Your assumption is not correct.

If you have 1 million, you didn't take up insurance, you had 1 million left for your family. (not to count those FD interest yet).
If you have 1 million, you take up insurance, you might ended up with 900K as need to pay for insurance premium, then insurance pay you 100K after you die, then your family still getting back 1 million.
Don't forget insurance is not freebie!

A lot of consideration needed to be taken into, as take up too much insurance will drain your cashflow quite severely which ended not much left for saving, while those saving can be used for others investment purpose including FD (as said don't want to risk it, can put in FD), which over 10 years, 20 years which your saving in FD already double or triple in this period of time.

Individual cashflow and situation is the ultimate factor to be considered, there is no such thing insurance is a must or not a must for everyone.

i agree somewhat. thats why i post

"perhaps a better way of looking at it is how much %age of your total wealth it is paying out vs how much %age of your cashflow it is consuming?"

lin00b,

I disagreed with that. You are missing ONE important parameter in the consideration.

1) How much coverage do you NEED??

It is a WASTE of money to buy more insurance coverage than you need. You are throwing money away.

The coverage need to be

A) High enough so that it actually helps when the incident happen.

B) Low enough so that the premium is affordable.

In general, 10 x Annual earning is the MAX life insurance that you should buy. Because life insurance's premium above 200K is so high, you may need to lower that too.

2 X Annual earning is the minimum life insurance that you should look at.

So, the RIGHT coverage is usually between 2 X Annual earning to 10 X annual earning and 200K or below.

Most people buy TOO MUCH life insurance in Malaysia.

<< "perhaps a better way of looking at it is how much %age of your total wealth it is paying out vs how much %age of your cashflow it is consuming?">>

Using that kind of formula for typical people in Malaysia will ended up buying TOO MUCH life insurance.

Dreamer

This post has been edited by dreamer101: Dec 26 2008, 11:54 PM

Dear Dreamer,

I've checked with my system and finds that what you claimed to be as bolded is WRONG.

Here's my system work out:
I take in assumption of 45 years old, male
sum assured, RM1mil, yearly premium RM9600, monthly RM840
sum assured RM500K, yearly premium RM4800 , monthly RM 420 (notice, it's half, thus the ratio is the same)
sum assuered RM250K, yearly premium RM2400 monthly RM RM210

It's like in exchange of RM100 sum assured I need you to pay RM3 to me first.

Also there is a difference between having so much money at a certain point of time and having so much money constantly.

so, when AIG in USA tumbled, were we affected here in AIG Malaysia? Did you hear any lay offs in AIG Malaysia? Did many policy holders line up to cancel their policy?

Pls read up on Bank Negara rules towards all insurance company operating in Malaysia and see where does the policy owner's money is being channeled to.

i disagree and agree. Agree on the 10X annual earning etc. But does your salary stay the same for the 5-10years? Does Malaysian generally drive the same car for the past 20 years? As salary increases, the same goes with your standard of living. Upgrade from a silver credit card to a gold card with higher limits, or mayb from gold to platinum. Car upgrade, no longer driving Proton or Perodua, at least a Honda or Toyota. House, from rented to owned. From apartments to a double storey link house. These are to common upgrade we see.

Again, dear Uncle Dreamer....
I'm going to repeat as I've mentioned it in another thread. I'll be frank that I still servicing my housing loan, car loan and some credit card debts and other debts as well. There are also some cash stashed away in my bank.

2 scenarios:
1. If I can't work for a month or 2, or let's say 6 months on a worst case scenario. On labor law, I would have to resign if more than 3 months. How much extra cash I need to stash away, what seems to be my life savings, needed to be spent on my medical bills and also my food while paying my debts? Well of course it mayb a heartache coz of years savings all goes down to these.

2. What if I'm dead? I have a will but then again, the assets are first to enter the Probate to have creditors paid off. Only after that, the money goes to the living. With all my card debts, house loan, study loan, personal loans, ah long loans, well of course my house loan is on MRTA, but my car loan? If deduct whatever cash I have, ends up with zero and sometimes negative. For the very least in Insurance Act, the beneficiary gets the money, creditors hands off At least beneficiary can have money to sustain their living.

Does this make sense?

Furthermore, to have RM1mil protection or more, usually the insurance company would require the person to show their actual income status to be highly insured Well, I guess none of us has reach this level yet

hamster9,

1) Show me the number for coverage of 100K and 200K. At 250K, you are on different scale in term of premium. You are above 200K.

