Policy Lapsed

One of the areas that create mistrust and loss of confidence for insurers is a situation when customers fail to pay life insurance premiums in line with the contract for whatever reasons.

In very simple terms, Insurance is a contract between the customer (insured or assured) and the insurance company (insurer) such that the insurer agrees to pay compensation to the insured should he suffer financial losses as a result of certain events covered under the contract in return for a consideration (premium).

Insurance could be classified as either short or long term depending on the tenure of the contract.  Short term insurances are contracts that are renewed yearly while long term insurances are contracts that take longer time to mature say five years or more.

Insurance is broadly classified under life and non-life depending on what is covered under the contract.  It is life when it is based on the life of the policyholder or another person (life assured) but when it is not based on the life of a person, it is non-life insurance.  Life insurances are normally long term insurances.

Life insurance is needed by anybody who is desirous of providing for his loved ones when he dies or is unable to earn income as a result of the above causes.  When one buys a life insurance policy, he seeks to protect his income to be able to provide for those who depend on it or to cover general living expenses should his income ceases as a result of death, sickness or redundancy.

Classes of life assurance include term assurance, whole life assurance and endowment mainly but there are income protection plans, accident, critical illness insurance, sickness and unemployment protection plans too. The choice depends on age, dependants, income and financial liabilities, among other things.

Term assurance
This provides cover for a fixed term with the sum assured payable only on death within this period. There are no investment benefits or payments on survival.  This is unfortunately, where many policyholders get it wrong; they expect that since they have bought insurance, they should get something at the expiration of the policy the period. There are variants of this.

Whole life assurance
This protects policyholders throughout the duration of his life, no matter how long he lives. Unlike term assurance benefits are paid if the life assured dies during the term of the policy or if he outlives it.

This policy will eventually pay no matter how long since there is no time limit to the protection; dependants of the life assured just have to wait patiently till he dies to get the benefits of the policy.  It guarantees lump sum payment when the policyholder dies and it has “surrender value” should the policy be cancelled midway. There are variants of this too.

Endowment insurance
Endowment policies are equivalent to saving schemes but the difference is they have life assurance cover in addition.  They combine the benefits of a savings scheme with the peace of mind offer by a life assurance policy. It pays outstanding debts including mortgages should the policyholder die before repaying the loan in full but if he outlives the policy he receives a lump sum payment.

Premium default
Sometimes policyholders default in paying premiums as agreed under the contract and may ask to take back whatever accumulated premium they have paid.  For reasons, including mis-selling, under-performing policies and inability to pay the premium and even ignorance among other things; policyholders may develop “cognitive dissonance” (post purchase doubts), feeling that they made a mistake buying the policies in the first place; so they stop paying premiums.

Inability to pay
Many policyholders go for a huge sum assured because they want the best for their families and loved ones who the policies are meant to protect in case of eventualities, failing to realise how stressful it could be paying premiums from their salaries and wages. Policyholders could as well lose their jobs or suffer business failures making it very difficult for them to meet their premium obligations to the insurer. These could lead to default in premium payment.

Stuck with wrong Products/mis-selling
The insurance industry in Nigeria is suffering from image crisis and apathy flowing from the activities of Agents who live on commissions. Insurers still engage unqualified and uninterested job seekers without giving them adequate trainings before sending them out into the field.  One of the sins of Agents is mis-selling as a result of ignorance or desperation to sell and earn commission.

 Many people who needed income protection plans unfortunately end up buying term assurances because their Agents did not explain to them the differences in the product offerings.  The policyholders eventually get frustrated.

Under-performing policies
Some policies may be under-performing and unable to meet policyholder’s expectations in terms of bonuses and interests.  The future value of life insurance products is affected by fluctuations in the rates of interest and inflation and cost of living index.  Where these rates erode the value in view, the product under-performs and frustrates policyholders.

Also, some people buy life insurance to reduce taxes but when tax policies change and frustrate their goals, the policy is seen to be under-performing and premium payment may not be a priority any longer.

When life policies lapse
A life insured is expected to pay premiums monthly, quarterly, half-yearly or annually. If the premium is not paid within one month of the due date the policy lapses. The insurer gives a notice to the policyholder stating that the policy is about to be terminated due to the non-payment of premiums within the specified timeframe and the grace period for reviving it.

