If you're earning more $2K , spending $200 per month on insurance is OK.
You should get one when you're young. I bought my 1st policy when I was 21.

i don think you are over-insured... i mean buying insurance not only an investment/saving, its for your own good too... u never know what will happen next time .. and if u afford to pay now, why not.... thou i know the value of money in the future kinda different but at least u have some assurance next time....

If you're immersed in this section long enough you'll know that there's a huge debate regarding Insurance policy as a method for investment and savings whereby I for one doesn't agree. I buy insurance not for savings or investment. I buy because of protection, I never expect returns or money back.
Go ask a CFP and seek their opinion. Most that I come across would say Insurance is for protection and not investment/savings. Currently KMDC is giving out course of CFP and I know some friends currently attending Module 2 - Risk Management & Insurance Planning.

If u think tat u r over insured, then is over insured lo.
Everyone have their own value.
If 150K something is ur value u wan for now is then fair enough.
U have the choice to value urself. But i hope ppl can think big.
In my view, Only ppl who is think big can achieve big success.
Give u an example la, Coca Cola in Mamak is RM1.60 but Coca Cola in Six Star Hotel is RM20++ to 30++. Why leh?? Is from the same factory, same taste n everything same.
Izzit over Value??
U think for urself.

this depends on individual... some people kinda feel troublesome with lotsa way of investment, thats why they go for package ALL in one (which i think its not wise enuf) ... i myself buy an insurance for protection too but don go for investment in it where i invest in other thing... but then you need to think of what that people really need... u know some investment kinda risky, and some people cant take risk, thats why they go in for ALL IN packaging .... its just depends on people preference .... we only can give suggestion but not decide for them ....

True....but ppl fail to see that in investment and savings (especially savings) the term liquidity is at utmost importance. Thus I also seldom advise on "flipping of properties" as a smart investment tools.

Why we term savings as savings is not because you do not need to use that money so you pack it up and saves. Savings is needed in case of emergency. Thus liquidity is not there in Insurance or it's not flexible enough to be termed as "savings". In hard times, we would rely on our savings to live. Thus save less or next to nothing and constantly withdraw from our savings. Insurance plan cannot provide that unless you already have sufficient "cash value" which take years to build. So in a way, one looses both his protection and "savings" because he cannot afford to pay for it; as combination of this "all for 1 package" usually is not cheap.

Regarding investment, there's a lot more vehicles that can generate more ROI than these insurance packages and at the same time offer more flexibility in cash out (liquidity). Maybe you're right in a lot of ppl are just too lazy to search. In a certain way, insurance agents are to be blamed; but I do come to my senses that it's their job whereby they rely on that income generator to live. They cannot be telling the clients the whole truth and risk loosing their clients and commissions to survive.


Anyway, back to the topic of over insured.
If a large portion of one earning goes to insurance and left nothing for "savings" than that's over insured.
Or when sometimes one felt burdened by paying their insurance than that's a very clear sign of over insured!
I've seen many ppl who are burdened by their insurance premium. Especially those that pay through credit cards. And It's because of paying via cards that I disagree that it's savings. Investment and protection yes....but never in my terms I would recognised insurance as "savings".

There should be an analysis of how old funds/insurance perform upon maturity ... to see if BS or not

paying 10% for those expensive insurance?
you may have a better chance at getting yourself a term insurance.

annuities, investment-link sort of insurance are the most expensive and costly product for a budding guy like you.

since there're dependents on your side, insurance is important.. but not all insurance are created the same.. take note!

i'll say.. you've paying this insurance through your nose! (it's too expensive for you)

This post has been edited by lwb: May 9 2008, 07:26 PM

"Savings is needed in case of emergency". Now... think, what is emergency?

- Is going to Karaoke emergency?
- Buying handphone?
- Buying gift for gf/bf?
or...
- Had an accident warded to hospital require surgery?
- Diagnosed with cancer, requires treatment?
- Husband passed away (bread winner of family), how much can you survive with the saving in the bank?

