3 Kinds Of People Who Should Use Credit Cards (And 2 That Shouldn’t)

People who should use credit cards and not

Credit cards can seem like a godsend. One swipe for your purchases, and you won’t have to worry about paying it until the end of the month. Being a credit card user, it allows you to delay your payments made usually up to 52 days of the interest-free period. Having a credit card also significantly reduces the amount of cash you carry in your wallet. While it is definitely useful, all it takes is a mistake in handling your purchases before it becomes ab-useful. Hurhurhur, get it? Not everyone should use it, to be honest. In this article, fundMyLife describes three kinds of people who should use credit cards, and two kinds that definitely shouldn’t.

People who should use credit cards

#1 You make expensive purchases

One advantage of having a credit card is that you don’t need to lug huge wads of cash whenever you make expensive purchases. If you find yourself living the Crazy Rich Asian lifestyle, you’d definitely need a card to handle your purchases. However, there’s also another reason why you should consider credit cards for your big ticket purchases – 0% installment plans. It lets you spread out your large purchases over a period of time, assuming you’ve the discipline to repay them regularly.

Caveats to note: no points or cashback (usually), upfront processing fees, penalties for card cancellation and early repayment, reduction in monthly credit limit during installments. So be sure to read the fine-print and ask a lot of questions.

#2 You buy lots of things for your friends

Are you the one friend who buys a lot of things for your friends? You’re probably the go-to person, whom your friends rely on. When it comes to group purchases, you’re the first point of contact. With cashback and/or points, you’ll benefit the most from helping your friends purchase things. After your friends repay you, you still get the benefits of the extra cashback and points. It’s a win-win situation for both parties. You’d definitely be one of those people who should use credit cards.

#3 You travel a lot

Find yourself travelling often? You wouldn’t go too wrongly with a travel credit card with no foreign transaction fees. On top of the convenience, there’s also the security factor as well. Instead of lugging wads of cash when you go overseas, carrying a travel credit card makes your life simpler. Of course, it doesn’t mean you should eschew cold hard cash completely. You can bring less of it if you bring your travel credit card as well.

People who should NOT use credit cards

#1 You’re terrible at managing things on time

First things first – ask yourself if you’re a punctual person. For example, do you pay your bills on time? If you find yourself regularly not paying your bills, the odds are that you won’t be able to pay your credit cards debts on time. Interest rates of your credit card ranges between 18-28% per annum – that is very hefty. If you continuously forget to pay your credit card debt, it will snowball quickly leaving you deeper in debt.

#2 You’re already in debt

As mentioned, the interest rate of credit cards is very high. You should consider credit cards as a mode of payment, and not a line of credit. As such, you shouldn’t be getting a new credit card because you’re in debt. Furthermore, getting more cards to cope with expenses is dangerous. Psychologically, it’s not painful to have $100 across ten card, even though the total debt is $1,000. With each card having its own terms and conditions, you’d have a hard time keeping up with all of them.

Connect with fundMyLife financial advisers today!

We hope you belong to the groups of people who should use credit cards, and not the last two. Make sure your cashflow and lifestyle has a qualified second opinion by a financial adviser!

You can connect with our panel of experienced and awesome financial advisers, curated by us. If you want to engage more financial advisers, or if you haven’t found the right one, why not consider advisers of fundMyLife? You can head on over to fundMyLife and ask our awesome financial advisers questions. Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Renting As A Singaporean, Yay Or Nay?

Is it worth renting as a Singaporean?

It is common than not for a Singaporean to stay with the family until very late into his life. This is a sharp contrast to Americans who leave the nest as soon as they turn 18. Of course, it makes economical sense to stay at home. Furthermore, home ownership is available when an individual, 1) applies for a BTO flat with his/her spouse, or 2) is over 35 years old and purchases a flat from a resale market. Option 1 requires a partner, whereas Option 2 requires significant resources – something which can be out of your control. Therefore, this leaves an individual with either continuously staying with his/her family or renting. In this article, fundMyLife shares reasons why renting as a Singaporean for a short term is not a bad idea.

Independence

Sometimes, you just want space. It could be due to several reasons. Your burgeoning sense of independence, increasing need for personal space, or even an oppressive home environment. Your family leaving you alone at home or coming home late at night does not constitute space. It is not sustainable over a long period of time without emotional distress.

On top of physical space, it’s psychological space that you might want to have as well. You cannot have that if you do not have a place to call your own. Plus, renting a place out there might make you appreciate your parents more and come home more often for their home-cooked soup.

Personal growth

With your own space, you’re free to explore activities or passions that you wouldn’t be able to without your own place. For example, you’ve always wanted a pet but your family is not pet-friendly. Or if you want to go out and stay out late at night without any repercussions. If you and your friends are up for it, you all can consider renting a place together. This will strengthen your friendships with each other. On top of that, it provides not only a fun chapter to have but it is also an opportunity to explore human interpersonal relationships, adding depth and dimension to your lives.

On top of that, if you do not rent for a short term, you will never truly have a time of your life when you had space to yourself. A typical living accommodation trajectory in a Singaporeans life involves staying with your parents until you apply for a BTO with your partner. After that, it will be you and your partner. The addition of children in the mix after a while means you will not have this luxury of space until when the children leave the nest. It sounds scary, doesn’t it?

Pre-marriage cohabitation

Renting as a Singaporean couple helps both to adjust to the independence, working out a proper household dynamic before settling in their new BTO flat.  They can also start easing themselves into the mundane, such housekeeping and cooking.

Read articles on how cohabitation can lead to divorce rates? Those aren’t entirely true. In a 2014 research, researchers found that age is a much stronger predictor for divorce rather than cohabitation status. People who cohabited or married at age 23 are half as likely to divorce as those who cohabited or married at age 18. Pre-marriage cohabitation, while seemingly a financial liability, will reap returns when you two get used to each other’s quirks and habits.

Connect with fundMyLife financial advisers today!

Renting as a Singaporean may not make financial sense at first, but there are benefits to doing this. It may not be such a bad idea after all to rent for a short while. Independence is a severely underrated skill to have, after all. However, if you’re going to spend part of your salary on renting, it’s important that you have a financial plan.

If you want to engage more financial advisers, or if you haven’t found the right one, why not consider advisers of fundMyLife? You can head on over to fundMyLife and ask our awesome financial advisers questions. Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Advisers’ Take: Biggest Misconceptions About Financial Advisers?

Advisers of fundMyLife share the biggest misconceptions about financial advisers

Financial advisers have an important job to do – plan your finances, provide advice on insurance and investments, etc. The best ones will be your lifelong friends as you move through different stages in your life. However, the bad ones are the ones that leave the strongest impressions on consumers – news, viral social media posts, angry word-of-mouth, etc. In fact, members of the public may have different ideas about who and what financial advisers are. In this article,  fundMyLife asks three of its financial advisers – Kennard Lee from AIA, Winifred Tan from Great Eastern, and Ryan Teo from AXA – about the biggest misconceptions about financial advisers.

Kennard Lee, AIA

Misconception #1: All advisers are the same

Consumers think that all advisers are the same. As such, they end up buying policies from friends and family. While relationship is important, it is more important to take into account the quality of the person providing the financial advice.

One of my clients bought several plans from her aunt. Upon finding out more information, I realized that she spends less than $200/month on insurance. It turned out that her combination of plans did not provide adequate coverage. For example, her hospitalization plan was at the lowest grade. She also purchased an endowment plan which she thought yielded 4%, but was only a projected yield as shown in the benefits illustration. I succeeded in redoing her plan and building a portfolio that best suited her. The financial planning jackpot is a friend or relative who is also competent at his/her job at advising. However, it is more important to choose someone who can advise well first and foremost.