But when for whatever reasons the policy lapses, the policyholder does not necessarily have to give up because depending on the conditions laid out in the policy document, a lapsed policy could be revived within 5 years from the date of the last premium paid by paying the outstanding premiums with interest.

If revived within 6 months, it could be reinstated without fresh medical examinations. Where the policy has been in force continuously for over 3 years, it gets a paid up value but there is no surrender and paid up values for policies that have not been in force for the minimum period stated in the policy document.

'Paid up' policy
Stuck with a lapsed policy, the policyholder could convert it to “Paid Up” policy. In this case, the sum assured of the policy is reduced to a proportion of premiums paid till date by the policyholder and number of times premiums have been paid.  In a paid-up policy, a diminished sum assured is paid
on death or on maturity.

This option benefits older people and those who may not be in a position to pay further premiums because they can continue to be insured under the same product for the same premium till the policy matures.  It also helps to reduce premium outflow and keeps life policies alive as against surrendering it.

Speaking on this option, an expert who pleaded anonymity said “after the policy tenure is over, the insured gets a diminished maturity amount plus bonus for the number of years premiums were paid and loyalty additions.”
However before going for this option, the policyholder should review the policy to see whether policy administration, mortality and fund management and other charges will continue to apply after making the policy paid-up.  If yes, then he needs another option because these would eventually erode the value of the policy significantly.

Surrender value
Another option for holders of lapsed policies is to go for the Cash Surrender Value (CSR).  The cash surrender value is the amount a life insurer pays a policy or annuity holder who voluntarily terminates the policy before it matures or the insured event occurs.

Surrender value is the worth of a life insurance product after charges and fees, if the contract is terminated early with value remaining. It is different from the cash value, which is calculated before any fees are taken upon surrender.  The difference is in the surrender charges, which can be significant at times.

Surrender charges drop over time and while always significant they may not impact the surrender value substantially in later years. These usually apply during the first 10-15 years of the policy and when this stops the cash value and surrender value will be the same.

A policyholder is eligible for guaranteed surrender value if he has paid premium for at least three years. Traditionally, the surrender value of a life policy is 30 per cent in the second and third years and 70 per cent in the fourth year, excluding the first year premium.

Making a choice
Many policyholders, who fail to revive their policies back out or surrender it out of ignorance only to regret their actions when they come to terms with the cost of their actions.
So it is important to note that if a policyholder stops paying premium after a specified period, his policy will continue but with lower sum assured. This reduced sum assured is called paid-up value or paid-up sum assured.

Also, if a policy is surrendered, the life cover stops unlike when the policy is paid-up. So, before surrendering that life policy, review what you stand to gain if you make it paid-up and keep it active till maturity.

Surrendering an endowment policy makes sense only if the surrender value when reinvested would generate a better return than the policy would at maturity.

On Line On Life

Until the October of 2009 all attempts to sell life insurance online had been met with pretty much abject failure. One of the reasons for this was that previous attempts had put products designed for the offline world into the online space with absolutely no attempt to give the customer good reason to buy the product without intermediation.

One must understand that there are four basic drivers that compel consumers to invest their time and effort to buy a product online.

The first reason is value - a key reason for buying online is that it is cheaper than buying a comparable product offline.

Another reason is convenience - a customer should see very distinct convenience in buying something online. Ticketing and booking sites use this as a great hook and in fact some have started charging a convenience charge.

A third driver to online purchase is information - customers use the digital space to compare prices and specifications and also look for recommendations and reviews in order to make an informed purchase decision.

Another driver is sometimes access - when a product is not available in the customer's geography and hence the Internet becomes the only place to get access to that product. If your product does not have one, some or all of these drivers then it has little or no chance to succeed online.

This is the reason why online term insurance saw almost instantaneous traction when it was launched nearly 5 years ago in 2009. The product was designed for online purchase - it was simple and easy to understand, it was cheaper by a large margin as compared to the offline versions available, it could be bought conveniently anyplace anytime and it offered a protection offering that was traditionally not very actively promoted by other distribution channels.

Yet despite early growth the share of online life insurance remains tiny. So what does the future hold for online life insurance? One of the very interesting things that is happening in the online space as far as life insurance is concerned is the concept of researching online and purchasing offline (ROPO).

