Category: SG Budget Babe

What’s covered under your home insurance?

What is Home Insurance?

A lot of finance bloggers have covered life / term / hospital / investment-linked / travel insurance policies, but I didn’t find much information on home insurance so I thought today I’ll dedicate an article to this boring but important topic.

Home insurance policies are just about as exciting as watching paint dry, but they’re an important concept to grasp for all homeowners. A home insurance policy will cover the physical structure of your home as well as your personal contents within the four walls. To be more accurate, some agents distinguish between fire insurance and home insurance, so here’s a quick run-down of the differences:

Fire insurance

Home insurance

Status

Mandatory

Optional

Premiums

As low as a few dollars for a 5-year plan (eg. $5.50 for a 4-room HDB for 5 years of coverage)

Ranges from $40 – $400

What’s covered

Only covers damage to your home structure, replacement of any original fixtures or fittings by HDB / the rebuilding of your home for landed properties.

Does NOT cover damage to home possessions in the event of fire.

Covers the contents in your home, together with a few other quirky stuff that you probably never knew.

In the event of any unforeseen incidents like a fire or burglary, your home insurance policy will cover any damage caused to both the physical structure as well as the belongings inside your house (eg. TV, credit cards, jewellery, etc). A more comprehensive policy will also cover you for alternative accommodation expenses during the period where you’re unable to stay in your home due to such events.
While researching on this topic, I also realised there are a few unexpected and interesting areas that home insurance policies also cover!

Unusual things and situations that your home insurance could cover for

1. Identity theft

We’ve all worried about cyber security, and there are various home insurance policies that can cover theft of credit / debit card and personal documents. One such unique policy is the AXA SmartHome Optimum Plan, who has a Cyber Protector Rider to protect against identity theft, fraudulent internet transactions, disputes with online stores, and damages to virtual reputation. You could claim up to S$1,500 for legal expenses on private settlement and a maximum of S$15,000 for court cases!
Of course, whether your claim gets approved in such events is entirely up to the insurer, but this is definitely a new area of interest worth looking into especially if you’re looking to combine with your home insurance policy. Moreover, such an insurance is often offered as a separate policy, but AXA combines them into a single plan in this case. For instance, Chubb has its Identity and Wallet Protection Insurance which only covers theft of credit/debit/ATM card and personal IDs, whereas AIG offers ID Guard which covers identity theft, credit card fraud, and online and email scams.

2. Clothes, grocery expenses and other living essentials

I was pretty intrigued when I saw that Chubb’s Home Insure policy offers up to S$3,000 payout for expenses incurred on clothing, personal effects and other essential items if your home becomes uninhabitable for a period of time due to the unforeseen events. Pretty cool!

3. Burst water pipes

Remember that story about the Singaporean family who came back to their brand new BTO flat only to discover it covered in crap due to a burst pipe? Well, home insurance protects your property against such tragic incidents as well.

4. Damage or loss of belongings of your household help and guests

Suppose your friend who’s staying over at your place for the night accidentally breaks her pair of spectacles. Or, a gold ornament of your domestic help gets stolen from the house. These things are also covered by your home insurance or home contents insurance (of course, only if you have opted for them at the time of buying the policy). Bet you didn’t know this!

You will have to pay an excess of S$100 or thereabouts, and the cover usually ranges from S$500 to S$1,500 per item. Some policies offering these benefits are Aviva Home Plus Policy and NTUC Income Enhanced Home Insurance.

5. Your Bicycle

If you’ve invested in a good bicycle, chances are that you’ve probably worried about it getting lost or damaged. The good news is that if this happens when your (or your family’s) bike was on your building premises, you can claim up to S$300 through insurance. Tokio Marine Flexi-Home Insurance and AIG Homes Advantage are some policies that offer this.