People think that products are different across different insurance companies. But based on my calculations, the difference between insurance products of the same profile and type is only 5%. This means it’s never about the product. It is more about the adviser who is serving you and how much they care about your financial success. These advisers will always make sure your portfolio is never out of date, and make sure it is updated according to your life stage.

Misconception #2: Insurance agents can only sell insurance

Insurance agents are not just for selling insurance only, but also sell investment products. Competent agents will help their clients achieve good returns, and conversely those agents who are not as competent will achieve poor returns for his/her clients. Apart from being competent, good agents also truly cares for his/her clients as well.

My personal policy is to buy the same sub-funds that I recommend to my clients. By recommending what I myself use, I have skin in the game.

Misconception #3: Advisers from banks are the same as the ones from insurance companies

The products you purchase from an adviser from a bank is different from products you purchase from an adviser from an insurance company.

For example, purchasing a mutual fund from a bank is different from a investment-linked sub-fund. Consider this scenario: you purchase a $100k fund product from either a bank or an insurance company. The following day, a catastrophic financial event like the bankruptcy of  Lehman Brothers. The stock market collapses, and your $100k becomes $40k. The next day, you die of an accident. If you purchased the $100k fund from a bank (a mutual fund), your family will only receive the $40k. However, if you purchased the $100k fund from an insurance company (a investment-linked sub-fund), your family will receive $100k back. That’s a great safety net to have.

Winifred Tan, Great Eastern

Misconception #1: Financial advisers are the same as insurance agents

The financial planning industry has evolved since the past. With a population that is better educated, and a society that faces more problem that it did today, there’s a need to make sure that someone stands by you to help you.

Financial advisers are not just insurance agents, where we sell or take orders from clients. For us, we are qualified consultants – some even have Chartered [fML: professional bodies] or Masters – and know finance and insurance/investment related knowledge and applying them to your lives. We also know retirement planning, estate planning, tax planning, and we have advanced certifications in theses specialized areas!

Misconception #2: All financial advisers are the same

Regardless of the good or bad experience that you had with the advisers you met, there are so many different advisers out there that you should not generalize them. There are very good/responsible/ethical ones out there, and this is how you tell them apart.

Firstly, you usually know the good ones via referrals. Secondly, the good ones have good resume, experience, and qualifications that set them apart from others. Thirdly, advisers who conduct seminars and other forms of educational events are usually more credible.

Misconception #3: Advisers will sell me policies for their own gain

As mentioned, not all advisers are the same. There are very passionate ones who love to add value to their clients’  lives. The best ones are reliable, and clients love them and like to discuss not just financial issues but life issues as well.

Some advisers have better qualification like ChFC, Masters, CFP, etc, so they know matters that the members of the public do not. The number of years in the industry would show that if they are really the type to seek personal gain rather than clients’ interests.

Ryan Teo, AXA

Misconception #1: Clients should just leave everything to the adviser

When you have a financial adviser, you should not leave everything to them to handle. There are clients who let their adviser figure everything out by themselves without giving them enough information about themselves. Both parties should actively participate and play a role in the financial planning journey.

For example, you need to let the adviser know of any major changes in your life, such as marriage. Clients should also have a quantifiable goal to work towards, so that the adviser knows how to plot the route to get there. A lot of clients fear that if they reveal too much information, the adviser may sell them more things. This is detrimental to the client if he/she withholds information.

For investments, clients need to articulate the % returns that they want so that advisers can advise accordingly. There are clients who hand everything off to the adviser, but get upset when their expectations are not met because of a lack of communication. You have to help them help you by communicating your expectations. I suggest that clients and advisers engage each other quarterly to review the investments and discuss strategies.

Misconception #2: All advisers that you see in roadshows are bad

One of the biggest misconceptions about financial advisers is that only bad advisers go on roadshows. However, good ones still go for roadshows because it is one of the many ways to meet potential clients. In road shows, there’s a fear that advisers whom you meet will sell you a plan straightaway. But, the best ones will first take a look at your finances before doing anything else.

fundMyLife Summary

Hate them, love them, financial advisers are here to stay. We hope you learned about the biggest misconceptions about financial advisers, from the advisers themselves. In their own ways, all three advisers emphasized the fact that not all advisers are the same. It seems that the public tends to hold a single impression of advisers, which is wrong since individual adviser has their respective edge.

Kennard emphasized the importance of competence over familiar relationships when it comes to financial planning, i.e. pick a good planner over supporting a friend or family. He also makes the case for insurance agents being able to advise on investments and not just insurance since the best agents can obtain the best returns from investments because good agents care about their clients. Winifred talked about the difference between advisers, and shared some tips on how to find the best ones. Ryan noted that it takes two hands to clap and that clients must work closely with their advisers to reap most of the benefits of the advisers’ advice.

Ask fundMyLife financial questions today!

If you don’t know who to ask or where to find amazing financial advisers, we got you. If you want to engage more financial advisers, or if you haven’t found the right one, why not consider advisers of fundMyLife?

Intrigued about any of fundMyLife’s advisers in this article? You can connect with either Kennard Lee from AIA, Winifred Tan from Great Eastern, and Ryan Teo from AXA, just click on the link in their names and you can ask them questions directly from their profile pages. Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

A Really Simple Guide On Investment Products To New Investors

Guide on investment products

[9 min read]

Written by Sherwin Chan, edited by Jackie Tan

Hello readers of fundMyLife articles! If you have read my two previous articles, which are here and here, you probably figured that I am relatively new to investing that has just a couple of years of experience.

Truthfully, when I first said to myself that I needed to start investing, I had a lot of inertia in the early stages because I didn’t know where to look for information or even what type of information I should be researching. And that’s why I am writing this article for those who are new to investments. Hopefully, I can be of some form of guidance to them.

What this article will cover is:

  1. How each kind of investment is suitable to the needs of different groups of people
  2. Pros and Cons of the major investment types
  3. My humble advice

Here’s the kind of investment that is covered below: 1) Stocks, 2) Bonds, 3) ETFs, REITs, and Index Funds, 4) Insurance products, 5) Alternative Investments

Disclaimer: this article should serve only as a general introduction to investment products. As such, do your own research and due diligence before you purchase any investment products. 

#1 Stocks

Who is it suitable for?

There’s no definite answer to this question. Why? It’s because there are so many stocks out there that every kind of investor can almost certainly find a stock that matches their financial needs. Still, pairing your financial needs doesn’t mean you should plunge straight into the stock market. There are other factors to consider as well.

For instance, one must have good knowledge and have the time to track how the stock market moves to time the entry and exit well. This knowledge is a combination of fundamental analysis and technical analysis because if you enter and exit the stock market at the wrong time or pick the wrong ship to board (analogy), you probably will lose money or won’t earn as much. Also, you should have sufficient financial and mental strength to weather volatility. The stock market is very liquid which results in high transaction volume, and therefore prices change quickly based on new information or market irrationality. As such, having the financial strength to weather volatility is critical, and you shouldn’t enter the stock market if you’re dumping a significant portion of your assets into it. Always be prepared for the worst.

Pros & Cons:

Pros:

  1. Potential for very high returns. (Look at Apple, Google 10 years ago and now)
  2. Some stocks offer stable, consistent dividends that investors can rely on as income.
  3. Almost all industries that you can think of are covered, and this is an excellent avenue for diversification across sectors.
  4. Stocks are easy to liquidate due to the ample liquidity in the market.

Cons:

  1. Higher risk especially if you pick wrong.
  2. Higher volatility in the short run than the long-term
  3. Time and effort are required for analysis.

My humble advice

Don’t be afraid of entering stocks! I know most of my peers are quite apprehensive about entering the stock market because to them, as newbies, it is venturing into the unknown. I genuinely understand that anxiousness, but it’s important to take your baby steps at the start. As I always mention to my friends, always start small and make as many mistakes as you can when your base capital invested is small. It’s better to lose $3,000 now than to lose $30,000 in the future. The earlier you make mistakes, the more you’ll learn because you know what doesn’t work. I’ve mentioned other advice regarding stocks on my first article here that I can only reiterate. Read voraciously, don’t limit yourself and test your pick across different strategies!