Imagine a pyramid with online buyers right on the top, those researching online but not buying in the middle and the offline population right at the bottom. The portion at the top is a sliver at the moment and the portion at the bottom is the largest with a medium sized portion in the middle. It is the opinion of this writer that the relative sizes of each of these segments is likely to change.

Mobile connectivity and lowering of data access costs will see large proportions of online customers transitioning online thus increasing the share of online users or the ROPO segment. At the same time we will also witness more online non-buyers becoming buyers as they become more comfortable with issues of payment security etc. Hence the growth in online insurance will only accelerate.

In order to facilitate this growth insurers competing in the online space will need to keep in mind that they would need to focus on products with a simple and clearly defined benefit that can be compared with similar offline products. That the customer must continue to derive both value and convenience from the product category that will give them a very tangible reason to adopt the online purchase process.

Leveraging technology in the future is also going to be critical. With more and more online users becoming unfettered - using only mobile devices to communicate, search and buy products on the net - an easy to use and intuitive mobile interface will be key to growing sales and fuelling growth in the category.

Mortgage Life Insurance - A Risk

If you’re getting a mortgage for the first time or refinancing an existing mortgage at a different institution, chances are the person across the desk is going to try to peddle mortgage life insurance. Data show that about 60 per cent of home purchaser comes with a mortgage written by a bank also have mortgage life.

It’s a check mark on the mortgage application, but it’s costly, often a bad deal when sold by a lender and deeply troublesome if the borrower dies before the mortgage is paid off.

Banks love to sell mortgage life insurance. Statistics from the National Association of Insurance Commissioners, an organization of U.S. insurance regulators, shows that mortgage life insurance lenders pay claims amounting to 40 cents for every dollar they collect in premiums. Regular life insurance policies pay 90 cents of premium dollars in claims.

The concept behind mortgage life is not troublesome. The lender wants to be sure it is paid; life insurance is just a way of covering the risk of the borrower’s death before the last dollar is paid on the debt. The bank fills out a form, gets a signature, and adds the life insurance cost to the monthly mortgage payment.

The devil is in the details, goes the saying, and that is where mortgage life gets to be problematic. Mortgage life has one beneficiary, the lender, and, though the amount of the risk declines as the mortgage debt is paid down, the premium remains the same. Although the bank’s risk is decreasing, there is no transfer or spillover of benefit for anybody else — for example, the borrower’s heirs

Mortgage Life Can Be Risky
Not only does mortgage life not provide benefits to anyone but the lender, it also tends to be evaluated or underwritten after a claim is made. That gives the insurer the opportunity to deny the claim, often on the basis that material facts were not disclosed.

Critics of the underwrite-after-claim process say that questionnaires asking about pre-existing conditions are complex and confusing. Some questionnaires ask, “Do you have a condition which would affect your health but about which you have not seen a licensed medical practitioner?” Or the ultimate basket case question: “Is there any condition that you have not disclosed which, if disclosed, would affect your insurability?” Do you recall a throb near your liver last year? Maybe you should have had imaging studies. In after-the-fact underwriting, you ignore even faint hints of illness at your financial peril.

Have you ever smoked? If you did take a puff 20 years ago but did not become a committed smoker, you can explain that and probably get a non-smoker discount on a conventional term policy.

Mortgage lenders tend not to give non-smoker discounts and are keen to deny coverage if they think they have been deceived. The moral of the story is to be very careful to report every illness when seeking life insurance, report anything that could be related to questions asked, and remember that lenders do their underwriting when you have a claim. That is a terrible time to find out that you should have shopped the policy and gotten coverage from a conventional insurance company that checked you out when you bought the policy.

With conventional term coverage, the insurer has two years to decline coverage for any reason. After that, you are covered even if you fudged a question.
With conventional term coverage, you can make the lender the beneficiary, provide evidence of that to the lender, and, if you change lenders, change the beneficiary. You will need the approval of the insurance company, but it is routine and usually given. As the loan value declines, you can beef up what other potential heirs get.

The price of mortgage life
Mortgage life is expensive. For example, a 38-year old man and a 37-year old female can pay $140 per month for $500,000 of term coverage with a 20-year level premium from a major bank for its mortgage life insurance.

The same couple could get 10-year term renewable and convertible coverage from a major life insurer through an independent agent for $41.54 per month. $500,000 of coverage for the same couple with 20-year level term would be $66.75. Details change from one quote to another, but the size of the gap indicates the advantage of shopping.

