Insurance Financial Analysis
Why do people need insurance?
Most people recognize if they die too young, their death could have negative economic consequences for others.
Have you ever got these questions in mind :
- Which type of insurance should I buy ?
- How much insurance should I own ?
- Is there a better option for me ?
- Am I clear of the purpose to the insurance purchased ?
- Have I reviewed and updated my policy ?
The major difference between a thing that might go wrong and a thing that cannot possibly go wrong is that when a thing that cannot possibly go wrong goes wrong it usually turns out to be impossible to repair. Douglas Adams
You need to review your policy as part of your financial planning.
You may need to give your policy extra consideration in the following life events :
In addition to determining whether or not your coverage amount is still appropriate, you may also consider insurance for your spouse. Updating your beneficiary list to include your new spouse.
Birth or Adoption of a Child.
With added responsibilities comes the need for additional coverage. Keep in mind that the a child’s primary breadwinners earnings are not easily replaced, and childcare can be expensive. As your family grows, be sure to update your beneficiary list.
New Home or Refinancing of Your Mortgage.
This is to cover the mortgage requirements and make sure it cover the loan tenure and mortgage amount.
Starting a College/Retirement Savings Plan.
Build up the education or retirement funds takes time. Know the coverage periods of your policy to ensure you are covered for a length of time that meets your current needs and future objectives.
If you change jobs, pay attention to the benefits offered by your new employer. Coverage amounts will often vary greatly from employer to employer, and this must be factored into your personal policy.
Starting Your Own Business.
If you are leaving your job and plan to start your own business, make sure that you do not sustain a significant loss in coverage when you leave your employer’s benefit plan.
Review your policy’s objectives and consider the use of life insurance as a useful business tool. For example, for business continuation purposes, you may now be interested in obtaining coverage for financing a buy-sell agreement. In certain circumstances, you may consider placing business partners on your beneficiary list.
How your motor vehicle is covered ?
In event of traffic accident, here are the elements of insurance cover to your vehicle depending of type of insurance your purchase :
- Bodily injury or death cause to other people or known as 3rd party
- Loss or damage to 3rd party property
- Loss of own vehicle due to accidental fire
- Loss of own vehicle due to theft
- Loss or damage of own vehicle due to accident
Important points to consider when taking motor insurance
If there is no claim made against the motor policy during the preceding 12 months of policy, then you have no-claim-discount (NCD) entitlement. For a private car, the scale of NCD progressively increase from 25% after 1st year to 55% on 5th year. The NCD will help to reduce your motor insurance premium.
Excess / Deductible
This amount varies from insurance companies and is the amount of loss you have to bear before your insurance company will pay for the balance of your vehicle damage claim.
If you are buying a policy against loss/damage to your vehicle, you must ensure that your vehicle is adequately insured as it will affect the amount you can claim in the event of loss/damage.
- For a new vehicle, the insured value will be the purchase price
- For other vehicles, the insured value is the vehicle’s market value
A standard motor insurance may not cover certain losses, such as :
- liability claims from passengers in your vehicle
- your own death or bodily injury in an accident
- loss or damage arising from an act of nature such as flood, storm and landslide.
All the above are exclusions that can be covered with additional premium added.
Protect Your Home
How your property is covered ?
In event of mishap happens, here are the elements of insurance cover to your residential property to recover the loss incur :
- Loss or damage to building due to theft, fire, lightning etc
- Loss or damage to building due to burst pipes, over flow water tank
- Loss or damage to building due to windstorm, flood, earthquake
- Loss or damage to building by aircraft, road vehicles or animals
- Loss or damage of household goods or personal effects
Important points to consider when taking property insurance
Adequate House owner cover
Given the fact of property appreciation and increase of cost of construction. It is important to review and ensure that your property is adequately insured at all times, taking into account the renovations made.
- The sum insured should cover the cost of rebuilding your property in the event of loss/damage due to fire, flood, earthquake etc.
- It is not compulsory for you to take up the policy offered by your bank / financier.
- Even if you accept the policy from the bank, you may elect take up separate cover on top of the amount offered by your bank since your bank will cover the amount of the loan taken only.
- If your property is strata-titled e.g. an apartment, condominium. The Management Corporation (MC) is required to take up insurance under a master policy. You must ensure that you get a copy of your individual certificate of insurance for your property
Declaration in Householder policy
You must specifically declare key items to be insured under the policy to ensure that you get the full compensation in the event of loss/damage.
- Key items are contents that constitute 5% or more of the total sum assured covered.
- It is advisable to also keep receipts of items insured, if available.
Basis of compensation in Householder policy
You should decide on the basis of compensation of your householder policy, whether it is on reinstatement or replacement value as this affect your premium paid.
- reinstatement -compensation with the value of a brand new item
- replacement- compensation with the depreciated value of item lost.
A standard house owner/householder policy doesn’t cover certain losses such as :
- damage due to subsidence, landslip
- loss or damage arising from strike and malicious damage
- theft claim if no evidence of forcible or violent entry
- 3rd party accident liability occurs in your property compound
All the above are exclusions or extensions that can be covered with additional premium added.
Important points to consider when taking travel insurance
24/7 Medical and emergency assistance
Check and ensure your travel insurance come with 24-hour emergency hotline service.
Foreign affiliates network
Find out the network of foreign affiliates offered in the policy that can provide the necessary assistance when required.
Nominate a beneficiary in your policy and inform your beneficiary of the travel insurance you have purchased.
One travel policy
It is not necessary for you to purchase more than one travel insurance to cover for the trip.
In the event the travel insurance is covered by the credit card or airline carrier, then upon unforeseen circumstances of your demise and disablement, you or your beneficiary, will be compensated for each policy.
However, for medical expenses claims, it will be compensated on reimbursement basis on the actual loss suffered.
Travel insurance do not cover certain events. Some common exclusions include:
- War risks
- Hazardous sports such as racing motorized vehicles
- Diving beyond 10m depth
- High risk occupation in oil rigging, mining, handling explosion
- Suicide and insanity
- Provoke murder or assault
- Pre-existing illness within 1 year prior to policy effective date
- Dental or pregnancy related expenses
So it is good to read your policy in details to understand the exclusions listed.
Financial Need Calculator
This financial need calculator tabulates your total financial commitments and show you how much insurance you required.