Things Agents Don't Tell You About Their Whole-Life Insurances
Updated: Dec 18, 2019
In an environment filled with countless similar products offered by different life insurance companies, the rising abundance of options creates nothing but more confusion in our purchase decision.
In this article, I will be presenting two of my findings after going through the bulk of the whole-life insurances policies that are being offered in this current market. Hopefully, this will help you in identifying critical areas that, as a consumer, you should be aware of.
Cost =/= coverage
It is a fallacy for us to associate the price to the quality of a product and in the whole-life insurance market, this false belief can easily cost you tens of thousands of dollars over the lifetime of your policy.
Even though two policy may have the same quantitative coverage (e.g. $100,000 death coverage), their price will differ due to the following reasons.
Perceived branding of the company
Differences in the contractual definition that affects the level of benefits receivable
Miscellaneous “benefits” attached to the policy from which may not be your priority.
Having said that it is very possible today to purchase whole-life insurance from company A that cost more but covers less than Company B.
Just because a product is cheaper doesn't mean it's bad and just because a product is more expensive doesn't mean it's good.
As such, when buying whole-life insurance, it is important for you to compare products from the different company and understand what exactly are you paying for.
You should always ask your insurance agent or “adviser” for both a qualitative and quantitative comparison of the insurance policies available in the market before making a decision.
This brings me to my second point which is:
Same Name Different Definition
While the types of coverage available in today's market can be summarized into the below four categories:
Total permanent disability
Early and Intermediate Critical illness
Advance Critical illness
The definition that will ultimately determine your likelihood of claiming can be different across companies.
Total Permanent Disability
For the category of Total Permanent Disability, only a handful of companies provide coverage that includes the inability to perform “activities of daily living” between the age 18-65 from which most of the other insurance companies do not provide.
The following paragraph is what you should look out for in the product summary:
Also, it is important to note that only two companies provide disability coverage for life, most insurance companies would only provide disability coverage of up till age 70. This can be inferred from the benefit illustration which will look something like this:
If the benefit illustration does not classify TPD as part of the supplementary benefit, you should look at the wordings within the product summary to determine if the coverage is for life (or just ask your agent).
If the product summary contain this paragraph, it means that any disability that occurs after age 70 will not be claimable under the policy.
As for critical illness, there is two things you will need to look out for in any given policy:
Type of critical illness covered under the policy
Definition of the critical illness
Currently, the only constant across all life insurance company is their compliance towards the provision of 37 Advance critical illness as per mandated by the life insurance association of Singapore.
What this means is that, out side of the 37 Advance critical illness, life insurance companies are free to include additional critical illness coverage and define them based on their own accordance.
As such, it may be worth looking into the type of the critical illness covered, their definition as well as the cost of the policy to decide for yourself if the additional critical insurance covered outside of the mandated 37 Advance critical illness is worth your money.
Be careful of marketing ploys where insurance companies use statements such as: "covers over 100 critical illness conditions" as the way they go about derving the figure may include double or sometimes triple count. For example, early, intermediate and advance stage heart attack may be considered 3 different critical illness count.
Insurances will always be a necessary expense to help consumers manage their downside risks and protect against events that could affect their income and lifestyle.
Having said that, it is important for you to find a right balance between benefits and costs while ensuring that you do not overpay for unnecessary benefits or even factors such as perceived branding from which adds no value to your financial plan.
ALWAYS ASK FOR A COMPARISON for it is the duty of a financial adviser to have a good understanding of the market and provide objective advice that is in sync with your financial plan.
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Instead of spending weeks reading through lengthy policy documents and fund fact sheets
Instead of spending days talking to agents and bankers just to get the information you need
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This article is meant to be the opinion of the author and is for information purposes only.
This article should not be seen as a financial advice
This advertisement has not been reviewed by the Monetary Authority of Singapore.