Over 10 years, in the first case, the savings would be $11,815. In the second case, which matches the 20-year term of the lender’s insurance, the savings would be $17,580.

There is also a cost strategy you can use with conventional term coverage. When young, say in your 30s, you can get 10-year level term coverage for very little. The rate rises for the next 10 years and then higher for the next. But family income is likely to rise and — this is the critical point — as mortgages are paid down, your need for coverage also declines. This is insurance cost management. Add guaranteed renewability to the 10-year term policy and you have a low-cost, intelligent method of premium management, a base insurance plan for your family or farm, portability and control.

Non-bank insurance
There are other advantages to having your own term insurance to cover mortgage debt. If you change lenders, you take your coverage with you and — this is vital — there will be no gap in coverage.

There are sad cases in which a mortgage borrower dies before coverage is in place in a mortgage transfer. That can’t happen if you have your own policy. Properly drafted, the policy and benefits provisions of your own policy would cover debt transfer in process.

Finally, and this is no small advantage, when you choose your own term policy, you can shop by price and have the policy tailored to your needs. Guaranteed renewability, guaranteed convertibility to whole ordinary life, various discounts for not smoking, good health, sometimes memberships in professional societies that get good insurance deals for members — all can help set the price of insurance and the bells and whistles on the policy.

That is not possible with the one-size-fits-all life policies mortgage lenders offer. As well, with your own policy, you can extend coverage for other debts, even for a family loan. One policy can then cover your house, maybe some equipment purchased with loan and other obligations. That flexibility is valuable and, if you do it right, you can get more insurance, more appropriate coverage, and pay less.

Planning Your Life Insurance

Financial needs change with change in one's life stage. Whether it's your marriage, children's education or retirement years, you need money to get through the various stages of life comfortably. Life insurance helps you meet these requirements and prepares you for unforeseen expenses. Insurance provides you with financial security that helps you take care of your loved one.

In order to reap the benefits that insurance has to offer, you must factor in insurance early in life.
When it comes to insurance, be an early bird

Ideally, it makes sense to buy at least one life insurance policy when you have just started to earn. Doing so has its own advantages. Not only do you add a crucial instrument to your financial portfolio, but it also helps ensure that your family's financial situation does not debilitate should anything untoward happen to you. Besides, when you start young, the premium amounts too are lower.

At a later stage in life, you can always revisit your insurance portfolio and add another policy keeping with your changing financial needs. This process is called a life insurance review and is extremely important.

Review your insurance plan from time to time
Life insurance is not a one-size-fits-all solution. It is therefore important to review your insurance plan at regular intervals. It will prepare you for life's various milestones and the associated expenses.

One of the biggest advantages of a life insurance review is that you do not stay underinsured. As age advances, your responsibilities increase and lifestyle undergoes changes. Based on timely reviews, you can revise your life insurance cover from time to time.

It is only with constant reviewing of your insurance plan can you start building a corpus for your old age.

Planning for the future
You start working, get married, have kids and soon enough, your kids grow up. Even before you realize it, you find yourself standing with a farewell bouquet at the threshold of a new phase of life - the post-retirement period. To ensure that you don't take a financial hit in your older age, you must plan for it in advance.

Taking a life insurance policy at a young age will simplify things for you as you approach the golden years of your life. There are varied options of retirement plans that one can choose from. You can choose to go with monthly income or annual payouts as per your requirements. if you choose to buy a monthly income plan, you will be entitled to a monthly income during your post-retirement years.

How your retirement plan will help you in your old age
On various occasions, people are under the impression that savings accrued over a lifetime are sufficient to see them through old age. This is perhaps one of the biggest misconceptions. Life is unpredictable and sometimes all it takes is a bout of critical illness to wipe out all that you had saved.

You can avoid such a situation by opting for a retirement plan early in life (preferable in late 20s or early 30s). It supplies you with an income every month, almost similar to the salary that you used to receive when you were employed. You can use this money for your routine expenses as also for health emergencies.

While none of us can gaze into a crystal ball and find out what the future holds, we can at least make the right choices which can help secure the future. This starts with investing in a reliable life insurance plan!

Medical Tourism In Malaysia

Muslim tourists have long chosen Malaysia, its beaches and its malls as a holiday destination thanks to cultural affinity. Now the Southeast Asian country, where Muslims make up about 60 percent of the population, wants to parlay its visitor dividend into a bid to overtake its neighbours for the world’s medical tourism crown.

