain you are on the right path: armed with the desire to know more – and to do something about it. All on your own accord. That is a winner in our books. (Co-incidentally, we think that’s what EVERYONE should do)
After delving deeper, she shared her current policies with us:
Insurance Policy 1: Covers Death, TPD (Total and Permanent Disability) and Critical Illness – 40 k SA (Sum Assured)
Bought 11 Years ago
Insurance Policy 2: Covers Death, TPD, CI (Critical Illness), Early Stage CI and Female Illnesses – Max Cover of 110k SA
Bought 4 Years ago
Hospitalization Policies (We assume that means a fully upgraded Shield Plan)
Note that we didn’t probe into the type of policies (they could have been Term, Whole Life, or an Investment Linked Plan) because we gathered enough information to answer the essence of her questions.
Well Nicole, you asked – and here are our answers.
Can I increase their current coverage/sum assured? Or do I buy another product with higher coverage/sum assured?
It is possible – but it depends
For some reason, I immediately thought of MacDonald’s when I read the question.
“Sir, do you want to upsai?”
Fact: It is definitely possible to increase your sum assured – but this depends on the type of policy purchased, the terms and conditions of the policy, and also if the insurer happens to be running any “Upsize” Campaigns
What do I mean by these 3 points?
Type of Policy Purchased: If you purchased an Investment Linked Plan (ILP), you probably have the option to increase your coverage amount by utilizing more of your units to protection rather than investment.
The Terms and Conditions of your policies: Some plans come with a feature that allows the policy holder to purchase additional cover without extra underwriting. (Unsurprisingly, it is called things like: Additional cover with no underwriting, or, Guaranteed Extra Protection Option)
But special life stage conditions have to be met, which include: marriage, having a child or adopting one, even buying a property or upon graduation.
Seems to be quite a hassle to fulfill either of these conditions just to buy extra cover, unless you really fancy adopting Duong Nguyen from Vietnam. In which case, you will still need extra cover. -___-
Upsize campaigns: Insurers do run campaigns where existing policy holders are contacted and offered a chance to increase their existing cover, without underwriting. Unless your insurer somehow miraculously calls you tomorrow, I would say don’t count on it.
It is akin to a thirsty person holding a cup out of the window, hoping that it will rain soon.
It is (generally) not optimal
This assumes that you are still in a good state of health, and hence eligible for most – if not all – insurance policies available out there in the market.
Firstly, products are constantly improving. For example, the list of Critical illnesses used to be around 30. It has been expanded to cover 37 standard illness as laid down by the Life Insurance Association of Singapore. Why not take advantage of this improved set of conditions?
Secondly, competition is stiff. We have over 15 Life Insurance companies operating in Singapore. Hardly a day goes by without seeing a discount being offered, or a new product launch that promises to be better than the competition in some way, shape, or form. More competition means better deals for the consumer.
If I were in your shoes..
I would go with shopping around for new and improved policies first before considering “upsizing” my current policies (of which I still have to jump through hoops, which isn’t my fave activity).
This can just be an opportunity to conduct a fresh round of financial planning to reflect my financial situation and goals, which probably has changed from since my last purchase.
Unless you really really like your existing policies, or have become sentimentally attached to them for some reason, I suggest you go with using new plans to increase your cover.
What does it mean to buy without an agent? Are there any disadvantages without an agent?
What tough questions to answer!
Lets list down the major (hypothetical) roles of an agent:
- To analyze your financial situation and goals
- To propose suitable plans that meet your requirements
- To service your policies and assist with claims and queries
Notice I left out things like: Buying you a birthday cake, sending Merry Xmas cards, or calling you periodically to keep in touch. These are nice, but they relate more to the relationship aspect rather than the professional role expected of agents.
(I don’t expect my surgeon to send me a happy birthday text each year, but only to do his job well in the operating theater!)
So by deduction, to buy without an agent means:
- You will have to analyze your own financial situations and goals
- You will have to decide what plans are suitable for yourself
- You will have to service your own policies and do your own claims
(You will also be in charge of sending yourself seasons greetings cards, but I don’t think that will be a problem)
Now, are they any disadvantages of buying without an agent? I’ll answer this the same way as I did previously, which is to list down the advantages first, then flip the answer on its head.
- You will have a trained professional analyzing your financial situation, who does it for a living
- The agent will know which plans suit your purpose and objectives – be it for savings, coverage, or retirement
- You can have access to in depth insurance knowledge and advice when you need it
Having an agent doesn’t mean you will surely have all these advantages. There are plenty of great agents out there – professional, knowledgeable, and with a willingness to serve. We have the pleasure with working with a good number of them.
Unfortunately there are also a number of agents out there to make a quick buck, and care not about the long term ramifications of their actions. Think: high pressure sales tactics, product based selling (as opposed to holistic planning) and Harry Houdini types (they disappear after a sale).
There really isn’t an easy way to tell a good agent from a detrimental one. It is not usually stated in their name card.
So having a agent means you might enjoy those advantages. (if your agent is good)
Not having an agent means you don’t have those advantages for sure.
One bright spark about not using an agent: Your policy would be cheaper. Just this year, MAS launched a directive to allow (some say force) all insurers to provide Direct Purchase Insurance (DPI), which is basically a Term Plan for now, that is priced more cheaply than regular Term plans.
It does come with a cap of 400k in cover though, and right now the only DPI plans are Term plans. Recently FWD and Etiqa launched their own online Endowment plans, which can be bought directly. But the choice of plans are still limited if you do choose to work without an agent.
If I were in your shoes..
To work with an agent or not is largely a matter of personal preference. Ever since the advent of the internet, information asymmetry is largely reduced for many consumers, including that of insurance. It will not hurt to learn as much as you can on your own, meet up with an agent or two, to seek some help and advice.
Should you like what they propose, and if it is consistent with your own learnings/philosophy, then you should have no problem entrusting your policies to them. If you don’t agree with what they say, you always have the option of doing it on your own.
But should you choose to work with agents, do be mentally prepared that one day they might leave the company for one reason or another. It happens, despite the best of his or her original intentions.
It is just the way the industry is currently structured, and the issue will persist so long as we adopt the commission model. That is a whole other story for another discussion.
To summarize:It won’t hurt to be self knowledgeable – especially since Life Insurance is really about your life.
That’s all for now
Whew! What a lengthy article – the longest one we’ve written for months and months. And we still haven’t really scratched the surface – there is so much to be expanded and elaborated upon. We will be covering these topics in the coming months in more detail.
Lastly, we would like to thank Nicole for writing in and giving us these kind words of encouragement.
To the great folks at Clearly Surely, I want to say a big thank you for this awesome website. I chanced upon your website via Facebook a couple of days ago and I’ve been reading all the blog posts diligently, going back as far as Jan 2016! All the information on insurance is so well presented, humorous (love those captions on the pics, some of them are like memes) and best of all, explained using layman terms.
Your website has answered a lot of questions I have on insurance but too paiseh to ask around. Now, I’ve started to look at the insurances I’ve bought (which were left to rot in my drawers) – a small step for me to truly understand them and evaluate if they are sufficient for me. How I wish I know of your existence much much earlier. Now you have a new fan girl 🙂
Awwww, shucks. We aren’t great – we just have the greatest supporters! Without knowing it, we will be turning 2 soon (a whole 24 months since we started!) and we couldn’t have made it this far without this type of inspiration. Hope that we’ve answered your questions – and we promise to do even better in the future!
If you have questions to ask, or experiences to share, we would love to hear from you as well. Just drop us a message here or email email@example.com
(And yes, we love memes, and will browse 9gag to the end of our days.)
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.