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For female readers.
For male readers.
*The average life of a sumo wrestler is about 45 years old, which coincidentally, is about the same as the Hippopotamus’s lifespan (49 years).
Ahem… Something for the male of the species to ponder upon…
Hardness matters…
“Grade 1 is when the penis is larger but not hard, Grade 2 when the penis is hard but not hard enough for penetration, Grade 3 is when the penis is hard enough for penetration but not completely hard and Grade 4 is when the penis is fully rigid.�
What about Grade 5? Fully rigid and horny?
So, what’s the big deal with the insurance charges? Well, I am going to cover exactly that, with a little bit of simple maths, don’t worry, no algebras!
Unknown to most, even to the sales personnel that has been recommending investment link products to unsuspecting clients, insurance charges in an investment-linked policies are calculated according to a rising rate. Note the keyword here- rising rate. We will discuss later how this rising rate will affect you not now, but a few more years down the road.
Insurance charges are the cost that is incurred by the Company to take up the risk for a particular coverage. Insurance charges is calculated according to the type of coverage. All the benefits such as Death, Dread Diseases and Disability has different insurance charges rate.
Below is a set of example I’ve taken from one of my existing investment-linked policy. You might need to refer to your policy manual to check up the rates or if you can’t find them in the policy manual, ask your consultant to provide one. This rate is very important for you to calculate if your premium you are paying now is enough for your coverage when you get older.
This is the reason why the premium you are paying for an investment-linked policy is not guaranteed.
For example, say you’re now 25 years old, and you’ve got yourself an investment-linked policy with a sum assured (death benefit of RM 100,000).
Based on the figure above, the insurance charges you are paying at age 25 is calculated as follow:
100,000 x 1.34 / 1,000 = RM 134.00 per year.
This means that RM 134.00 will be allocated for your Basic Sum Assured (Death Benefit) coverage for that particular year.
Similarly at age 50:
100,000 x 5.37 / 1,000 = RM 537.00 per year.
And at the age of 70, you will need:
100,000 x 29 / 1,000 = RM 2,900.00 per year
just to cover for your Basic Sum Assured (Death Benefit). And this is not including other benefits such as Dread Diseases, Waiver of Premium for Disability/Dread Diseases etc.
While we are at it, let’s also take a quick look at how much your medical card charges will cost you as you get older. The insurance charges table for medical card is shown below in Figure 2.
This figure is much more easier to read, since you can get the total insurance charges for the year you are looking for directly from the chart.
For 25 years old, your medical card coverage will cost you RM 238 yearly in insurance charges.
For 50 years old, similar medical card coverage will cost you RM 438 a year.
And finally at age 70, you are paying RM 1,651 a year for the same medical coverage.
Okie, that’s all for the maths. Now, you might be wondering, “How then, my premium is not guaranteed?” Or you might rebut, “Hey! I was told very clearly that my premium is fixed!ďż˝? You are both right and wrong.
Let’s take a look again at the two tables above. What do you notice? (observe harder…)
Well, you should realize that in the beginning of the first few decades, your insurance charges remain pretty much level. This is the optimistic era of your life, where everything is going well, hopping from one good job to another, driving new cars, moving into new house. Everything is sunshine and lovely!
As you approach mid-life crisis, that’s when the rise of the insurance rate charges kick in, of course, to add to the crisis!
The investment-linked policy is a product designed in such a way that it allows you to buy a very huge sum of protection in the early years with very minimal premium. By now, you should know why. I have seen cases where people can get RM 300,000 protection with a mere RM 150.00 monthly premium. Consumers who don’t read this article will think that they are paying RM 150.00 a month until Kingdom Come.
The Old Age Dilemma
As you get older and wiser, evidently the insurance charges will continue to increase dramatically.
When the premium is not enough to cover, you will receive a letter from the Company to remind you that you either top-up your premium, allow the Company to channel the profits (if any) that you’ve made from your investment to cover for the rising insurance charges or in the worst case scenario- terminate the policy.
If your retirement budget does not include this portion of expenses, you either let the policy terminate or you will need to adjust the coverage down to a level where you can afford or remove some of the benefits. Not a good idea, since the older you get, the more you need the coverage.
This is why you might be told that your premium is fixed, but at the expenses of adjusting your coverage/benefits.
Conclusion…
That’s why it’s important that one understand the nature of an investment-linked policy before signing on the dotted line. An investment-linked that is tied with many features and is financed with minimal premium is not meant for investment or savings purposes since most of the premium paid by the policyholder will be used up to pay for the insurance charges. Its core function is for protection only. If you are looking for investment return from your investment-linked policy, consult your insurance adviser on how you should allocate your premium.
Ensure that you are not being taken for a ride with the low premium high protection concept! Traditional insurance policies are the only GUARANTEED REGULAR premium insurance products. The premium and insurance charges has been calculated and averaged throughout the entire policy life. This is the reason why traditional policies are slightly pricier than their investment-linked counterparts.