<<1. If I can't work for a month or 2, or let's say 6 months on a worst case scenario. On labor law, I would have to resign if more than 3 months. How much extra cash I need to stash away, what seems to be my life savings, needed to be spent on my medical bills and also my food while paying my debts? Well of course it mayb a heartache coz of years savings all goes down to these. >>

2) Stop doing "bait and switch". Life insurance does not cover for that too.

<< 2. What if I'm dead? I have a will but then again, the assets are first to enter the Probate to have creditors paid off. Only after that, the money goes to the living. With all my card debts, house loan, study loan, personal loans, ah long loans, well of course my house loan is on MRTA, but my car loan? If deduct whatever cash I have, ends up with zero and sometimes negative. For the very least in Insurance Act, the beneficiary gets the money, creditors hands off At least beneficiary can have money to sustain their living. >>

3) What has that got to do with life insurance??

4) In general, you are in BAD FINANCIAL SHAPE if you need to buy MRTA on your house loan. It means you buy TOO MUCH HOUSE and you cannot afford a large down payment. In general, it is CHEAPER to do not not buy MRTA but increase your life insurance coverage. The survivors may not want to and afford to keep the house.

5) All my bank A/C are joint. I have standing instruction with my wife that if anything happen to me, she should withdraw ALL MONEY from those accounts and put into her own account.

6) Given the picture that you painted, you are in a very BAD CASH FLOW situation. So, how does paying MORE insurance premium and hope that you worth more death than alive helps??

7) What if you are ALIVE but lost income for 6 months or longer. We are almost reaching that point of recession in Malaysia.

<<Furthermore, to have RM1mil protection or more, usually the insurance company would require the person to show their actual income status to be highly insured Well, I guess none of us has reach this level yet>>

That is YOUR GUESS.

<< Again, dear Uncle Dreamer....
I'm going to repeat as I've mentioned it in another thread. I'll be frank that I still servicing my housing loan, car loan and some credit card debts and other debts as well. There are also some cash stashed away in my bank. >>

Basic rule of financial survival. Your TOTAL LOAN PAYMENT per month cannot exceed 33% of your monthly gross income. If you exceed that, life insurance is the LEAST of your problem. In fact, buying LIFE INSURANCE is probably going to make it worse.

My rule of thumb is do not buy a house until you finish the car loan.

We are playing in a different league. I have 2 years of expenses in FD and CASH. I do not have to touch my investment for at least 2 years if I lost my job. That is my preparation for this recession.

Dreamer

You should buy medical insurance....to protect urself just in case. But if you really rich....no need.

if you are not really rich, its suggested to get insurans but it is not necessary.

p/s. better safe than sorry.

If you are really rich, do you have RM180K (based on recent claims) stashed away in your safe box? Would you have the ambulance sent you to the bank to get the money out? Rich but most assets are not in liquid manner and logic thinking would be they would keep much in the savings account which have them little interest.

My 2 cents

hamster9,

1) We are NOT in the same league.

2) Average GROSS SAVING RATE in Malaysia is 33%. So, how normal are you??

3) Most people that I know is in the average 50% gross saving rate.

4) I save 50% of my gross income for the last 10 years.

5) How do you know that 2 years of expenses is equal to how many % of my total asset?? In fact, I excluded my 2 years of expenses as ANY part of my asset.

<<Would you have the ambulance sent you to the bank to get the money out?>>

6) Why do I need to do that?? I keep a few K at home and I have a credit card. Most of my family can muster up a few K easily. We are NOT in the same league.

<<Oh, yeah, I forgot. Sorry. Was rushing that day. Let's put a half of RM250K which is RM125K (to show u the non-exponential figures) based on the above 45 years old male again. The annual premium is RM1541 while monthly RM133. For information sake, RM100K would have an annual premium of RM1233 with monthly RM107>>

7) Are those quote = term life insurance or whole life insurance?

<<I dunno which MRTA you are meaning. Probably loan incorporated MRTA. But I have life insurance taken in as MRTA with a will to state that the insurance money obtained would be for repaying the remaining of my housing loan. I believe generally in public (as not many are like you, Unc Dreamer) would only pay 10-20% of the downpayment.>>

8) People that I know pay enough on down payment to avoid MRTA.