#2 Bonds

Who is it suitable for?

Bonds are suitable for those looking a regular source of income. Most bonds provide regular coupon payments that are stated in the terms, and this payment is pretty much guaranteed so long as the company doesn’t default on it. Bonds are also suitable for those looking for diversification sources from stocks and other forms of investments because bonds are stable long-term investments that can provide a decent income. Also, because it is usually recommended to hold the bond till maturity, investors should have sufficient financial strength to hold them until maturity.

Pros & Cons:

Pros:

  1. Returns are fixed and pretty much guaranteed so long as the company doesn’t go kaput
  2. Less risky in general compared to stocks in general
  3. You get the benefit of knowing what a good bond versus a junk bond thanks to credit rating companies

Cons:

  1. Sizeable principal sum needed to purchase the bond in the beginning
  2. May lose value in the future if interest rates rise especially for longer-term bonds
  3. May lose value if you don’t hold them until maturity
  4. Not as liquid as stocks.

My humble advice

Don’t shy away from junk bonds. It’s not that I’m saying you should buy junk bonds, instead, do give some considerations to junk bonds as well because junk bonds often have higher returns that AAA-rated bonds. Remember, go for the bond that you feel comfortable with and can maximize your wealth. Also, don’t underestimate the interest rate risks on bonds especially for those investing in long-term bonds. For all investors, it is essential to have a basic understanding of how the interest rates move and how it affects your investments.

#3 ETFs, REITs, Index Funds

Who is it suitable for?

For this class of assets, while ETFs, REITs and Index Funds are entirely different things, one thing they have in common is that they are all baskets of investments. These usually hold more than one financial product in it and as such, are decently diversified within itself. This means that there are less diversifiable risks and hence provide a safe investment with not so bad returns. Additionally, since it is usually passively managed by a finance professional, it is suitable for those who have no time to micro-manage their portfolio and for newbies who are risk-averse and not sure of what other investment products to venture into.

Pros & Cons:

Pros:

  1. Can provide stable returns
  2. Have lower volatility than individual stocks
  3. An easy way to track the health of an industry/sector/economy
  4. Some are passively managed while finance professionals actively manage some
  5. Good for newbies who are not sure of what stock to buy but know what sector is good. (Reduces the chances you make a costly mistake)

Cons:

  1. Returns are lower than individual stocks
  2. For those managed by finance professionals, you still must pay management fees even if you don’t make a profit
  3. If you do make money, they also take a cut of your profit
  4. Your exposure may be too focused on the industry/sector causing you to have systemic risk

My humble advice

Always check what is contained in the basket you are buying. If you don’t check what’s inside the basket you are purchasing; you’ll never know whether there are golden eggs inside or rotten eggs inside. As such, it is essential to understand what you’re buying. I mean, it’s basic common sense to know what you’re buying right? Additionally, always be sure to check the management fees and the commission fees the finance professionals are getting from you. In times of recession and periods of low return, these small amounts make a huge difference in whether you make a net profit or a loss.

#4 Insurance products

Who is it suitable for?

Almost everyone. Now, talking about insurance warrants its series of articles but thankfully fundMyLife has covered this topic here and touched on the basics of it. But as a summary, there are many different forms of insurance available out there in the market, and you really should talk to a financial consultant to understand more and tailor your needs to the correct financial products. However, in general, it is suitable for people seeking ultra-long-term financial security and for those who are risk averse but do not want to earn the measly interest rates a savings account in the bank provides. Also, it is advised that you hold these products for the long term to enjoy the full benefits of it and hence, it is more suitable for those who have the financial capability to sustain this commitment.

Pros & Cons:

Pros:

  1. Returns are stable especially if you hold for ultra-long-term
  2. With proper research and planning, some have high bonuses over the long run
  3. Variety of insurance products are massive, and some will suit your needs

Cons:

  1. Returns may be lower than the market average
  2. Some products are not suitable if you need high liquidity in the short term
  3. You need to read all the fine print and understand everything inside it
  4. Most products require regular premium top up
  5. Be careful not to be scammed by those products that promise high returns but may not suit your long-term needs

My humble advice

I am no expert in insurance products and as such, implore you to read other fundMyLife articles on the basics of insurance as a start. One thing to know about insurance is that while there are many financial consultants out there who are out to eat your commission, there are many others who have a genuine passion in helping you meet your financial needs. One way to protect yourself is to do your research before engaging one to prevent yourself from falling into investment traps.

#4 Alternative Investments

Who is it suitable for?

Alternative investments here are those types of investments that don’t fall under the above four categories. For example, the most prominent alternative investment product is currently cryptocurrency. Other forms of alternative investments include art, vintage cars, timepieces, wine, etc. While there are many alternative types of investments out there, these usually don’t have the size and liquidity of the above four, and as such, I only recommend it to those who are willing to take risks and for those seeking to diversify away from regular investment products.

Pros & Cons:

Pros:

  1. Returns can be eye-popping (Bitcoin if you time it well)
  2. A wide range of choices available for you and as such, provide useful avenues for diversification

Cons:

  1. Returns can be wild, and losses can be massive (Again, look at bitcoin)
  2. Information about it is a lot lesser and are less accurate than those provided by reputable firms.
  3. Usually not very liquid investments

My humble advice

Truthfully, I am not well versed enough in this area of investments that I can provide you guidance per se. However, what I can tell you is that this area of finance is niche, and most investors are not suited for it. If you ever dabble in this area, make sure you do your proper research on the technical details, legal details etc.

Conclusion

What I have written above is just a simple guide for newbies to understand more about the different product types and by no means a comprehensive list. Newcomers should still do their research on every kind of investments and more importantly, understand their individual financial needs and goals so purchase the correct investment products. It is imperative also to have some basic finance knowledge before you genuinely commit your money into the investment. All the best and may you be profitable in your endeavours!

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

My First Time Was Painful (When I Started Investing)

Why and how I started investing

[6 min read]

Written by Sherwin Chan, edited by Jackie Tan.

How I got lucky with boredom

Before you read on, what I have written below is more on how I got started with stock investing and some snippets of suggestions inserted based on my personal experience. It won’t be a long read but neither will it be short. Hopefully, I can provide prospective investors with some peace of mind of what to expect. I’ll follow this article up with another one that will help you understand the different types of financial opportunities and how some will not suit you.

Boredom

I started investing due to boredom.

Now hear me out, it is not that I do not have the awareness that early financial planning would be beneficial in the future, but rather the reason why I first picked up a book related to investments was merely due to boredom. I started investing when I was in the army doing my national service; I was a clerk and was fortunate enough to stay out (go back home daily). Since my daily duties were not physically exhausting, by the end of the day, I had sufficient energy to engage in my hobbies – binge watching my favourite shows.

As time grew on, I got bored of the routine where I just “consume YouTube videos like there is no tomorrow” lifestyle and decided to read more educational non-fiction books instead. This led me to non-fiction books that eventually brought me to topics like economics and investments. I decided to pick up the book on “Stock Investments for Dummies” (I was a dummy then so I might as well start from the book designed for me) and was pretty apprehensive about it at first but still gave it a shot.

Me giving a shot at the book led me to spend the next four months intensely devouring its contents. I studied my book as if I was taking A Levels and learned lots of stuff from it. Now, I’m not promoting the book but merely telling you how I felt when I first dabbled in a topic that I did not know. I was like a caveman seeing the fire for the first time; everything was new and too exciting for me to pass. I’m sure that’ll be the case for you newcomers as well.