A better risk management strategy would be to ensure that you also have traditional policies covering your life alongside the investment-linked policy. An ILP should be used mainly for your medical card coverage.
What about those who found out that they can’t afford the sudden hike of insurance charges and decided to start a traditional policy? Definitely not a very good idea especially if you realized this problem when you are about to retire (55 years old and above). The premium for any insurance products at that age will be prohibitive.
And that’s that. I am going to wrap up the entire series on Investment-linked Policy with the following advice:
There’s no way you can get high protection with low premium, at least not for long. Ensure that your consultant give you the whole picture of the policy terms, including insurance charges and risk profile of the fund. If the plan is too good to be true, it probably is. Remember, there’s no free lunch!
Articles in this series:
Investment-Linked Insurance Policy: An Overview- Part 1
Investment-Linked Insurance Policy: How Mutual Fund Works- Part 2
Investment-Linked Insurance Policy: Premium Allocation- Part 3
Investment-Linked Insurance Policy: Insurance Charges- Final Part
In this section, we are going to see how Mutual Fund is being applied in an investment-linked policy.
Let’s say you’ve just started an investment-linked policy with Never-Say-Die Insurance Company. This investment-linked policy provides you with a few types of funds to invest your money in. These are the available funds from Never-Say-Die Insurer.
a) Coward Fund (very secure)
b) Half-assed Fund (a balanced fund with a bit of bonds and some equity)
c) Black Jack Fund (very aggressive fund)
Let’s say you are a very aggressive investor and decides to invest in Black Jack Fund. Your premium for the policy is RM 200 a month. However, not 100% of the RM 200 you are paying will go into the fund, at least not for the first few years! The RM 200 will be split according to the terms that is stated by Never-Say-Die company, where one portion will go into the investment and the other into the administrative charges.
So how many percent of that RM 200 is going to be allocated into Black Jack Fund?
Let’s just use the following list for this discussion:-
Funds allocated for investment into Black Jack Fund.
1st Year: 40% (RM 80)
2nd Year: 50% (RM 100)
3rd Year: 80% (RM 160)
4th Year: 90% (RM 180)
5th Year: 95% (RM 190)
6th Year: 100% (RM 200)
7th Year: 100% (RM 200)
One very important thing to note is that the more money you have in the fund, the harder your premium is working for you. But you must always keep in mind, this is an investment and it carries with it the risk of losing money. Still remember who’s going to bear this risk? You, my dear policyholder! If you make some clean profit, congratulations! If you suffer losses from the fund, don’t blame the company, you authorized the investment, remember?
For those who are curious about the actual premium allocation for various insurance companies in Malaysia, here’s a summary breakdown for the first seven policy years.
The information might be outdated, and if you find any inaccuracies, please let me know!
This is one reason why an investment-linked is never a good idea to be used as a SAVING policy unless you are prepared to contribute extra premium which will be allocated specially for investment purposes. Similar to any investment vehicles out there, your investment funds is subject to growth and losses, based on the performance of the underlying investment activities of the funds. Hence, to ensure that your investment-linked policy meet your financial objectives, the premium allocation must be carefully planned and structured and not leave everything to chance.
So what’s going to happen to all the units that are being bought using your premium? We shall cover that together with one of the most important topics and also one that is often not clearly stated, if it’s stated at all during the sales of an investment-linked policy- Insurance Charges in an Investment-linked policy.
Stay tune!
Related articles:
Investment-Linked Insurance Policy: An Overview- Part 1
Investment-Linked Insurance Policy: How Mutual Fund Works- Part 2
Investment-Linked Insurance Policy: Premium Allocation- Part 3
Investment-Linked Insurance Policy: Insurance Charges- Final Part
First of all, you most likely already have an investment-linked insurance policy (ILP).
Maybe your agent might not have told you about it, but if you are like many others who has a medical health plan, it is most likely to have been tied with one.
Do you understand the risks you are taking all these while as an ILP policyholder?
Also why must your medical card plan be tied to an ILP? I can’t be sure, but I can speculate on a few possible reasons:
1) a medical health plan is a very important defensive financial tool to help you guard against expensive medical expenses. Since the inflation for medical and hospitalization stands at about 6-7% on an average, it’s not surprising that the profit margin for medical health plan is the lowest for the Insurance Companies (IC). So, what better way to rebalance it with a tie-up with insurance policy.
Note: You can take up the medical health plan on its own without tie-up, as I’ve explained it in my previous post: Ruling against Profiteering Hospitals.
2) Why an investment-linked insurance policy and not other insurance policy? Well, in case you wonder, they are many other types of insurance policy, such as endowment, whole-life, term etc.
So why the tie-up with investment-linked? It’s a relatively new product and most ICs marketing team decides that the best way to market and “educate�? the public is via a tie-up with medical health-plan.