RM150 / month, you get RM100k death benefit, how many months do you need to save to reach RM100k if you save RM150 per month?

Majority traditional Life Insurance plan will break even about 15 - 20 years, which means Surrender Value is more than total premium you paid.
So if you bought an Insurance plan at the age of 22, and when you reach say.... age 65 you feel that you are old enough... die die la, don't need the insurance anymore, no more dependent... etc. You can surrender the policy and a very high chances are the cash you got back is more than the premiums you paid.

Yes. I'm an Insurance Agent (GE). What I'm trained in giving a quotation to client is...
1. Annual premium should be around monthly salary to maintain affordability. You're only putting about 8% of your monthly salary into insurance.
- Salary RM2400/monthly, pay about RM200 per month for your insurance lor.

2. Sum assured should be around 3 times your yearly expenses. So that your dependent can survive on your insurance for at least 3 years or more.
- Monthly expenses about RM2000, 3 years is RM72000. Sum assured is RM72000.


**Don't treat Insurance as the only form of saving or investment. As we all know, higher risk, higher return. Insurance product is considered risk free, so the return.... . BUT Insurance policy is a saving account you must have, and discipline yourself to save into it. Can understand ah? **

This post has been edited by bbjslee: May 9 2008, 10:09 PM

bbjslee,

So, if someone is lay off, they can come to you for money. Since you told them that they ONLY need insurance, they do not need EMERGENCY FUND.

<< Yes. I'm an Insurance Agent (GE). What I'm trained in giving a quotation to client is...
1. Annual premium should be around monthly salary to maintain affordability. You're only putting about 8% of your monthly salary into insurance.
- Salary RM2400/monthly, pay about RM200 per month for your insurance lor.

2. Sum assured should be around 3 times your yearly expenses. So that your dependent can survive on your insurance for at least 3 years or more.
- Monthly expenses about RM2000, 3 years is RM72000. Sum assured is RM72000.>>

B.S. It is VERY SIMPLE. If a person is NOT saving 10% to 15% of their GROSS INCOME, they are spending TOO MUCH. So, a person SHOULD NOT pay 8% to insurance and if they cannot SAVE 10% to 15% of their GROSS INCOME on top of that.

<<Majority traditional Life Insurance plan will break even about 15 - 20 years, which means Surrender Value is more than total premium you paid.>>

How likely for a person to continue employment/income uninterrupted for 15 to 20 years?

<<which means Surrender Value is more than total premium you paid.>>

If a person buy term life insurance and save the additional premium into FD, the person will make MORE MOENY.

Dreamer

I understand your point of view, and I agree to a certain extend.

1. Maybe you replied before I added the footnote.

2. Does your saving in bank account provides any coverage?
3. How many people are disciplined enough to save into bank (saving/FD) monthly/yearly? If most of us are financially disciplined enough, there won't be so many credit card slaves in Malaysia.
4. How likely is a person to be unemployed for 3 months in Malaysia? (Not even a cashier / waitress job?)
5. Do you know you can apply for loan on your whole life plan? I know some business man applied for the loan before without much hassle when their business are in dire need of some cash.

It seems that you're more towards Term Insurance instead of whole life / ILP.
That's your personal view, but do you know what are the disadvantages of it?
- There is no return when the policy expires
- Premium starts off low when you're young and increases as you get older
- Limited riders/supp. benefit

i already having the plan.

i think, most of the people know, insurance is for protection.

RM200 is about my 7% of nett income. So, i think i am still afford especially when i am single as now.

investment is bomnus for it. Investment link does not gurantee the return, and this is the risk. Yet, it can create more return than Life insurance.

When there is a risk, there is a chance.

With this amount, i can have the protection and may be the return. Why not?