Suggestion #1: Your first book should give you the general idea of where to begin

While we are on this note about what books to start with, I suggest newcomers pick up a book that covers the different forms of investments. I started with “Stock Investing for Dummies” (more specialised to stocks) partly because I already knew I wanted to try stocks first before others, but also because I couldn’t find the “Investment for Dummies”, the more general one, and was lazy to go find it on other bookstores. For beginners, always know what choices are available to you first before picking one and going to learn more deeply about it. This means knowing what a bond is, what are ETFs, what are REITs and all the other possible investment products available out there for you. The more you know about each type, the better you can invest based on your needs. Ultimately, if you don’t know anything about investments, it’s best to start with the definition, scope and depth of it first! I will be covering more the different forms of investments in the follow-up article that will be so stay tuned!

Creating my first account

Apologies for the slight digression above but that’s how I am going to place my suggestions. They are all just snippets of useful information, that will be inserted wherever appropriate. Going back to my story…

I eventually got into the process of creating my first brokerage account with DBS Vickers Securities, and it was at this point that I felt that I should have done more. I was naïve then and just assumed that a good brand name for a company was all there is to a brokerage account; I’m not saying that my experience DBS Vickers is terrible, in fact, my experience so far with them has been positive. All I am saying is I did not do the necessary research properly before choosing my brokerage firm. I was lucky that DBS is an excellent firm with a strong reputation, but for other first-timers into the investment scene, I shall create a short to-research list about the brokerage account in the follow-up article (otherwise we would never end this article). For now, let me just share with you my experience when I created mine.

When I first wanted to create an account, I was not eligible for a full trading account (above 21 years old) and signed up under their young investor scheme (18-20 years old) instead. They explained to me what the benefits of having their trading account was and gave me a short risk-profile test and sizing my investment knowledge. Which basically went like this…

Well, the picture might have slightly simplified things but what I can say is that they do all the assess you in a natural flow of conversation that helps keep young, apprehensive investors like me at ease. They also informed me that the brokerage account is different from your usual bank account and how to top up money into it to start trading. They also explained the different avenues which they can help me improve my knowledge of investments. I eventually got my brokerage account and SGX CDP account (requirement if you wish to trade in SGX) created at one go in 15 minutes. With this, I finally had a powerful platform to start my stock picking.

Devouring information

Now doing all the above will only give you the platform to start investing. The other, more difficult portion is knowing what to buy. What I’ve learned over the past couple of years is the importance keeping up to date with industry, economic, political trends and random information off the news. During the whole course of the journey, it is essential that you know everything and anything about the stock you want to buy or already have. Only when you know the latest trends, predictions in the future can you be “in-the-know” about what stock to buy, whether the industry is expanding, threats to your company etc.

Suggestion 2: Start reading early

You don’t have to have an investment account to start knowing what is happening around the world. A lot of news event around the world occurs in a sequence of events; they don’t happen singularly. For instance, predictions you hear about quantum computing doesn’t just come from the wild imagination of a tech geek, these futurists often have seen information and news from around the world that gradually roll out. If you don’t expose yourself to this small but gradual steady stream of information, you will never be able to analyse trends yourself and must always rely on others. What I’m saying is if you’re the kind of person that doesn’t have the habit of reading news regularly, it’s difficult to follow what is happening in the world and that puts you at a considerable disadvantage over other investors in the market. You’ll always be behind the curve. So, start early!

Choosing the first stock

The first stock I picked was a company listed in SGX. It was G92: China Aviation Oil and getting to this stage where I decided my first stock took me two weeks of research. How I went about choosing my first stock was looking at things from a macro to a micro perspective. Firstly, I analysed the country and the sector that I thought had growth potential. In this case, I chose China’s booming aviation sector. After which, I decided on the industry within the sector, and this was the aviation fuel supplier business which China Aviation Oil was engaged in. I mean, planes need fuel to fly so being in the aviation fuel business would suggest that this industry would be part of the booming sector. After choosing the industry, I narrowed down to the different companies and set a price target to buy & sell. Once I felt the price was sufficiently low and had excellent earnings potential, I bought the stock.

How I chose my first stock may seem easy but trust me, it was tough. Firstly, there are many booming industries and stocks with high potential and narrowing it down to one was hard. It is always best to have a few shares in mind eventually and pick one with the most earnings potential based on the current and future market price. There is a reason why I took two weeks to do this because there were many considerations and it is okay to feel lost during all the research. After all, the companies and industries on the list are probably those that you never heard of so take your time to understand as much as you can!

Suggestion 3: Don’t limit yourself

You may have heard from your parents, investment gurus that blue-chip stocks (large established firms) are stable and provide excellent earnings. While it is true they are stable; they may not offer the BEST gains. Don’t just limit yourself to a particular type of stocks, countries, industries etc. Always keep an open mind and do your stock screening well. Always remember to do your research correctly and BELIEVE IN YOURSELF! It’s better to make mistakes when your starting capital is small than make an error in the future when your wealth is more substantial.

Suggestion 4: Test whether your pick survives the different ways of picking a stock

My method of going from macro to micro can be a way which you choose shares. However, there are many other strategies which people employ. Pick an approach first and once you have a few companies narrowed down, test them with different strategies and see whether they survive the litmus test and is still worthy of a purchase. The stock doesn’t have to endure all approaches but the more the better. Also, don’t pick a plan that does not align with your goals and needs.

What’s next after you purchase your first stock?

Be patient. That’s the number one key. I know it is tempting to sell your stock when you see a sizable increase in its value OR a sudden decrease in value but always stick to your price objective. In the meantime, it is essential to check the value of the stock at regular intervals to monitor for sudden price changes. Sudden price changes might mean there is new information that may affect your stocks current and future value. During all these, never stop keeping yourself up to date with the latest trends and keep an eye out for the next opportunity. New information in the market can change your price objective and remember to re-evaluate the present and future value of the stock regularly.

My journey from picking up the first investment book to purchasing my first share took me a total of 4 months. It may seem long but in hindsight, the moments I had when I felt lost was invaluable because it taught me many things about how to do and not-to-do things. Trying to establish a sense of direction was arduous and painful, but I’m glad to have gone through this journey. I am now more financially independent and able to help my fellow peers. I am continually learning and from my experience, the critical thing I can share is TRUST YOURSELF.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

 

Ask fML Advisers: What Are The Most Common Questions On Integrated Shield Plans?

fML advisers share the most common questions on integrated shield plans

[5 min read]

MediShield Life is a national health insurance scheme that protects all citizens and PRs regardless of economic status and health to cope with large hospital bills. They can also purchase Integrated Shield Plans as an upgrade to their basic plan to stay in higher class wards. We had the impression that there is plenty to add on top of our previous piece on the most common misconceptions about Integrated Shield Plans. As such, in this article fundMyLife asks another three of its financial advisers – Michelle Ngiam from Great Eastern, Roshan Belani from AIA, and Melvin Liu from Manulife – about the most common questions on Integrated Shield Plans.

Michelle Ngiam, Great Eastern

Michelle Ngiam, Great Eastern
Michelle Ngiam, Great Eastern

#1 Do I still have to pay for MediShield Life when I purchase an Integrated Shield Plan?

Yes, an Integrated Shield Plan is an upgrade of MediShield Life. Therefore, MSHL is still embedded within the IP. By paying the premium to the private insurer, you are actually paying for 2 components – MediShield Life premium and private insurance company premium. CPF still deducts the MSHL premium from your payment.

#2 I already have MediShield Life. Why do I need to purchase an Integrated Shield Plan?

MediShield Life will provide coverage for your large hospital bills in Class B2/C wards in government hospitals. If you prefer to seek treatment in Class A/B1 or in private hospitals, MediShield Life will not be able to cover the bill fully, leading to you forking out more from your MediSave account or cash.

Therefore, by upgrading your MSHL with an Integrated Shield Plan, you have the choice to cover all the way up to private hospitals. This allows you to have the option to go to any ward of your choice.

#3 Will the premiums increase once I purchase an Integrated Shield Plan?