Read also: Singles Tell Us 6 Tips They Learnt as First Time Homeowners

6. Groceries in your refrigerator

No, you can’t make a claim for that block of rotten cheese you forgot about because it was hidden for ages behind boxes and boxes of other frozen food. But if some food items in your freezer gets spoilt because of temperature fluctuation, power failure, lightning, or a technical problem in the refrigerator/freezer/chiller, you can claim up to S$500 per item as insurance. (You still have to pay an excess of S$100 though, so it only makes sense to make a claim for items that are actually very expensive to replace.) Usually companies approve such claims with ease when you haven’t been home for a few days – for example when you are on a vacation – rather than when you have been at home all the time.

Policies that offer this benefit include DBS HomeShield, ETIQA eProtect Home, and MSIG Home Insurance.

7. Pets

Last but not least, most pet owners I know don’t actually bother to buy pet insurance, which is surprising considering the benefits they can get. Anyway, you’ll be surprised to know that your home insurance policy can also cover:

      Accidental death of your pet

      Theft of your pet

      Damage caused by your pet to a third-party property

I’ve no idea why, but usually only dogs are covered, although some policies insure cats as well. Generally, the maximum amount offered is around S$500 per pet, for a maximum of 3 pets. You can get this in plans such as EQ HomeGuard and American Express Home Insurance, or go directly and get a dedicated pet insurance policy instead.

What I found through this exercise was that each home insurance policy is customisable as per your needs, and not all plans offer the same benefits or the same cover. Contrary to what I had expected, there’s a lot more that you can opt to get coverage for instead of simply the physical structure of your home and the contents in it. It is worth comparing across the different insurers to see which kind of coverage you would like to opt into vs. the premiums, so if you haven’t bought a home insurance plan yet, you can head over to get a comparison on BankBazaar.sg before getting one.

If you’d like to get a personal loan or a credit card, you can also visit BankBazaar.sg to easily compare and apply for the best offers in Singapore.

Disclaimer: This post was written in collaboration with BankBazaar.sg.

With love,
Budget Babe

DBS Be Your Own Boss (BYOB) IS more superior than OCBC 360

I’ve been requiring quite a number of enquiries regarding my previous post, where I highlighted DBS’ latest Be Your Own Boss promotion as an extremely good deal.

Naturally, there were people who were skeptical. 

I know, I know, mindsets are hard to change. It has been a few years since OCBC 360 became the first bank to introduce such high-yield savings, and people have been very skeptical of all the other accounts that followed after. Stubbornly still believing that OCBC 360 is the best, even though they’ve changed their T&Cs to reduce the interest time and time again.

I’ve covered UOB One, POSB Cashback and BOC SmartSaver which all came after OCBC 360, and each post had their skeptics as well. The latest to join the stable is DBS BYOB, and if you qualify, it is without a doubt the highest-yield savings account at the moment, but naturally some folks just find it hard to believe that good deals do exist.

Well, you can continue living in your bubble, because I’m here to outrightly say that OCBC 360 is no longer superior.



If this is indeed so, then I’d be worried because I said this in my original review post:

For the higher income-earners who can afford to park aside $3000 of savings every month but still don’t spend enough to consistently hit $500 on your credit card, you can also take advantage of this promotion to get even higher interest than your existing <2% p.a. on the other banks’ schemes.


I get worried when I recommend wrong stuff to you readers. BUT I was very sure I was correct and this reader was wrong. After all, it is easy to assume when you don’t bother doing the hard work or the leg work to back up your claims.

So for all of you who still think your OCBC 360 is superior, prepare to have your mind blown…
Notes:
I used $40,000 initial savings based on the assumption that the average working adult in
Singapore should have no problem saving this sum after working for a few years, as I’ve shown here.

1.55% p.a. interest is used (0.05% + 1.2% + 0.3%) assuming that the person can’t consistently chalk up
the $500 min. spend on their cards,
which I highlighted as another good reason upfront why you should switch to DBS BYOB!
You can stick with your OCBC 360 and wave goodbye to that $1,860 extra interest that the rest of us will be happily getting on DBS BYOB.