The only risk i forseen is, i lost my return. And just like unit trust. i need force to cancel it. So, i need to take an eye on it always... And, i told my agent to alert me on this.

Did you read. I never say no insurance. Insurance is for protection which is for the cases whereby you mentioned above.
Savings is for emergency....when you hit recession, when you're layed off, when someone in your family needs money, when you need money, when you want to buy house, when you need to get married, when you plan for oversea trips etc...
(btw, I haven't even go long winded about the utmost importance of emergency fund)
Tell me what can insurance do in this condition.
Thus I disagree with treating insurance as savings, and especially despise when the word "force savings" is being used! End of story. You may do an own survey by asking CFP's opinion.
Thus I did mention there's a lot of hot debate on this definition.

Btw, while you quoted my statement:
"Why we term savings as savings is not because you do not need to use that money so you pack it up and saves. Savings is needed in case of emergency. Thus liquidity is not there in Insurance or it's not flexible enough to be termed as "savings". In hard times, we would rely on our savings to live. Thus save less or next to nothing and constantly withdraw from our savings. Insurance plan cannot provide that unless you already have sufficient "cash value" which take years to build. So in a way, one looses both his protection and "savings" because he cannot afford to pay for it; as combination of this "all for 1 package" usually is not cheap."
You never talk about the liquidity part and the chance of both losing his protection and "savings" portion which I mentioned.
So any insights on that?

And if possible, I guess you may correct me also in my last statement which was not in your quote:
"Anyway, back to the topic of over insured.
If a large portion of one earning goes to insurance and left nothing for "savings" than that's over insured.
Or when sometimes one felt burdened by paying their insurance than that's a very clear sign of over insured!
I've seen many ppl who are burdened by their insurance premium. Especially those that pay through credit cards. And It's because of paying via cards that I disagree that it's savings. Investment and protection yes....but never in my terms I would recognised insurance as "savings""
Since you talked about credit card debts and bad financial discipline. So if the guy doesn't have any discipline to save in banks and are card slaves, insurance "forced savings" would help him?!

This post has been edited by b00n: May 9 2008, 11:31 PM

g00glesYYl,

<<RM200 is about my 7% of nett income. So, i think i am still afford especially when i am single as now.>>

If you are saving 10% to 15% of your GROSS INCOME on top of that, you can afford IT. If not, you CANNOT. In ALL your posts so far, you DID not mention what is your saving level. If you SAVE NOTHING, you are SPENDING TOO MUCH. End of discussion.

Dreamer

---

Added on May 9, 2008, 11:37 pmbbjslee,

1) How many recessions have you experienced in your life??

2) You can be under-employed too. Aka, used to be manager but now work as casher. With reduced income, you need savings to supplement your income to survive for a while.

Dreamer

This post has been edited by dreamer101: May 9 2008, 11:37 PM

hi googlesyyl,

risk and return are both a variable in the future..

but one thing is absolutely certain and factual is:
the cost of the insurance that you're carrying or the product of this sort of insurance is expensive and not cost effective as a tool of investment to even begin with.

there're better ways to achieve what you're doing at a fractual of the cost..

and the other thing about unit trust is.. it's your own eye that is responsible to your own investment and NOT your agent's eye. be reminded that agent are equipped to sell but they don't fit the shoe of a financial advisor, unless they're certified.. the best eye is still your own eyes.

you lost money because you don't know how to discern cost and value in an investment.

hi bbjslee,

for this, i really have to say.. you probably haven't been through any recession before.. you're probably young and naive (tending towards ignorance).

Sorry maybe have misinterpreted your POV. I sincerely apologize for it.

1. We do agree on certain things.
- SAVING IS A MUST.
- Certain protection should be in place. (Dreamer seems to be more supportive of term insurance than whole life)

2. What we couldn't really agree on is what is EMERGENCY.
- We have different personal definition on it.
- For me, any events regarding health or accident is more emergency because we could never foresee it coming.
- Besides, when you are unemployed, the last thing you want is being involved in an accident or have some serious health problem.