Yes, generally premiums will increase as you get older. However, there are also a few factors at play here.

Firstly, it depends on how the insurance companies price their premiums. Most insurers also use an age-band premium scheme like MediShield Life. For example, if you are 35 years old, you will be paying the same premium as the rest of the people insured within the same age band of 31 to 40 years old. The premium will increase once you enter the next age band (in this example, 41 to 50 years old).

Secondly, they are affected by government policies regarding health insurance in Singapore. In 2015 when the government upgraded MediShield to MediShield Life (MSHL), the premiums were also increased with added benefits. With the upgrade of MSHL, insurance companies had to reprice their plans to cover the new premiums of MSHL, with enhanced benefits for better overall coverage.

Lastly, how the claims experience for the insurer has been like. In recent years, many insurers have faced rising claims and it has affected the premiums leading to premium hikes. The increases were largely focused on plans covering private hospital treatments and stays.

Roshan Belani, AIA

Roshan from AIA
Roshan Belani, AIA

#1 Am I covered for overseas treatment?

The answer is both yes and no. For most integrated shield plans, overseas treatment is only covered if it is deemed to be an emergency. At best, even if a plan allows for general overseas coverage, the benefit payable is still limited to the level of Reasonable and Customary charges in a Singapore private hospital. With this limit, say if a surgery in the US cost $20,000, had the same surgery been performed in a private hospital in Singapore at $10,000, then the claimable amount would only be based on the customary charges in Singapore, which is $10,000 in this example.

As such, it is important to determine whether overseas coverage is necessary. For most who are working in Singapore, shield plans generally provide good level of coverage for the individual based here. However, for those who are working or studying overseas, having a global plan or even a plan that is available in that country will be a great complement to the shield plan. The shield plan should still be active in case the individual decides to come home to Singapore for various reasons such as finding a job, starting a family or even retirement.

#2 Am I covered for pregnancy?

This is a question commonly asked by first-time mothers as they prepare themselves for the cost of pregnancy. To be very clear from the beginning, a pregnancy without complications with straight forward procedures will not be covered under a integrated shield plan. This is because there was no ‘risk’ or incident that required protection from per se and thus, the bill would not be reimbursed. However, should pregnancy complications arise during the pregnancy, and if it falls within the definitions as stated in the integrated shield plan, the bill would be reimbursed accordingly.

Of course there are maternity insurance plans out there that provide cover for even normal deliveries and prenatal consultations. However, they are in addition to the integrated shield plan and generally cost much higher premiums.

#3 Does the plan cover me for outpatient treatments?

Again, the answer is yes and no. For outpatient treatments, they are claimable only under two conditions: 1) Treatments and consultations eventually lead to confinement in the Hospital for hospitalisation or a surgery being done and 2) falls within the allowed number of days for pre & post hospitalisation benefit. Both conditions must be met and if either one fails, the outpatient treatments is not claimable.

To give an example of how condition 1) might not be met, an individual who fractured his foot was referred to a specialist but was told that no hospitalisation or surgery was necessary. Consultations and treatment costs for its healing would not be covered since the individual did not have to stay in the hospital or require a surgery.

To give an example of how condition 2) might not be met, an individual recalled having seen a specialist about 4 months (120 days) from his hospitalisation. His integrated shield plan only allowed for 100 days for pre-hospitalisation treatment. As the number of days exceeded the allowable limit (120>100), the consultation and treatment that day would not be reimbursed.

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

#1 Can my hospital plan cover me for scope procedures (eg. colonscopy / endoscopy etc)?

Colonscopy/endoscopy (and similar procedures) are considered as a day surgery procedure and  will be covered under shield plans. However, it’s important to note that this will depend on whether its a routine check-up or whether it is ordered by your doctor during a consultation. It may not be covered if it is simply a health screening.

#2 Can my shield plan cover me if I am hospitalized overseas?

Overseas cover generally apply to emergency hospitalization, and for some insurers, benefits may allow for pre-arranged overseas inpatient treatment which is pre-approved by the insurer. It is best to buy additional travel insurance if going overseas.

[Editor note: We wrote something about personal accident plans when you travel overseas, so you should check that out too]

#3 I recall I have bought a hospital plan, but I can’t remember which insurance company I bought from or what plan I bought. How do I check?

You can login to your CPF account under: My Messages > Healthcare > MediShield Life/ Integrated Shield Plan. From there you should be able to see which company is your insurer. You can contact your insurer to find out the details of your plan.

fundMyLife Summary

Michelle provided the rundown on common consumer concerns on getting Integrated Shield Plans, such as what it is and whether premiums will increase. Roshan explained that Integrated Shield Plans do not cover normal pregnancies, but will kick into effect when there are complications that occur during pregnancy. He also shared that Integrated Shield Plan claims for outpatient treatments can be a bit complicated, as it depends on whether the outpatient treatment results in hospitalization/surgery and that the outpatient treatment fell within a stipulated time frame from hospitalization. Both Roshan and Melvin wrote about whether Integrated Shield Plans will help when the consumer is overseas – they both recommend that it’s wiser to get travel insurance when travelling. Melvin cautions that endoscope procedures is covered if it is ordered by a doctor, but a routine checkup is not covered. He also gave advice on how to check which company the consumer bought the Integrated Shield Plan, by going to the CPF website.

Conclusion

That’s all folks! We hope this article shed a bit more light into the most commonly asked questions on Integrated Shield Plans. If you’ve more queries on the plan or are considering to get insurance but don’t know who to ask, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either  Michelle Ngiam from Great Eastern, Roshan Belani from AIA, or Melvin Liu from Manulife, just click on the link in their names and you can ask them questions directly from their profile pages.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are The Common Misconceptions About Integrated Shield Plans?

Financial advisers of fundMyLife share some common misconceptions about integrated shield plans

[5 min read]

According to the Ministry of Health, the MediShield Life is a national health insurance scheme that provides lifelong protection against large hospital bills. On top of MediShield Life, locals and PRs can purchase Integrated Shield Plans from six insurance companies, which provides additional coverage for higher hospital class wards. While MediShield Life is relatively straightforward, Integrated Shield Plans can be quite a tricky matter.

In the past, we wrote about the considerations to make before purchasing Integrated Shield Plans. However, we also realize that there might be clarification required before embarking on buying these plans. Who better to clarify possible misconceptions, but our very own financial advisers of fundMyLife? In this article, we ask three of our fundMyLife financial advisers – Winifred Tan, Jonathon Han from Prudential, and Ryan Teo from AXA – about the common misconceptions about Integrated Shield Plans.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

#1 “IP plans are the same as CPF Medishield Life plans”

Firstly, Medishield Life (MSHL) and IP plans are not exactly the same although they have some overlapping similarities. Both MSHL policies and IP policies are payable by CPF. MSHL is a compulsory hospital/surgical insurance for all Singaporeans and PRs which covers only basic hospital stays, e.g., daily room and board benefits, and basic surgeries, but with limitations on claim amount and also on type of hospital that the user can stay in (up to only public B2 ward, 6-bedder ward).

IP plans are composed of MSHL as its foundation and an additional private insurance on top of it from either of the six insurers in SG to remove all the category limits and allow users to even insure themselves for better types of hospital services e.g. Private hospital, or Public A ward (1-bedder). It is thus essential to get an Integrated Shield Plan if one has enough CPF-Medisave to afford it as it would really help when bills incurred are large, as in most cases MSHL only covers 10-20% of a bill!