It seeks to appeal to less affluent patients with reasonably priced treatments. But figures show it has some ground to make up on Thailand and Singapore in boosting its share of an industry that generates $38 billion to $55 billion annually.

 

Malaysia is a new player in the market, competing with experienced, branded names. But it is quickly attracting the attention of patients, earning third place for “best and most affordable healthcare” by International Living, a lifestyle magazine.

 

“Thailand’s pricing is not attractive any more and Singapore can’t cope with the flood of patients,” said Jacob Thomas, president of the Association of Private Hospitals of Malaysia.

 

“We are one of the easiest countries to enter. Most foreigners don’t need to fill in a landing form.”

The number of foreigners seeking care in Malaysia more than doubled over five years to 770,134 in 2013. Most patients are from Indonesia, followed by the Middle East and North Africa, areas with plenty of new money and where healthcare is inadequate or dogged by long waiting lists.

 

That compares with 850,000 in Singapore in 2012 and nearly 2.5 million last year inThailand, though that figure includes spa stays and resident expatriates.

 

Spending by foreign patients totaled $216 million in 2013, dwarfed by Thailand’s $4.3 billion, again including spa stays.

 

Medical institutions have promoted cardiology and orthopaedics, areas with high demand in Indonesia and the Gulf states. And the mainstay, according to Patients Beyond Borders, a medical tourism publisher, is health screenings, which account for more than two-thirds of business.

 

The United Arab Emirates spent over $2 billion in 2011 to send patients abroad, according to Medical Tourism Guide 2014.

 

Also being tapped are middle class patients from countries with poor health systems. Kuala Lumpur’s Prince Court Medical Centre received almost 2,000 from Libya and more than 1,000 from Iran in 2012.

 

Lower costs, a shorter recovery time and high quality care have helped put Malaysia on the radar.

A heart bypass, at about $20,000, is less than half the cost in Singapore, and 10 percent cheaper than in Thailand, Patients Beyond Borders says. Hospital rooms and follow-up treatments are also cheaper.

 

“Malaysia’s strength has been at conducting high-end surgeries like the heart bypass and orthopedic procedures that are done non-invasively, so they don’t have to stay too long to recuperate,” said Mary Wong, chief executive of the Malaysia Healthcare Travel Council, a government agency.

Not all industry players back the low-price strategy.

 

“The number of people coming in doesn’t necessarily translate into higher revenue,” said Suresh Ponnudurai, chief executive of private medical travel company Malaysia Healthcare.

 

“Singapore and Thailand are targeting those who are really wealthy, whereas those who come to Malaysia aren’t as wealthy.”

 

Hospitals say most Gulf governments sponsor their citizens to specific countries. But they are more inclined to choose Singapore and Thailand, so persuading patients to switch to Malaysia, regardless of price, has been a challenge.

 

At least three countries – Kazakhstan, Libya and Oman – already have government-to-government agreements to send patients to Malaysia.

 

“The way to gain ground is to secure these accounts with government agencies since they are paying for the patients,” said Amiruddin Satar, managing director of KPJ Healthcare, one of three big hospital groups.

 

Still, institutions anticipate an influx of patients.

 

KPJ Healthcare, along with fellow health giants IHH Healthcare and Ramsay Sime Darby Health Care have sought increased bed allocations for foreigners.

 

KPJ hopes by 2020 to see the share of its revenue from medical tourism jump to 25 percent from 4 percent last year.

 

To the north, business is still flourishing in Thailand, but the military coup in May has posed a problem for patients whose governments have issued travel advisories.

 

Thailand had a head start, promoting its services after the 1998 Asian financial crisis, when the value of the baht currency sank. Middle East business rose after the September 11, 2001 attacks on U.S. targets, as patients felt unwelcome in the West.

 

But competition is also heating up from elsewhere.

 

South Korea last year flew actor Song Joong Ki, its medical tourism ambassador, to Qatar and the UAE to drum up business. Dubai and Istanbul are also marketing themselves as hubs for Middle East patients reluctant to travel long distances.

 

 Malaysia is also pursuing a larger share of the Muslim market through halal treatments, which exclude products forbidden under Islamic law, such as those derived from pork.