Or, if you’re not young enough to qualify for DBS BYOB (<30 years old), how about UOB One, which I already highlighted last year as another superior account for those who have no problem meeting the $500 monthly credit card spendSome of the savvier folks have already switched to UOB One in all that time you spent thinking – this Budget Babe siao ah?! OCBC 360 is obviously better please. You can read why you should totally have done so as well here

Here are some other misconceptions I’ve encountered (based on comments and responses to my review). I remain by my original stand that DBS Be Your Own Boss is a superior product.

Misconception 1: There must be some sort of cap on the max. amount!
The cap is on your monthly savings amount in SAYE, with a max. of $3000 additional injections every month. 

For any ad-hoc deposits outside of the automated monthly transfers, those will only earn the base interest rate (0.05 to 0.25% p.a.).


Thus, if you simply followed my hack (including where I illustrated to transfer a max. of $3000 to SAYE monthly), you would still be getting the full maximum interest.

Misconception 2: Surely the more realistic transactions would be excluded
I had originally recommended chalking up the 5 monthly transactions via Grab / Uber payments, grocery shopping or buying NTUC vouchers, watching a movie, eating or drinking out, or shopping at retail stores like Watsons and Guardian where you can stock up on your personal care and grooming necessities.

Some folks didn’t believe it could be that easy. One reader even asked if topping up of ez-link would count (thank you, what a fantastic tip!):


I’ve checked with DBS on the legitimacy of this brilliant idea, and yes, it will qualify!

So go ahead and sign up!

Misconception 3: There must be a min. $400 monthly spend on DBS / POSB cards



Apparently two of my readers highlighted that when they checked with DBS, the bank customer service officer / retail branch salesperson insisted that there is a minimum of $400 spending for the 5 transactions. 

This was directly the opposite of my hack which I shared in my last post, where I highlighted how the DBS BYOB is fantastic because there’s no minimum monthly spend and you could technically make as little as 5 x $1 transactions to qualify. 

I’ve since confirmed with the corporate folks at DBS running this BYOB promotion that there is no minimum spend for the 5 card transactions.

I’m not sure why there are such instances of inaccuracies, but this is definitely not the first time I’ve heard of it. This reminds me of another incident where I strongly recommended POSB Cashback programme when it was launched, and my article also drew its fair number of skeptics. In my review, I detailed how to “hack” the scheme to get maximum benefit out of it. However, the bank officers sang a different tune to those who had read my post and wanted to sign up.

The original review post:

One of the responses that came after my review went live:

 And the aftermath.


I’m not sure why the bank officer gave inaccurate information, but anyway, it does pay to double check before you strike off a good deal especially when it comes to your money.

Because this inaccuracy has happened more than once, I just wanted to put it out here once and for all that I check my facts very carefully before I post, especially when it is a collaboration post with the brand. Thus, you can be rest assured that my information / recommended “lifehack” is most likely to be accurate, because I’ve already done the digging on your behalf prior to posting the review.

Of course, if I’ve truly gotten my facts wrong, I’m always more than happy to make the amendments. Please, highlight them to me if you spot any! After all, we’re all responsible in keeping each other accountable.

I understand that it is hard to trust many social media influencers these days, what with so many exposés – such as how the UOB Krisflyer campaign (influencers) reeked of dishonesty, the Beautiful Teeth Whitening kit (here and here), and of course the Gushcloud exposé by Xiaxue.

Not all of us rely on sponsored posts for a living. Some of us are actually more discerning and value the trust you’ve placed in us, and we’re not going to break that just because of a short-term sponsorship! That’s just not my style, and I’m sure I speak for many of the financial bloggers here who operate the same way.

So all in all, please continue to question and do your own due diligence, but you can trust my reviews (haha!). Do also continue sharing such good deals with me, because I wouldn’t have found out about DBS BYOB if it weren’t for you awesome readers who had raised it to my attention.

To greater lobangs and wealth!

With love,
Budget Babe

Get 4% p.a. interest with DBS Be Your Own Boss (BYOB)!

Looking for a savings account that doesn’t require you to jump through too many hoops for higher interest? If you struggle to meet the $500 monthly spend requirement on your credit card, there’s a new product on the market that you might want to consider.