#2 “Why must I get the rider? I’m still young and don’t want to waste my own cash to buy a rider which I would probably wouldn’t claim anyway”

Whether you are young or not, every hospital/surgical bill incurred will first subtract off the Deductibles and 10% co-insurance – essentially you have to co-pay this part – before you can claim using the main IP plan paid by CPF. It’s not an easy part to explain, so you can either ask me directly or drop me a message on my Facebook page. In terms of probability of going into hospitals, perhaps things like critical illnesses are rarer among younger people but what about the possibility of being active in sports or at work that you injure yourself and require a say, surgery e.g. ACL tear/burns/fractures? How about Congenital illnesses that may out of a sudden, strike in a young adult? These are the probabilities we need to guard against and having the entire package (basic main IP plan + rider) would really help you mitigate such financial risks

#3 “I have a hospital-cash/hospital-income benefit rider in my whole life plan! It’s so much cheaper than the rider of the IP plan so why should I waste money to get this when I can claim through the whole life rider?”

Firstly, the coverage is entirely different in the hospital-cash rider of the whole life plan vs a full IP package. The former only gives a small payout, i.e. $30 a day when you’re hospitalized and warded to help replace your possible income loss during the time you’re hospitalized. They do not normally pay for surgeries/outpatient treatments/followups as well. The latter really covers all of your hospital bills as well as surgery/outpatient/followups/pre-admission tests from the first dollar onwards. The latter is also more of a reimbursement of bill instead of extra payout for income-loss. Bills often can be as high as $1,000 even for minor surgeries or hospital stays. Thus, what we have to focus on, is to ensure the bills are covered for, and then work on getting the extra hospital-cash for some income replacement during the time that you’re unfit for work!

Jonathon Han, Prudential

Jonathon Han's picture
Jonathon Han, Prudential

#1 Buying an ISP means anything to do with hospitals can be claimed

ISP are hospitalization plans. What this means is that the customer must be HOSPITALIZED in order for the plan to take effect. Should the client see a specialist – even with a referral letter – without staying in the hospital, they will not be covered for the medical bills. However, if their specialist check-up requires them to be warded for observation or medical treatment, then yes the bills will be covered.

Special circumstances can be made for customers to claim their ISP without being hospitalized, and these include A&E treatment and follow-up specialist treatment from previous hospitalization stays.

#2 Having a company insurance means I don’t need to buy an ISP

Not true. Why?

Firstly, a majority of company insurance is not as comprehensive as personal insurance. Personal health insurance can protect individuals from medical bills of up to $1.5 million a year, whereas a lot of company insurance barely crosses the $20k of medical coverage per individual per a year.

Secondly, company insurance is non-transferable. What this means is that the moment you leave the company, your coverage will stop. Some of my clients had to leave the company due to their inability to work, and leaving the company means that they no longer are covered under the corporate insurance. At this point of time, if we don’t have an ISP, we are left exposed to the mercy of the bills.

Ryan Teo, AXA

Ryan Teo's picture
Ryan Teo, AXA

 

#1 Integrated Shield Plans payment is separate from MediShield.

When you sign up for an Integrated Shield Plan, you’re still paying for the MediShield component as well. This is because Integrated Shield Plans are not separate coverage, as it is an additional top up coverage to MediShield.

#2 It is a minor matter to switch Integrated Shield Plans

Before you switch providers, you need to weigh the options that the other provider gives, especially if there was a previous surgery or pre-existing illness. Cost-wise or benefits may seem better, especially as plans improve; however, you may not enjoy the same protection you previously enjoyed for existing medical conditions. In fact, under your old plan, you may potentially pay more for the same level of coverage.

#3 No need to pay a single cent if I have full rider coverage by Integrated Shield Plans

Actually, it is not really true. You may still need to pay a cash deposit if it’s required by the hospital. Therefore, it’s useful if possible to have a letter of guarantee (LOG) as an assurance of payment offered by insurers before any hospital admission.  It can help to waive any cash deposit required by the hospital or bill payment. However, it’s still up to the discretion of the hospital to accept the letter. You may still need to fork out your own money first before applying for a claim.

fundMyLife Summary

Winifred clarified the differences and similarities between Medishield and Integrated Shield Plans. Ryan also expressed similar sentiments – it seems that consumers do mistake MediShield and Integrated Shield Plans as separate kinds of plans, when the former is a sub-component of the latter. No wonder this necessitates clarification on the MOH website. Winifred also emphasized the importance of riders, and explained the differences between hospital-cash rider of the whole life plan and the rider of a full IP package. Jonathon cautioned that not everything hospital related is claimable using Integrated Shield Plans and stressed the importance of not relying on company insurance. Ryan also debunked the myth that it is a small matter to switch insurers for Integrated Shield Plans, and talked about cash deposits during hospitalization and how Letter of Guarantees can alleviate the financial pressure.

Conclusion

We hope this article was helpful in addressing the common misconceptions about Integrated Shield Plans! If you’ve more questions on the plan or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Winifred Tan from Great Eastern, Jonathon from Prudential, or Ryan Teo from AXA, just click on the link in their names and you can ask them questions directly from their profile pages.

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

The New Rider Co-payment: Is It That Bad?

fundMyLife discusses the new rider co-payment

In the past, patients with Integrated Shield Plan riders had their hospital bills completely paid for. However, this will soon be a thing of a past. Under the new rules announced on the 8th of March 2018, riders for Integrated Shield Plans will no longer cover the entire bill. Under the rider co-payment rule, you have to pay at least 5% of the hospital bill, at a maximum of $3,000/year.

Wait, but why?

In the past, we wrote on why this phenomenon happened, and observed that cost for services increase drastically when insurance is involved. According to Ministry of Health, the average bill of someone with a rider is around 60% higher than someone without. Patients with riders tend to seek treatment in private hospitals as well, which results in the difference in average.

In addition, the asymmetry of information for medical bills allowed hospitals to charge high prices for procedures. The first response to the increasing bills was introducing the medical fee benchmark to be implemented in second half of 2018, and this forms the second major response by MOH.

What does that have to do with you, you might ask? Premiums for Integrated Shield Plans increased over the years, with higher increases affecting older policyholders and those with private hospital plans. This is bad because if the increase in premiums continue, these people won’t be able to afford the premiums later in their lives. At the risk of being reductionist, the sequence of events goes like this:

  1. High expenditure due to riders
  2. Healthcare decides to charge more – insurance companies are paying, anyways
  3. Insurance company faces loss
  4. Insurance company charges higher premiums

Inappropriate levels of health service usage lead to an overall larger healthcare expenditure. Future consumers suffer directly due to escalated premiums. All Singaporeans also suffer indirectly since healthcare expenditure affects taxes.

Financial advisers of fundMyLife share their opinion

Out of curiosity, we asked the financial advisers of fundMyLife on their opinion regarding the rider co-payment. Disclaimer: their opinions were either paraphrased for reading convenience or quoted verbatim.

Winifred Tan

Winifred believes that full coverage is the best. She sees why the Ministry of Health wanted to implement this due to rising claims and “free buffet” effect, and that there are too many people in hospitals trying to take advantage of insurance policies. However, she would rather they increase the premiums just like last year instead of co-payment.

Another point Winifred made was that it is better to, if you can afford it, buy the best of hospital plans. She shared that most people think that they won’t need it and buy cheaper riders in a bid to upgrade it in the future. However, unpredictable changes like this will happen and presumably throw people’s plans awry.

Jonathon Han, Prudential

I think people are missing the point here. The fact is that there is going to be a gradual shift from government supporting us with subsidies and schemes to a more self-reliant ecosystem whereby we pay for what we want.

There is no point crying over spilled milk and who we should blame for this episode. We shouldn’t expect a U-turn from either the insurance companies or the government for this matter.

My suggestions are objective and pragmatic:

Over few years as we progress towards an aging population, we need to scrutinize our own portfolio to see if we have enough savings. Be real with yourself you haven’t saved enough or build up enough passive income. Because with whatever changes that might happen during the coming years (I don’t think this is the end), only one thing is constant. We are going to need more money for medical and for our daily cost of living. Hence, it’s better we start our planning today.