3. I'm a strong believer in forced saving. I set my saving account (salary) into Scheduled Inter Giro into my another bank account which I do not have ATM card or CC. And I do set aside about 20% of my salary for saving. Anyway just in case some of you got confused, I'm a part time insurance agent working towards fulltime now.

Anyway, the thread is about "Over-insured". That could never be a clear guideline on that. There are people who buy insurance policy with premium 20% of their income. It has to be reviewed case by case basis.

---

Added on May 10, 2008, 12:07 amI grad in 2002 almost into 30s now. I've never been out of job for a week. Perhaps I was lucky

Anyway, the way you put it, is almost like personal attack.

We're here to share our POV on the subject "over-insured".

This post has been edited by bbjslee: May 10 2008, 12:07 AM

Here's a 'simple' method to use.

To know if you're over insured or not just ask yourself these questions:

1. If you're disabled today and can no longer work, how much income do you want to have per year and for how many years?

2. If you have dependents, how much money would they need to survive if you're no longer around, and for how many years?

Then check the amount you want with what total liquid assets - liabilities you have and add an additional 50% of your current annual income for your last expenses which includes funeral expense & taxes to be paid.

Why only liquid assets? You still need a house to stay in when disabled and so does your family if you're no longer around.

Add it all up and that's the figure you should be looking at.

If you want a full personal financial review which is much more detailed, feel free to drop me a pm.

--

As the financial knowledge among consumers grow in Malaysia, financial institutions are also coming up with better, more sophisticated products to meet the customer's need.

Newer Insurance plans can now act as an Emergency Fund, namely because:

1. Faster cash value built up.
Traditional plans normally has cash value built up after the 3rd year, where as newer plans starts off in the 1st year itself.

2. Flexibility of withdrawals and top up.
Liquidity is there as withdrawals can be made and money received within a week. Alternatively, you can top up money into the account to enjoy higher interest than a normal bank savings account.

3. Higher transparency.
You can see exactly how much is being deducted for the cost of insurance and how much goes into the savings.

You want to know if getting a term and saving the rest in FD is better versus a protection/savings plan? I'd be more than happy to show you.

Best Regards.

bbjslee,

1) You did not say in your post.

2) From financial standpoint, Emergency is anything that requirement MORE MONEY than your usual expenses.

<< For me, any events regarding health or accident is more emergency because we could never foresee it coming.
- Besides, when you are unemployed, the last thing you want is being involved in an accident or have some serious health problem.>>

You COULD NOT forecast a time where you can be unemployed for a long time. But, does that mean you do not prepared for this??

3) You WOULD NOT BUY so much insurance that you could not save 20% of your income. But, you WILL NOT give the same advice to others. This is called hypocrite. You do not believe what you are saying.

<<Anyway, the thread is about "Over-insured". That could never be a clear guideline on that. There are people who buy insurance policy with premium 20% of their income. It has to be reviewed case by case basis.>>

B.S. You have a guideline for yourself. But, you would not tell others because it prevents you from selling more insurance.

<<I grad in 2002 almost into 30s now. I've never been out of job for a week. Perhaps I was lucky >>

It simply means that you have NEVER been through a recession. Aka, you are YOUNG and NAIVE.

Dreamer

1. I couldn't tell you step 1 - step 100 how I sell insurance. This is not "how to sell insurance" thread. The 1 golden rule that I uphold is Be HONEST to your client. That's how I would get return clients and more referrals. Besides, I wouldn't want my client to stop his Insurance policy due to financial problem. Having less commission is better than stop of commission.

2. I agree with you. That is why I already stressed in my post. DO NOT treat insurance as your only saving. Besides the recession/employment you've been stressing all the time, you still need saving to buy cars, houses.

3. Back to my point 1.

- Have you made any insurance claim or anyone close to you made a claim before?