A few readers recently alerted me to DBS’ newest promotion – the Be Your Own Boss (BYOB) savings initiative – and asked me what I thought about it. Nothing gets my attention like another high-yield saving account, so I reached out to DBS and dug out more information. Here’s my take!


The premise is quite simple: DBS BYOB encourages you to pay yourself first when you get your paycheck each month. This is pretty much in line with what I’ve been preaching since my very first post in 2014 (read: how I saved $20,000 in a year), so it gets a thumbs up from Budget Babe.


DBS calls this method akin to saving like a boss. At 4% per annum, that’s a pretty solid interest rate, and one that currently beats all the other high-yield saving accounts I’ve previously reviewed.


What I used to do, before anything like BYOB was available, was to open up separate bank accounts for my savings and expenses. My paycheck went directly into my savings account, and I would manually transfer a fixed sum to serve as my “pocket money” for the month into my expenses account. For those of you who are lazy to track your daily expenses, this is a effortless way to stay disciplined and within a budget.


DBS makes it easier for you by automating this step. Set a figure sum to be automatically transferred to your POSB Save As Your Earn (SAYE) account every month and try to resist the temptation to withdraw money from your SAYE account.


Next, use your DBS / POSB credit or debit card to make at least 5 transactions monthly. Unlike many of the other saving accounts which require you to spend at least $500 on your credit card in order to earn bonus interest, there’s no such requirement here as you could technically make as little as 5 x $1 transactions just to qualify! Need some ideas?
  •        Grab / Uber payments
  •        Grocery shopping / buying NTUC vouchers
  •        Watching a movie (my favourite! DBS Mastercard also gives you discounted prices at Cathay)
  •        Eating or drinking out
  •        Shopping, whether at physical retail shops or online



For anyone who

  •        Spends less than $500 on your credit card in a month and / or
  •        Earns less than $2,000 a month,

this would be the best account in the market with the highest interest rates.


I’ve compared against the other high-yielding savings accounts in Singapore and none offers such a high interest rate with such low requirements at the moment. If you know of any better deal, please jio me!



For the higher income-earners who can afford to park aside $3000 of savings every month but still don’t spend enough to consistently hit $500 on your credit card, you can also take advantage of this promotion to get even higher interest than your existing <2% p.a. on the other banks’ schemes.

What’s the catch? Well, you’ll have to be a working adult of between 18 – 30 years old with no existing salary crediting arrangement with DBS/POSB between Sept 2016 – Feb 2017. For those of you who are older, you might want to look elsewhere…

Here’s what I recommend you to do in order to maximise the bonus interest of 2+2% p.a. without too much effort:

  1. Register for the Be Your Own Boss initiative here.
     a.    Get $88 cash gift if you do this before 30 September!

    1. GIRO credit your monthly salary into a DBS/POSB savings account.
    2. Open your SAYE account online here, and select the salary crediting account as the debit account to automate your monthly savings amount between $50 – $3,000.
       a.    Choose your preferred date for the transfer between the 1st – 25th day of your salary credit.

    3. Leave your SAYE account untouched.
    4. Use your DBS/POSB Credit or Debit card on at least 5 transactions a month.
        a.    For the best debit card, I recommend the DBS Visa Debit Card which gives you 5% cashback on your Visa payWave purchases (min. 5 transactions a month).  
      b. You 
      can use your card for Grab / Uber rides, or grocery shopping, or at the movies, or offer to pay the bill first when you’re eating out with your friends.


    Remember to get this done before 31 September 2017 to enjoy the bonus cash gift!


    Before you sign up, you might also want to read about the BYOB promo, its terms and conditions (I’ve highlighted the more pertinent ones in this post), the bonus interest illustration and the SAYE account.


    Disclaimer: This article is written in collaboration with DBS (after a reader alerted me to BYOB, which was how I came to know about the product). All opinions are of my own.

    REITS Investing 101: Understanding the different types of REITs

    For the dividend investor, real estate investment trusts (REITs) have been extremely popular over the last decade for their, giving both capital and dividend gains to investors who hold them.