Ryan Teo, AXA

Private medical bills are increasing about 10-15% per annum for the past few years, so it’s little surprise that this has caused insurers plenty of concern.

But from a patient’s perspective, if the patient knows there’s insurance coverage and when the doctor recommends diagnostic tests etc, we’re not really going to say no. The main priority in our minds is just to make sure everything is okay. The cost part is taken care of by the insurance.

However, with the co-payment change, will we think twice about costs of tests? I doubt so. Health is still a priority.

A a consumer, it’s frustrating to not get full coverage or if you haven’t utilized your shield and your premiums are escalating. But it’s understandable that over the longer term, co-payment is the way forward. In fact, I think we’ll all be moving towards co-payment in the long run. 

Melvin Liu, Manulife

Melvin shared that it was easier to downgrade a rider than to upgrade it as upgrading requires medical underwriting whereas the other way does not. He recommends that you buy a better plan first to have more options available to you. On doctors who benefit from charging higher fees dues to insurance, he opined that it is challenging to figure out whether it is true or otherwise, and that good ones do want to treat the patients in the best manner possible.

Melvin said that it is easy to talk about co-payment for riders when it involves outsiders. For insurance companies, it makes sense. However, he pondered whether one holds the same opinion if his/her loved ones are the ones in hospital. He also questioned if a consumer would prefer co-payment or pay as-charged.

He also thought that there should be more innovative solutions out there such as Prudential’s PruShield, where customers enjoy premium discounts when there are no claims made whereas there is premium adjustment after claims. However, while solutions such as this is in the right direction for pricing structure, first-time buyers may reconsider getting riders in consideration of the likelihood of needing to pay higher premiums after claims.

What do others think about the rider co-payment?

We also browsed the Insurance Discussion SG Facebook Group, where a lively discussion took place. Both sides offered compelling argument for and against the new ruling. Of the few posts that we surveyed, there were thought-provoking comments. For example, a commenter mentioned why a doctor would order extra tests on a patient.

One of the many comments in the group that discussed the new rule. Source: Insurance Discussion SG.
Another comment in the same group. Source: Insurance Discussion SG.

Both comments brought valid points to the table. That said, who should we blame in this who affair? There truly isn’t a sole party to blame – affordable and fair healthcare requires the cooperation of various stakeholders. Consumers, insurance companies, and healthcare providers are all in it to make healthcare accessible for everyone.

How will this change things for consumers?

As of the moment of publishing, there are currently no plans to require existing policyholders to co-pay their hospital bills. However, this could change since insurance companies will come up with more competitive and innovative plans to encourage existing policyholders to switch.

Is it the end of healthcare that we know it for future policyholders? Not necessarily so. Medisave can cover some of this co-payment, and the ministry estimates that 1 out of 2 rider policyholder will pay SGD$100 or less for hospital bills across all ward types. However, financial planning in the future will probably have to include planning for rider co-payment, since riders no longer offer full cover.

Worried about this new rider co-payment rule? Fret not – head on to our site to ask our curated pool of trusted financial advisers on what your next move should be, if you have not purchased one.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are The Most Common Questions On Personal Accident Plans?

fundMyLife FAs talk about common questions on personal accident plans

[5 min read]

A personal accident plan is a plan that pays out when you are injured, resulting in either death or permanent/temporary disabilities. While it is seemingly simple, there are many considerations to keep in mind when deciding what plans to purchase. As such, there are plenty of questions on personal accident plans.

Where better to hear about these questions and get answers, other than asking financial adviser themselves? We ask the financial advisers of fundMyLife on what they are often asked when it comes to this plan. In this article, Roshan Belani from AIA, Winifred Tan, and Melvin Liu from Manulife share their thoughts on common questions on personal accident plans and their perspectives.

Roshan Belani, AIA

Roshan from AIA
Roshan Belani, AIA

Before I share the most common questions on personal accident plans that clients ask me, I would like to share a personal accident claims story of my own. I was in a team bonding trip in Desaru with my colleagues, and in one of the games I fell. The fall did not hurt me, but two colleagues landing on my foot did. A colleague sent me back to Singapore, where I sought treatment in Mount Elizabeth hospital.

I suffered a hairline fracture in my 4th metatarsal but I did not stay in a ward since I did not need to undergo surgery. In total, I paid around $3,000 for:

  1. MRI scans
  2. X-ray imaging
  3. Digital imaging
  4. Follow-up treatment
  5. Crutches

The Great Eastern Personal Accident Plan helped in defraying the treatment costs. I was out of action for 2-3 months, during which I had to was fortunate enough to have my colleagues’ help with my clients. In retrospect, I would have gotten a plan that provided a weekly payout during the period when I was unable to work. A plan with a weekly payout as a result of lost income would have helped with lifestyle maintenance.

“Is my accident plan on an annual basis or per accident basis?”

This is a question that clients often ask, that whether the accident plan they purchase is on an annual basis or per accident basis. The Great Eastern plan I was on when I was injured in the team bonding exercise had a $10,000/year cover. In contrast, the personal accident plan in AIA has a $4,000/accident cover. As such, the question might arise on which plan is better than the other.

Neither are better than the other – it just depends on your own injury patterns. Ideally, you should have both as these two forms of personal accident plans as these two kinds complement each other. A per-annual basis plan helps to cover what a per-accident basis plan cannot. After all, personal accident plans are generally affordable and are designed to not hurt your budget. However, if you have to choose between either, you have to decide whether you’re clumsy or accident-prone. It would be more beneficial if you anticipate frequent injuries.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

“What’s the coverage like?”

Most people have the impression that personal accident plans are for serious things like car crashes or loss of certain body parts, etc. However, it also covers for temporary injuries like sprains and cuts.

“Does it cover medical expenses?”

Yes, even for Traditional Chinese Medicine (TCM), chiropractor for some policies under Great Eastern.

“Does it cover dengue and zika?”

Yes, for Great Eastern’s case.

“What kind of accidents are considered accidents?”

Anything that is external, violent, and visible means and are not self-inflicted.

“What are the common exclusions?”

Personal accident plans typically exclude jobs such as sports coaching, military, professional motorcycling. Why? It’s because they take on higher risks! Accident plans are not to be take for granted. It requires you to take precautions as well before going ahead with dangerous activities.

“How long does it take to claim?”

2-3 weeks, if everything – documents in general – is furnished in order for claims.

“What is the claim period from the date of accident?”

Within 90 days after the accident, and normally we allow follow-up claims up to 365 days form the accident.

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

“Is personal accident plan the same as life insurance, etc?”

There are two groups of people when it comes to personal accident plans. The first are people who know what they want and why they are getting this plan. The second group of people are relatively more clueless, and confuse personal accident plans with other plans. Personal accident plans are useful because they complement other insurance plans for out-patient treatment and consultation.

“Is it useful to renew the personal accident plan?”

People ask this because they need to renew the plan annually even though they did not claim anything. I would encourage them to do so, since the premiums are affordable and it is truly useful when they need to claim for something. Even I myself have a personal accident plan for my own daughter.

I notice that consumers often do not have questions about personal accident plans, and are receptive to whatever I share with them.

fundMyLife Summary

Roshan first recounted a story on how he got hurt, and how his personal accident plan helped. He also discussed the differences between plans that have an annual limit, and plans that have a limit per accident. Winifred shared common questions on personal accident plans that she encountered with consumers, and provided useful clarification for each of those questions. Finally, Melvin mentioned a common misconception that consumers often have – mistaking personal accident plans with other plans – and encouraged yearly renewal of the plan due to benefits.

In general, from our conversation with some of the advisers, we had an impression that consumers ask many questions on personal accident plans. In addition, they commented that consumers often reply on their company’s group accident plans and do not scrutinize the details unless they need to claim for something.

Actionables:

  1. For freelancers, consider getting a personal accident plan as it will immensely help you when you injure yourself.
  2. If you have a corporate group personal accident plan, read the fine print and see if you have adequate coverage.