<<For the very least not only it reduces my interest rates but in case of any emergency, there is a flexibility to withdraw. >>

9) You do know that in many cases, bank can cancel your credit line with little or no notice. Please check your loan to confirm. This has happen to many people in USA.

<<With all fear of recession, losing income for 6 months with being able to work isn't much of an excuse unless you are being plain egoistic without working any job lower that your previous ones. >>

10) Let's assume that instead of working as professional, you work at McDonald as waiter. Can your income support your life style without losing your house??

11) How many recession had you been through? Survive one first before you can confidently make that kind of statement.

Dreamer

1. why not have more than what you need so your dependent can have more buffer/freedom to do what they would like to do? like start a business perhaps.

2. IMHO, 10x annual income takes too much out of your monthly income

3. i'm always amazed at how you manage 50% saving, (i am at 25% as a fresh grad) do you think its possible with today's younger generation not used to the hardships you experienced?

Average Malaysian Size and Cost For Ordinary Individual Life Policies In Force of Direct Insurer in 2007 is
Whole Life - RM48,460 Average Premium is RM1,388 (Average Cost is 29 cents/per RM1K)
Endowment - RM22,619 Average Premium is RM1,228 (Average Cost is 54 cents/Per RM1K)

It is far away from RM200K Sum Insured.

Source: From BNM Life Insurance Statistic Report 2.8
Year 2008 report is no available yet.

lin00b,

1) Buying MORE life insurance so that you worth more when you die??

A) I could have invested those money and get even better return.

B) I intend to SPEND and ENJOY ALL my money. My children had to work and earn their own way.

2) That is the MAX.

3) I know young fresh grad that done it with monthly income of 2K. They lived with their parent. They buy cheap car. After they married, they stay with their parent for a few years. Then, they ONLY buy a house when they paid off the car.

The YOUNG generation has it easy. I had to support my parent plus sponsoring my sister through college when I started working.


Transit,

What is the average income for Malaysian??

<<Average Premium is RM1,388>>

That means Malaysian BOUGHT TOO MUCH life insurance with the income that they have.

Kudos to the insurance agent. One down for the average consumer.

Dreamer

your statement 1 is assume something must happen,then even you buy 10 million coverage will still not be too much.

your statement 3,not just dreamer can,by carefully planning and implementing earning,i and a lot lyn members also can do that.

The estimate for Malaysian Per Capital Income is RM23,103 for 2007.
GNI - Gross Income National Income, Malaysia Population estimated is 27.2 million.

Source: From BNM Report - Table 2.17

BTW, the early report does not include Investment-Linked, just Whole-Life and Endowment indicator niah.


Attached File(s)
 2.8.pdf ( 37.42k ) Number of downloads: 1
 2.17.pdf ( 44.08k ) Number of downloads: 0

1A: could you? how can you compare investment with insurance when they are different? investment needs time to mature, but insurance pays out whenever you KO.

1B: that seems contradictory to your save/invest 50% policy, you are not enjoying those

2: agree, and from the premium quoted, thats too much, IMHO

3. how about saving 50% independantly? i.e with no support?

---

Added on December 31, 2008, 9:49 amit will be too much if the premium takes up a huge chunk of your income.

i'm advocating buy as much as you can, i'm thinking maybe buy at some %age of your income, i.e 5% (when you have 2k income, buy 100, and buy 500 when your income is 10k, etc) rather than totally giving it up at some point because you are rich already. does that seem logical to you?

This post has been edited by lin00b: Dec 31 2008, 09:49 AM

lin00b,

1A) Life insurance benefit the survivor. It does not benefit ME. So, why should I contribute more when I die??

1B) The GREATEST LUXURY in life is TIME. My current plan is to early retire. I do not plan to work for money for my whole life. And, the flexibility to do what I want and when I wanted.

3) I had seen people do that too. And, the person that lived with parent contributed towards support of their parent too.

Life insurance is for RISK MANAGEMENT. It is used to control risk that you DIE while your dependent is STILL rely on your income.

For people that save 50% of their gross income, they only live on 25% of their income. For every year that they worked, they save 2 years worth of expenses. After 5 years, they had saved at least 10 years worth of expenses. So, even if they died at that moment, there are enough savings to last 10 years. So, how does insurance comes into play for a person like me that had least save 50% for the last 10 to 15 years??

It is TOO LITTLE and TOO LATE.