    Photo credits: Seedly

     But before you jump onto the REIT bandwagon, you need to first understand what the different types of REITs are and which you prefer to invest in.


    Retail REITs

    One advantage of retail REITs is that for most investors, it is easy for you to do your scuttlebug due diligence by simply going to their malls. Take some time to observe the location, mall architecture, tenant mix and type of shoppers. With such information, you can obtain a first-hand idea of the earning power of that mall, unlike other REITs where observing the property from within can be difficult or even prohibited.




    “A hallmark of a vibrant retail REIT is one whose management is proactive in organizing events, holding competitions and actively engaging people to come into their malls. Suntec REIT (T82U.SI) is an excellent example; the REIT holds multiple entertainment events, invites celebrities to meet and greet with fans, hold competitions, host international conferences, and organize sale bazaar fairs and travel roadshows to continue to make their shopping malls lively.”


    Ideally, you’ll want to invest in retail REITs that own malls and shopping centres which consistently draw in the crowds and have the potential to continuously revise rental rates upwards.



    Healthcare REITs



    Hospitals and nursing homes are underlying assets of healthcare REITs. The master lessee of these properties (the main tenant who rents the entire hospital) usually takes care of all property operating expenses, taxes and insurance of the property.


    The leases of healthcare assets are generally long term, usually longer than ten years. For instance, National Health Investors Inc. (NYSE: NHI) generally sign 15-year leases on each of their portfolio assets.


    Be it for small accidents or major emergencies, hospitals and healthcare offices will always be in demand and are fairly recession-proof. This is why healthcare REITs are often trading at a premium and continue to show a solid and steady return on investment even during a recession.


    If you’re thinking about investing in overseas healthcare REITs, be sure to ask yourself these two questions before investing: Does this overseas healthcare REIT have a track record of managing healthcare assets in a cash-flow positive manner? Does the REIT have a reputable parent?


    Quantitative observation-wise, look at the “Rent over EBITA” ratio of the hospital operator. This is the total rental divided by earnings before interest, taxes, depreciation and amortization. It’ll show you how much of its cash generated goes towards paying the rental owed to the REIT (the lower the ratio, the better).


    “Many unitholders do not have the financial capability and time to do due diligence on an overseas hospital asset. However, one can simply use Google Maps and observe where the hospital is located. Is it easily accessible? Is it in or near a major city or dense population base? Are there many other hospitals around in proximity?”


    Industrial REITs



    Business parks, flatted factories, show houses and warehouses are often categorized as industrial REITs, which offer higher yields relative to other REIT classes (but also with risk).


    Smart investors tend to pick industrial properties that are adaptive and well-equipped to serve big-business clients. Easy access to wide roads or highways (for logistic purposes), built-in high floor-loading capabilities, high ceiling heights and wide column spans are some examples of highly desired industrial assets for big companies.


    It is important to also look at the tenants as you will want to find large and reputable tenants. Otherwise, no matter how long the contracted lease term is, it is of no value to the unitholder. Generally, industrial REITs who have a 60% or higher exposure to reputable MNCs are deemed to be considerably “safer” to invest in.



    Hospitality REITs (includes serviced residences)



    Hospitality REITs are usually one of the most vulnerable as they are easily affected by external factors such as spread of diseases, terror attacks, economic recessions and layoffs, etc. In light of this, some hospitality REITs do negotiate a master lease agreement with a hotel operator which provides for a minimum fixed revenue amount. An example is OUE Hospitality Trust (SGX: SK7), which pledges a minimum yield of 4.5% simply due to the master lease agreement they’ve contracted with their hotels.


    Another real threat is the rising popularity of Airbnb, which is an online platform allowing people to list and rent their own homes and apartments to travellers. This has had an adverse impact on hotels, and in a recent study conducted by HVS, hotels lost more than $400 million in direct revenues per year to Airbnb in 2015.


    Unlike other REITs who undergo renovations and AEI (asset enhancement initiatives) to upgrade themselves for higher future DPU, hospitality REITs have to undertake enhancements even if they’re not always yield-accretive, simply because they need to continuously keep up with appearances and standards.