 

“For example, insulin, a widely used product in hospitals, we are sure which are bovine or porcine based. Where we can help it, we offer patients halal options,” said KPJ’s Amiruddin.

 

Islam allows for the consumption of non-halal ingredients in matters of life and death, but hospital pharmacies inform patients of products that are gelatin and porcine free. That includes offering the drug Dhamotil as a halal option for diarrhea, instead of the commonly used Imodium.

 

Hospitals are also using sutures manufactured by a local firm made from lambs slaughtered under Islamic law.

 

Work is underway to produce the world’s first halal vaccines for meningitis and hepatitis by 2017. The target would be Muslim pilgrims going for the Hajj in Saudi Arabia, which requires visitors to be vaccinated for meningitis.

 

“We realize that if we can come up with halal pharmaceutical products, there’s a big market for it,” said Jamil Bidin, chief executive of Halal Industry Development Corp.

 

“As far as Muslims are concerned, if you have a halal product, there’s no compromise.”

Life Plan

A: Insurance Protection Gives You Plan B - Life is a chock-full of unexpected events and whilst some may be pleasant; there will definitely be those which make you wish you had Plan B. That’s where the right kind of insurance comes in. If you have purchased the necessary policies, you will be afforded the peace of mind of knowing you already have an escape route. But having the foresight to know what kind of insurance policy you need and when to purchase it is key.

While we have segmented when you should get a specific policy, these are just guidelines – they’re not set in stone – so do feel free to make the ‘executive decision’ on which policies to purchase as and when necessary. Below is a brief overview of the insurance policies that you should be getting at specific points in life:

B: Starting Your First Job - Priority: Establishing a career, setting financial goals, including adequate medical and accident coverage

1: Medical and Health Insurance
How cheap (or expensive) is basic healthcare in Malaysia? With the recent allowance for medical practitioners to raise medical fees and charges, the simple fact remains that for most Malaysians, healthcare is hard to afford without access to a medical card – which allows you to claim for costly hospitalisation and surgical fees.

If you have been insured under your parents’ medical insurance policy all these years (usually up to a maximum of 23 years old), you’ll need to fork out some cash for your own after your coverage has expired. If you have a confirmed employment, you will usually obtain one through your employer.

2: Motor Insurance
Malaysia currently has the dubious honour of being one of the top 25 countries most dangerous to road users, with an average of 30 deaths for every 100,000 individuals – the road accident rate in Malaysia is really quite alarming! Not only that, because of the often clogged roads and frantic driving in urban cities such as Kuala Lumpur, many drivers have succumbed to road rage – just ask our good friend Kiki below:

The point is not to scare you from ever driving again, but to emphasize the importance of having comprehensive insurance protection for your vehicle, be it a car or motorbike. For a new vehicle, the insured value will be the purchase price while for other vehicles, the insured value is the market value of the vehicle at the point you apply for the insurance policy.

3: Personal Accident Insurance
If you rely purely on your monthly salary to support your daily expenses, you should get yourself a personal accident insurance policy – it will provide you with financial compensation in the event of injury, disability or death caused by violent, accidental, external and visible events. That is unless you are working in a high risk environment that has already provided you with a specialised PA policy i.e. law enforcement, pilot, military, and divers.

While employers traditionally provide you with PA insurance policy, some people may prefer the increased coverage provided by buying private policies to supplement those of their employers. This is especially important when you have dependents relaying on your income.

C: Starting a Family
Priority: Pay for mortgage loans, protection for your spouse, and financial security for your child’s education

1: Term Life Insurance
A term life insurance, similar to your personal accident insurance, is meant to replace your income for those relying on it should something unfortunate were to happen resulting in your death or permanent disablement. Again, having this policy is very important when you have dependents such as children and a spouse who is not employed.

Once your children are all grown up and can support themselves financially, a term life insurance won’t be too necessary.

2: Critical Illness Insurance
Often times policyholders will supplement a term life insurance policy with a critical illness rider or stand-alone policy. This policy gives you a lump sum benefit upon diagnosis of any of the 36 major diseases and illnesses including cancer, heart attack, stroke, diabetes including diseases often associated with old age such as Alzheimer’s disease and Parkinson’s disease.

3: Fire/Homeowner’s insurance
If you own or plan to own a home, you will need a home and fire insurance – this cannot be negotiated. A homeowner’s insurance will insure everything from the home itself to your belongings to someone getting injured on your property.