I had at least 2 years of expense in savings. And, my investment portfolio far exceed that. I am aiming for early retirement in a few years aka I have enough passive income so that I do not have to work.

So, if my income level is the same regardless of whether I am alive or death, why should I buy life insurance to protect my income??

Death represent NO RISK to my income.

Critical illness insurance may make more sense to me. Critical is more a REAL RISK to me.

Insurance is USED for RISK MANAGEMENT. You do not buy insurance for THINGS and RISK that does not affect you financially.

Dreamer

thats a very self centered way of thinking, why buy life insurance at all then? your dependant should work things off by themselves, you shouldnt worry bout them.

people who live independantly without relying on their parents do contribute funds to their parents as well. 25% of a freshie gross income of 2k is 500. i honestly doubt that is possible in kl.

Dreamer's opinion is more towards buying the "right" insurance.
The radical thinking of:
1) Do you need one?
2) Can you afford one?
3) Which policy to choose and which is suitable? (in this case, does one really need life insurance?)

lin00b,

The KEY WORD here is DEPENDENT.

A) If you have enough MONEY and INVESTMENT to support your DEPENDENTS until they NO LONGER depend on your income, why do you need life insurance??

B) Unless you believe that as Asian parent, your children should NEVER WORK. You should feed them for their whole life.

C) For those ethical insurance agent, their STANDARD advice is to buy insurance coverage of 10 years worth of income. That is for normal people. For people that save 50% of their gross income, 10 years worth of expenses is more than enough for them to self insured themselves.

D) Whether you doubt or not, it is relevant. I known people that had done that. And, if you asked around lyn, there are others that had done that. Those people are tend to be low profiled.

<<thats a very self centered way of thinking>>

E) It looks like you have NO IDEA what is the goal of life insurance. How does throwing money into the pocket of insurance agent helps you?? Unless you are an insurance agent.

Basic idea:

1) Nobody will be your dependent forever. They do grow up.

2) You do grow OLD. Hence, you may no longer have income to protect.

3) In fact, now a day, you be unemployable or has lower level of income before your official retirement age. I know folks can no longer find job at between age of 45 to 50. Age discrimination is wide spread in Asia.

4) Whole life insurance or life insurance with cash back is a VERY BAD deal. The return is LOWER than FD. So, term life insurance make more sense if you need life insurance.

5) I have FREE life insurance coverage of 2 X annual income from my job for the last 10 to 15 years even though I do not need it.

6) Fair amount of people has more than adequate life insurance coverage from their job.

The PROBLEM in Malaysia is that they bundle everything (life, PA, disability, medical, critical illness). So, it is harder for a consumer to shop for exactly what they want and need. So, insurance can make MORE MONEY out of YOU. It is NOT in their best interest to make you a smart consumer.

Dreamer

'

QUOTE(dreamer101 @ Dec 26 2008, 11:54 PM)
lin00b,

I disagreed with that. You are missing ONE important parameter in the consideration.

1) How much coverage do you NEED??

It is a WASTE of money to buy more insurance coverage than you need. You are throwing money away.

The coverage need to be

A) High enough so that it actually helps when the incident happen.

B) Low enough so that the premium is affordable.

In general, 10 x Annual earning is the MAX life insurance that you should buy. Because life insurance's premium above 200K is so high, you may need to lower that too.

2 X Annual earning is the minimum life insurance that you should look at.

So, the RIGHT coverage is usually between 2 X Annual earning to 10 X annual earning and 200K or below.

Most people buy TOO MUCH life insurance in Malaysia.

<< "perhaps a better way of looking at it is how much %age of your total wealth it is paying out vs how much %age of your cashflow it is consuming?">>

Using that kind of formula for typical people in Malaysia will ended up buying TOO MUCH life insurance.

Dreamer

when dreamer suggest max insured for life insurance is 10x yearly salery,Here is what you say in post 190:


'1. why not have more than what you need so your dependent can have more buffer/freedom to do what they would like to do? like start a business perhaps.'

this is assuming something must happen,make your family become rich if getting insurance pay is like gambling,so i say,if you know something bad must happen,even buy a 10 million coverage are not too much.but if nothing happen,you are burden your current living.

you want higher coverage than dreamer suggest,however,how could you use 5% salery to buy that coverage?just a term life equilvalent to your 10 years salery may cost more than 5% of your total yearly salery.

This post has been edited by athlon 11: Dec 31 2008, 11:33 PM