    The key metric to determine the earnings potential of a hotel is to calculate the revenue per available room, or “RevPAR” – the average daily rate (ADR) multipled by the average occupancy rate (AOR). The higher the RevPar, the better. Lower RevPars generally indicate that the hotel has many rooms under-utilised or even left empty for significant periods of time, which is not ideal.


    “An investor looking to take advantage of an upcoming tourism boom in a country should go for hospitality REITs that have negotiated a larger proportion of their lease structure on the variable side. Vice versa, an investor looking for more stability in the sector should go for hospitality REITs with a higher fixed portion in their lease structure.”


    Office REITs



    A good office REIT will usually have their office buildings located in notable business areas that are easily accessible by public transport and cars. Given the high skyscrapers and swanky exterior, many investors are drawn to the idea of investing in REITs that collect rental from reputable MNCs, financial institutions and other corporations.


    However, what many people do not realize is that office REITs are actually highly cyclical and can be more sensitive to economic headwinds than their retail REIT counterparts. For instance, during the great recession from 2008 – 2011, many companies consolidated their branches and halted expansion plans. This led to a severe oversupply of rentable office space, causing all NYSE-listed office REITs’ unit prices to plummet. When the economy recovered after, occupancy rates then rose back to the 90% range again, which led to a rise in their office REITs’ unit prices.


    “Look for office REITs with management who are focused on tenant retention as well as tenant attraction, with the desire to maintain a long and healthy lease expiry profile which will provide sustainable returns to unitholders like yourself over the long run.”


    Given the cyclical nature of office REITs, it is important to recognize the stage of the economic cycle in which you’re investing. Do not make the mistake of being seduced by the high rental income achieved during strong market periods. It pays to think like a contrarian.

    In summary, the industrial, hospitality and office REITs are inherently more risky than other REITs due to their assets’ sensitivity to economic headwinds. The silver lining, though, is that such volatility can offer gutsy investors the opportunity to buy these REITs at a cheaper price and be duly rewarded during market upturns.



    Disclaimer: This informative article was written in collaboration with Ivan Ho, author of the Investing in REITs masterclass. If you’re interested to learn more about REITs and how you can develop a new source of passive income from investing in them, click here for a discount on the above REITs masterclass!

    How much commissions do insurance agents earn?

    Everyone’s talking about how a former AXA Life Insurance agent, RameshKrishnan, has been awarded $4 million in damages. High Court Judicial Commissioner George awarded this based on the establishment package offered by Prudential:

    •        A commencement allowance of $675,000 +
    •       An initial monthly salary of $65,625 +
    •        A salary of $43,750 for the next 12 months. 
    In other words, we can look at this as a $4 million annual paycheck that was given out.




    Many had a lot to say about the absurdly high pay.

    Credits: The Straits Times Singapore Facebook page


    The key question I had after reading the news article was: 

    Was the agents’ focus on regular premium policies self-motivated?

    “The Ramesh Organisation had focused predominantly on regular premium policies instead of single premium policies since the beginning of 2010. 

    (Regular premium policies are those for which the policyholder pays premiums throughout the life of the policy, while single premium policies are those where, as the name suggests, the policyholder pays one premium at the start of the period of cover.) 

    The persistency ratio for single premium policies tends to be more volatile as policyholders will typically cash out these policies to realise the profit when market conditions are favourable. Ramesh asserts that the CEO then, Mr Gilbert Pak, had assured him in February 2010 that they was agreeable to taking into account only the persistency ratio in respect of regular premium policies when assessing the eligibility of Ramesh Organisation advisers for incentives and awards in the event that their persistency ratio in respect of single premium products dropped as a result of the organisation’s shift in focus. On this assurance, the Ramesh Organisation had focused on regular premium products.”       Source 

    Doesn’t this sound like the agents’ motivation to sell regular premium policies were not purely based on their customers’ needs anymore, but also because they wanted to increase their persistency ratio? It sounded like this to me leh?