If you’ve more questions on personal accident plans or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Roshan Belani from AIA, Winifred Tan, or Melvin Liu from Manulife, just click on the link in their names and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Ask fML Advisers: What Are Your Opinions on Endowment Plans?

[5 min read]

Usually marketed as a form of “forced savings”, endowment plans are long-term plans designed to help you achieve a certain financial goal over a time period. We have written at length on endowment plans, and what to do if you ever think of selling them. However, while we hear a lot of stories from friends and family about endowment plans, what do financial advisers themselves think?

In this article, we asked three financial advisers of fundMyLife – Melvin from Manulife, Jonathon from Prudential, and Ryan from AXA – on what they think of endowment plans, such as interesting case studies and common misconceptions. Without further ado, here’s what they have to say:

Melvin Liu, Manulife

Melvin Liu's picture
Melvin Liu, Manulife

What is your opinion on endowment plans?

At least half of the people I encountered have the general impression that the returns are guaranteed, that they are safe and likely to hit the projected returns. They forgot that they were told that the projections are not guaranteed, only to remember when I reminded them.

When I look at endowment plans, I study three things:

  1. Guaranteed Cash Values/Projected Yield to Maturity
  2. Liquidity/coupon paying features
  3. Intention and suitability of clients for considering endowments as an option

In general, I noticed that endowment plans have evolved over the past five years and not all endowments are the same since each may differ in features such as premium-paying periods, liquidity options and protection features. The plans nowadays are competitive and the guaranteed amount upon maturity aims to be on par if not higher than total premiums paid.

My personal opinion is that people really need to understand why they are purchasing endowments in the first place. In addition, people generally should not plan to withdraw cash benefits (where applicable) from their endowment plan before maturity, unless its necessary.

What are some interesting stories that you’d like to share with us? 

There were two cases I was involved in.

In the first case, it involved a 21-year old lady who was seeking my advice on an endowment plan she recently purchased which she was having 2nd thoughts about her choice. She was contributing a substantial amount of her monthly income, i.e. $750/month, to a 25-year premium paying endowment plan. She got this particular endowment plan from someone she met at a roadshow. Moreover, she was a Malaysian working in Singapore, and having to sustain her premiums for a good 25 years here might sound challenging due to many potential uncertainties, to which she agreed. After consideration, she deliberated between keeping it for another 2 years or so when she could surrender it to take back some cash, or to surrender it straightaway after paying for about 6 months. I showed her objectively the difference in the amount she would lose if she hung on for another 2 years vs surrendering immediately, i.e. $16k+ vs $4.5k respectively, and let her make the call. She eventually managed to resolve it with the agent, and I didn’t probe further on her decision.

In the second case, I was advising a 50-year old lady on her plan to have a regular stream of income in about 2 years time for her retirement. She was surprised that I advised her that she did not need any plans after I reviewed and advised that she was ready to retire with the sum of money she already had. However, she nonetheless was keen to see what options she had to put her in a better financial position while meeting her income needs with a lower risk. We worked out a few options and suggested that she could prepaid an endowment plan in a lump sum so that she can start getting guaranteed cash coupons as retirement income from the second year onwards while maintaining her desired lump sum balance for security and/or legacy.

Endowments are generally more suited for those who wish to take on a lower risk, prefer having a guaranteed cash value component and have a specific time period to save and cash out for their needs.

However, endowments are often promoted also because they are easy to sell and easily positioned as forced savings e.g., for young adults who are starting to work. Like any financial plan, endowments should be recommended as an option only if it meets the client’s needs and not just simply a way to save money.

Jonathon Han, Prudential

Jonathon Han's picture
Jonathon Han, Prudential

What is your opinion on endowment plans?

A major misconception that people have regarding endowment plans is that they think that these plans are lousy. People often compare endowments with investments, which is like comparing apples with oranges – they are different asset classes with different risk categories.

Endowments are good to grow money at a secure rate for timed events, for example an education fund for children or a retirement fund. If you choose to invest in the stock market instead, the time horizon involved, e.g., 20 years, means that you risk a situation where you disappoint your children because the markets are not doing well.

Important point: besides using endowments for retirement and children’s education, it can also be used to build capital towards buying a second property. The advantage of using endowments over investments is that endowments are less susceptible to market fluctuations. On the other hand, property prices and the stock market are correlated; in the event of a market downturn, both stock and property prices fall which defeats the purpose of investing for a second property in the first place.

The second major misconception is that endowments have poor returns. The perceived low rate of returns is due to the financial adviser allocating too much percentage of the premiums to protection instead of investments. Ideally, you should find someone who can advise and allocate the investment-protection proportion correctly. In fact, it is possible that certain endowment plans can beat Singapore Savings Bond and fixed deposits.

Currently, most insurance companies have endowment plans where you can withdraw money after 2 years. However, if you choose to withdraw the money instead of re-investing for further compounding, the returns might be much lower at maturity. As such, I advise clients to take up fixed endowments but pay less premiums for a relatively higher rate of return compared to those cashback endowment plans.

The third misconception is a lot of practitioners introduce the projected 4.75% investment rate you see in the Benefits Illustration as interest, THIS IS NOT ACCURATE. The effective annual interest rate is also something consumers might find it hard to calculate unless they have an access to a financial calculator.

What are your thoughts on picking a good endowment plan?

I believe 80% of people who buy endowments are happy because they serve a good purpose for their needs. Please note that not all endowments are designed to be withdrawal before their maturity. There might be a serious misconception among customer who buy endowment plans from banks that these endowment plans are fully liquid, please bear in mind that endowment plans are never as liquid as compared to your current account.

Secondly, it is important to study the performance of the insurance companies selling the endowment. Endowments are paid of out a participating fund and if it does well, insurance companies have more funds to allocate to policyholders, i.e. 90% surplus to policyholders and 10% to shareholders. As such, it is useful to pick major insurance companies with good track-record of participating funds – you find the information online. Note: past performance is not indicator of future outcomes.

Lastly, decide whether you want the endowment plan to be fixed or flexible. Don’t ask for flexibility unless you need it since it reduces returns in the long term. You should decide also if you need to add on riders for the protection component. However, keep in mind that the cash value of the protection does not increase over time.

Ryan Teo, AXA

Ryan Teo's picture
Ryan Teo, AXA

What is your opinion on endowment plans?

People often have the misconception that the returns are guaranteed. Another misconception that people have is that they mistake returns in the Benefits Illustration with interest rate which are two completely different things.

In general, endowments are pretty standardised. I take into account the length of the policy when it comes to endowments. What I advise people looking into savings plans but have concerns about liquidity, is to invest 1/3 of their funds into the Singapore Savings Bond and the remainder into an endowment plan. This arrangement provides liquidity.

Endowments generally have a trade-off between returns and flexibility. For example, for plans with cashback, the total maturity may be higher but guaranteed sum may be lower than premiums paid.

A thing to take note: inflation should be considered when it comes to endowment plans. At the break-even point, i.e. the point where the surrender value is the same as premiums paid, the duration of the plan also implies that technically the consumer loses a bit of money due to inflation.

fundMyLife Summary

The major misconception that the public have for endowment is that the sum assured is, well, 100% assured. The advisers caution the importance of understanding what you’re in for when it comes to endowments and know exactly why you’re getting what you’re getting.

Melvin shared what he looks for in endowment plans and recounted two interesting client stories – one who benefits from getting an endowment and the other, not so. Jonathon listed three major misconceptions that the consumers have regarding endowments and provides his thoughts on picking a suitable endowment. Finally, Ryan Teo noted the tradeoffs when it comes to flexibility and returns in endowment plans.

If you’ve more questions on endowment or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Melvin from Manulife, Jonathon from Prudential, or Ryan from AXA, just click on the link in their names and you can ask them questions directly from their profile pages.

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.