Largely due to imperfect information, we often do not know what are our best options available for our life situation until we are offered the option. As a result, we may unconsciously end up compromising.
In this article I share 3 of the lesser known benefits that great financial planning may potentially offer you and in this process, help you better allocate your resources for your own situation.
(I originally wanted to write about 5 lesser known benefits but felt the article would be too long)
1. Getting the most optimal medical terms
A lot of times, when we have a medical condition, it might be common we are advised to declare and be mentally prepared to accept the conditional terms insurers offer. Many times, this can be a result of insurer limitation if the service provider only has one solution. Often, consumers may end up assuming that every insurer would underwrite the same way but this may not be true as different insurers have different underwriting standards based on their own risk appetite. Eg: Insurer A may view heart conditions with more stringent standards but weight issues with more leniency while Insurer B may be the opposite.
What if you healthy but you have a family history?
Case Study: Recently, I've come across multiple cases where clients get excluded from Breast related illnesses as a result of parent's having a medical history of breast cancer. Client is healthy.
What's interesting in this case study is that many insurers have opted to exclude client for Breast related conditions to varying degrees however, there happens to be one insurer who was willing to take on the risk with standard terms (no exclusion or loading).
In such cases, most people who are presented with the substandard underwriting terms would have either opted not to get themselves covered because they 'feel discriminated' (I've personally serviced a few clients who behaved in this manner prior to meeting me) or would have gone ahead with the coverage with exclusion or loading.
Very few people would have thought of applying to multiple insurers because of the hassle of finding a representative from each insurer. On top of which, many people assume that the underwriting standards are the same. Above all, most people in Singapore do not know what is preliminary underwriting and the availability of this option.
I would like to add a disclaimer: While preliminary underwriting and sourcing for multiple insurers increases your chances of finding the most optimal terms offerable to your health condition, it is not magic. There are health conditions that will be rejected or offered substandard terms across ALL insurers. In such cases, you will get a perspective about how serious your health issue is.
2. Liquidity
Another reason people may not like to do financial planning is because they assume that all their funds would be locked up for a long time. The truth is, in the market there are liquid solutions as well as illiquid solutions. A good financial portfolio will eventually cover both.
Again due to assumptions, many people end up holding cash in their bank accounts because this is the only form of liquidity they are aware of. Often, the cash amounts they hold far exceeds their needed emergency funds and some hoard so much in excess they even qualify for priority banking.
While most insurance instruments have a minimum of 2 years before any form of liquidity is allowed, there are investing instruments available that can offer liquidity from day 1 subject to market movements. Your investment frequency can also be flexible. Is it advisable to take up these instruments with a short term view in mind? No... but the feature of liquidity in the event of unforeseen emergencies is there. Of course, a responsible financial advisor will tell you that you should still set aside 6 months of emergency funds.
Prior to first July, there was an insurance solution that would have interest clients who value liquidity and slightly better returns than bank deposit accounts. That product is known as Etiqa Enrich Advance. I'm sharing for knowledge sake (just so we don't get limited by our assumptions), it's not a product recommendation, anyway, it's no longer available.
3. Cost Savings
Most consumers tend to assume that buying insurance is a fixed unchangeable thing. It depends. There are considerations in place such as whether changing benefits you. Whether you can make changes without compromising on your benefits (you might be healthy before and unhealthy now)...
However, it's a flawed assumption to just assume you shouldn't explore this option because it is troublesome. It is also a flawed assumption to believe that doing so ONLY benefits the advisor and not you. At the end of the day, you have to take an objective view on the numbers to see if doing so makes sense. This is similar to your objective assessment whether to upgrade or downgrade your house, whether it makes sense to take a loan or pay in full, etc...
Not everyone is familiar with the possibility that we can reduce our cost (premiums) for insurance while increasing our benefits (coverage) because insurer promotions and pricing varies. Unless you do a mass comparison, you might overlook some of these possibilities if you only enquire with a few insurers.
Sometimes, the issue can be bigger without you knowing. You could be paying a lot for very little coverage because the plan has other features (which you may not need or want). One potential implication to this would be locking up a significant portion of your money with other needs exposed but having no other resources to fill them.
Please also read: The 90 Days Waiting Period In All Critical Illness Coverage
Summary
Modern financial planning is very diverse and has a myriad of solutions. Sometimes, I even invite clients to dream up their ideal solution and we can explore if we can put something together (no risk, fully flexible and high returns isn't a possible at the point of writing haha).
The intention of this article is mainly to point out the lesser known benefits a consumer should explore instead of limiting themselves because of flawed assumptions.
1. Get Optimal Coverage
It is ultimately in client's interest to seek out the most optimal coverage for themselves especially when there are pre-existing illnesses, weight issues or family history. Healthy clients in particular might get emotionally offended when they are asked to pay more or be excluded from some benefits... sometimes an emotional response is to go without coverage but common sense tells us this isn't a good idea (if you did think this is a good idea, you wouldn't think of buying insurance in the first place).
2. Liquidity
It is also worth exploring options to beat inflation if commitment issues is a big problem for you. There are solutions available although such liquid options have their own set of drawbacks.
3. Cost Savings
With financial plans getting more competitive, it is advisable to do a policy review to see if you can improve your coverage with less cost. Again, this isn't magic. A big group of clients can benefit from it but it's still subject to multiple considerations like health conditions, entry age, type of solution, the combination of items covered, etc...
After reading this article, you may have some questions or may want to get started on how you can benefit from these lesser known benefits (there are 2 more I didn't write about). You can reach me by dropping me a message.
Be sure to share the article if you feel this information is helpful. You will enable a lot more people to learn about how to not compromise on their financial planning.
About Janice
I specialize in portfolio optimization (ensuring you get maximum value for every dollar you put in) and retirement planning.
Clients look for me primarily to outsource their retirement planning needs so that they can focus on other aspects of life that interests them. Many of whom are very good in earning their incomes in their respective professions and wish to ensure their monies continue to work harder while they focus on what they are good at. Refer to client testimonials here.
I've helped many clients who are referred to me reduce the costs they are paying for their insurance or help provide solutions when they deem they are stuck with huge commitments bought when they were younger but unsuitable for their present life stages. You can reach me at 94313076 or my social media accounts on Facebook and Instagram.
Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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