    (The persistency ratio is a key assessment criteria of an agent’s performance in running for the bonus awards and incentives given to top performers.)


    Letter from AXA’s CEO Glenn Williams


    High Number of Lapsed / Surrendered Policies 

    “Based on our observations of notable trends [on] the lapsing and surrendering of policies, we have strong reason to believe that the ex-advisers in [the] Ramesh Organisation have been involved in [the] twisting of clients’ policies. We are very concerned as to whether the clients have been provided with proper advice or [whether] any improper switching/replacement practices [have been] carried out by the ex-advisers which are detrimental to [the] clients’ interests.”

    (“Twisting” is a term used to describe the situation where a policyholder is persuaded to allow an existing policy to lapse, only to enter into a new policy on similar terms.)


    “Twisting” hurts the consumer but is a sweet deal for the agent who stands to earn the commissions all over again. However, it is unclear from the judgment if any evidence was found thereafter to support AXA’s claim that the agent had indeed practised “twisting”, and probably only the agents themselves will have the answer.


    Source: The Straits Times

    The next question we’re all wondering is, how much do financial advisors stand to earn from selling us insurance?

    Coupled with the ongoing debate over term and life insurance, many financial bloggers advocate Buy Term and Invest the Rest (BTIR), whereas insurance agents cry out that you should be getting Whole Life (WL) Insurance instead. Recently, there was even a rather contentious article put out (by an insurance agent, unsurprisingly) to argue in favour of whole life policies.

    Who’s right and who’s wrong? That’s a topic for another day, but in the meantime, you can read my previous posts on this debate here and hereOne common argument raised by BTIR advocates is that insurance agents are pushing for WL because it lines their pockets with hefty commissions.


    Is that true? How much does your insurance agent stand to gain if he sells you a whole life policy instead of term insurance?

    Let’s take a look.

    Someone managed to get a copy of the Agency Schedule of Commissions from one of the major insurance companies in Singapore, which I’ve reproduced below and will be using for the purpose of this article.

     Credits

    As you can see from the commission table above, whole life insurance, endowment and investment-linked policies (ILPs) have the highest commission rates.


    Read why I cancelled my ILP here.


    Let’s look at two insurance agents – one who advocates BTIR, and another who promotes WL. 
    Year Percentage of Premium *
    1 50%
    2 25%
    3 to 6 5%

    Selling Whole Life Insurance

    Woohoo! You’ve just closed a whole life policy with an annual premium of $4000 (I’m using the quote I recently got from my agent for 500k TPD if you were wondering).


    1. Your 1st year commission is $2000
    2. You get renewal commission in the 2nd year of $1000
    3. Renewal commission in the 3rd to 6th year is $200 yearly

    All you need to do to earn $50,000 in the first year is to close 25 cases of whole life policies with an annualised premium of $4000. 

    That doesn’t sound too difficult, does it? You technically just need to find at least 2 customers every month to hit your quota. Even my 9-6pm job didn’t pay me this much income!


    Selling Term Insurance


    On the other hand, let’s compare to the other agent who closes a term policy with average annualised premiums of $400 instead. Let’s call him Jack.


    1. 1st year commission: $200
    2. 2nd year commission: $100
    3. 3rd to 6th year commission: $20 yearly

    Unlike you, Jack needs to find 250 consumers to buy term insurance from him if he wants to match up to your $50k annual income. Assuming he goes for vacation in June and December with his kids, that means he needs to close 25 customers every month, or almost 1 sale a day!

    Let’s not forget that insurance companies also offer a lot of other perks to their agents, including bonuses and long-term incentives that can significantly boost your income too.

    How do I know? Well, I married an ex-insurance agent who was pretty terrible at his job (because he mostly sold term, health and travel insurance – stuff which I agree with). He didn’t push ILPs or endowment plans, and that’s why I told him to quit his job and switch careers (I’m not kidding).

    Still not enough proof for you? Check out this Million Dollar Round Table (MDRT) Prudential insurance selling you the same dream career in this manner. You can earn $100,000 in a year! 