You will also be covered from natural disasters such as flooding and landslides. A home is potentially the biggest investment you will ever make, and many struggle everyday to afford to have a roof over their heads, so protecting your home should be a top priority.

In Malaysia, you can either take up a MRTA or MLTA insurance to insure both your family and mortgage. Of course, you will have no need for one if you decide to put your home up for sale, go back to renting, or make alternative living arrangements – move in back with the parents, maybe?

D: Getting Ready For Retirement - Priority: Secure regular income for retired life, update medical and critical illness coverage

1: Retirement Insurance
As you slowly move into this stage in life, your financial woes will mostly relate to maintaining a plan to ensure a steady flow of funds with the absence of paid employment.

Once you reach your late 30s, sign yourself up for a retirement insurance plan, also known as a retirement annuity plan. You receive a guaranteed level of income each year that can be paid out monthly. For some, their Employees Provident Fund(EPF) contributions may be enough to tide them over through their golden years, but on average, most people would have run out of funds within only 3 years.

As an example, you can start by paying a RM3000 premium per year from the age of 40 until the year you retire. Your policy will then be able to pay out a higher amount based of say RM7000 per year for 10 to 30 years after you retire.

With a retirement annuity, unlike a Private Retirement Scheme (PRS), which requires you to produce a GP (Grand of Probate) or LA (Letter of Estate Administration) to unfreeze and withdraw money in the event of your death, you will only need to make a nomination to pass on your wealth to your beneficiaries.

E: Know your options
The best thing to do before deciding on a insurance policy is to get yourself educated – get quotes from different insurers, read the nitty-gritty details of your policy, and whenever in doubt, ask your insurance agent questions.

This was brought you by Chester John from RinggitPlus.com

Understanding Generation Y

When it comes to Generation Y (Gen-Y) seeking to buy their first property, there appears to be a huge expectation gap. Apparently, Gen-Yers won’t buy into low-cost and medium-cost apartments and houses because they aim too high, desiring the high-end living that their salaries are unable to support, according to several property experts.

The crux of the matter is the lack of a trade-up mentality among younger house buyers, particularly among Gen Yers, who are eyeing what they want and not what they can afford. These are the 20- to 30-year-olds who are starting out, some of whom are just starting to earn their first salaries of around RM3,000 a month, says Malaysian Institute of Estate Agents (MIEA) president Siva Shanker. “They want something that they cannot afford now. So what do they do? They save up. However, the house prices move up faster than they can save. But if they practise trade-up, affordability will not be an issue,” he says.

Gen-Yers, also known as the Millennials, were born during the 1980s and early 1990s, and are often referred to as “echo boomers” because they are the children of parents born during the baby boom. Because the generation that is born during this time period have had constant access to technology in their youth, their perception is different to their predecessors, the Generation X (Gen-X).

For example, the Gen-Yers are not afraid of quitting their jobs without a back-up plan, says Shanker during a forum held at the Property Investment Convention 2014 organised by the Wealth Mastery Academy on July 12 and 13. “And they [Gen-Yers] are not worried that they will have no income.

For the Gen-Xers, they will have another job waiting before they resign,” he says, explaining that the resignation is merely a matter of transitioning from one employer to the next. “The Gen-Yers are different and it is because they are brought up differently. In my time, if I lose my job, I would have been whacked across the room,” he says.

“Now, when the Gen-Yer quits, their parents are sympathetic to them.” Shanker suggests that instead of having to deal with saving up for that condominium “that’s out of reach”, younger buyers should consider the trade-up method as an investment route to securing the home they desire. The problem for most young buyers is that they are looking at the primary market in hot spots and the property prices in those areas are most certainly beyond what they can afford. “Don’t look for a hot spot. Look for a spot that’s hot for you and make it work for you,” he tells FocusM.

Property entrepreneur Prudence Wong shares her experience of trade-up, coming from a family that was not well off. Her trade-ups obviously worked for her. Her first investment – an apartment – had offered good rental cash flow and when the time came for her to dispose of it, she enjoyed a substantial capital appreciation. “I started small. I moved from a small apartment to condominium units, to shoplots, factories, and bungalows and now to land,” she says. “It’s not what you invest in but how you invest.

I had basically two strategies. The strategies are maximising the rental cash flows and multiplying the profits. How do I do that? I add value to the properties I invest in.”