Contracts of insurance on human life or annuity where the benefits are wholly or partly to be determined by reference to the value of, or the income from, property of any description or by references to fluctuations in, or in an index of, the value of property of any descriptions.
Related article:
Investment-Linked Insurance Policy: An Overview- Part 1
Investment-Linked Insurance Policy: How Mutual Fund Works- Part 2
Investment-Linked Insurance Policy: Premium Allocation- Part 3
Investment-Linked Insurance Policy: Insurance Charges- Final Part
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It seems that eating “carnivorous fish” can increase the amount of mercury that we intake during a fishy meal.
Mercury in fish
The fish accumulate mercury in their muscles and cooking does not appreciably reduce the mercury content. Mothers can pass on the ingested mercury to a foetus and through her breast milk into a nursing infant. Experts advise pregnant or breastfeeding women and women of child-bearing age to avoid consumption, or limit eating not more than once a month, of fishes such as swordfish, king mackerel, shark and tilefish.
If you still suspect that there’s something fishy being served in your local fish & chips outlets, just ask for the chips!
Even doctors are given the opportunities to freelance. Doesn’t seem like a long term plan to me.
No, thanks.
“How can they do justice to their patients if they take on the added responsibility of private practice?� he asked.He said doctors would not be able to concentrate fully on their jobs with such a move as their energy would be divided.
“This is because paying patients will command more attention than their non-paying counterparts,� he added in a statement yesterday.
A must-read article for anyone who hasn’t got any health care protection in place and even if you already have, it will be a revealing read:
Skim Insurans Kesihatan Kebangsaan (SIKK) which is a proposal to implement a mandatory health care policy for every citizen, is still under wraps and will not come cheap.
Thus the average expenditure per family will amount to RM2,808 per year (RM13.0 billion divided by 4.63 million families). In other words, each family will have to pay about RM235 per month.
Dr Xavier Jayakumar (Deputy Secretary General, Parti Keadilan Rakyat) on the state of Malaysia’s Health Care system:
“It’s so pathetic that even after 48 years of independence, Malaysia has yet to have a National Health Care Policy in the effort to shape the direction of the nation’s health care service.”
To make matter worse, the brain drain of hospital workforce in the public sector to the more lucrative private sector is also cited as the main culprit of deteriorating quality of health care provision in the public sector.
i) Firstly, income differences are enormous; a specialist in the public sector earns between RM4,000 and RM12,000 per month while those in the private sector earn between RM10,000 to RM100,000 per month. Some surgical specialists can even earn more than RM200,000 per month!
ii) Secondly, the workload in the public sector is heavier in most specialities.
iii) Thirdly, many medical and health professionals in the public sector feel that their contribution is not being recognised by pencil-pushing bureaucrats in the ministry and especially in the Public Services Department.
Dr Jeyakumar Devaraj (Coalition Against Healthcare Privatisation Secretary):
“We’ve been discussing this with health ministry officials for over a year now and it’s clear that the government is has yet to decide on the crucial aspects of the scheme .
Even the list of illnesses in the essential health package is not ready. When we asked if heart disease will be included, the ministry said it is waiting for the consultant (to determine this)”
Makes you wonder where did all the tax money go. Well, on a personal level, how many of us actually even allocate budgets for our own medical expenses? I am not talking about the occassional visits to the GP but those major “projects” which you need to change some internal “spare parts” or when your cells decided to have a game of PacMan.
Like how Dave Ramsey puts it, “The number-one cause of bankruptcy is Medical Bills, Number Two is Credit Cards.”
Ouch! Let’s just hope the wait won’t be life-threatening.
I wonder how are “emergency cases” classified, since nobody really would want to be in the queue for the Operating Theatres if they have had a choice.
Via The Star Online
The leak in the autoclave piping system that sterilises the utensils in the operating theatres has resulted in bacterial contamination of the water in the network.
“The hospital decided to close the OTs (operating theatres) for fear of the bacterial contamination spreading to other areas,â€? Universiti Kebangsaan Malaysia’s Centre for Public and International Relations director Prof Dr Yang Farina Abdul Aziz told The Star.
Shocking statistics, goes to show that Durex’s campaign is not doing a very good job in Sabah.
Via Daily Express
Sabah recorded 541 cases of reported HIV infection (397 males and 144 females), 162 cases of full-blown AIDS and 63 deaths between 1991 and October this year.
State Health Department’s Principal Assistant Director (HIV & AIDS), Dr Narimah Hanim Ibrahim said Tuesday, the State showed an upward trend from zero HIV infection in 1991, except for 2003 when only 52 cases were reported due to failure of notification, culminating in 105 reported cases last year.
“All the 144 females contracted HIV via the heterosexual mode of transmission. Sabah registered 71 new HIV cases, 35 new AIDS cases and 19 new reported AIDS deaths between January and October this year.
Can Wealth Last 3 Generations by Ong Eu Jin (Hard Copy)
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