    Selling Personal Accident Insurance

    From the table, you can also see that accident plans have a flat rate of up to 30% which is payable throughout the entire premium-paying term. This means that you’re not just limited to 6 years worth of accident plans, but much longer!


    The smart insurance agent could also then start your relationship and gain your trust by selling you a cheap personal accident plan, and then slowly upgrade you to other plans later on.

    So how much commissions does your insurance agent earn from selling you that policy?

    Well, now you know!


    Also read: Questions to ask your insurance agent (including how much they stand to gain from you)


    For the record, my policies are handled by my 3 agents who focus on selling me the plans I need instead of pushing me to stuff like ILPs or WL. Maybe because they know they’re dealing with Budget Babe, LOL. I’m not saying agents who promote such products are bad, but they definitely aren’t my cup of tea. At the end of the day, insurance is a complex product and there are no right or wrong answers. I cannot emphasize enough on having a trusted advisor who will be focused on selling you the right policies that fit your needs vs. the ones that line their pockets. Best of luck finding a good advisor!

    With love,
    Budget Babe

    Does losing money make you a bad investor?

    Does losing money make you a bad investor?Rather than get demoralised over losses, I believe that losing money is part and parcel of one’s investment journey for greater growth and insights. After all, some of the best lessons I learnt were when I lost…

    Best Fixed Deposit accounts in Singapore right now

    For those new to investing and looking for a way to grow your money while taking as little risk as possible, you can first consider either high-yield bank saving accounts (like UOB One, OCBC 365 or BOC SmartSaver), fixed deposits (FD) or government bonds (like the Singapore Savings Bonds).

    For experienced investors, you aren’t the only one finding it tougher to find value buys in today’s market conditions. I’ve been sitting on a growing cash pile too, and there are lesser value stocks as compared to the same time in 2015 when China’s Black Monday happened. While waiting for the next bear market to come around, make your warchest count by parking it in fixed deposits to earn higher interest rates in the short-term.

    The benefits of fixed deposits

           They are capital-guaranteed. You won’t lose a single cent.

           They offer guaranteed returns. You will know exactly how much returns you’ll be getting from this “investment”.

           There are different FDs of varying holding periods for everyone. You get to decide how long you want your investment to be parked away and how long to grow.

           They are oblivious to market fluctuations and are especially great in rising markets where you can’t find value stocks to deploy your money towards.

           They’re almost entirely risk-free, unless you withdraw the money before maturity which could result in lesser or no interest. The only other risk would be if the bank defaults, but there’s a low likelihood of that happening in Singapore.

    You can choose from FDs with tenures as short as 1 month or as long as 5 years, and open a fixed deposit account with as little as S$1,000.

    The best fixed deposit promotions in Singapore right now (Aug 2017)

    If you’ve already maxed out the interest in your high-yield savings account and you’re looking for another place to park your money in, here’s a look at the best FD promotions currently available:

    Bank

    Promotional deposit tenure

    12 months and 24 months

    3, 6, 12 and 15 months

    12 months

    7 months

    Promotional interest rates

    12-month tenure – 1.40% p.a.

    24-month tenure – 1.55% p.a.

    0.70% p.a. to 1.35% p.a.

    1% p.a.

    Priority Banking customers – 1.05% p.a.

    Non-Priority Banking customers – 1% p.a.

    Minimum placement amount

    S$5,000 in Savings Account and S$50,000 in Time Deposit Account

    S$30,000

    S$20,000

    S$25,000

    Promotion expiry date

    Yet to be determined by Maybank

    Yet to be determined by HLF

    Yet to be determined by OCBC

    31 August 2017

    Singapore’s Deposit Insurance Scheme

    If you’re still worried about putting your money in fixed deposits, rest assured that they’re as safe as keeping your money under your bed. Here’s something interesting about the banking system in Singapore that you may not be aware of: the MAS (Monetary Authority of Singapore) acts like a caped crusader protecting our deposits with all banks and finance companies that are licensed in Singapore. In the event that the bank/finance company where you’ve set up your fixed deposit account fails, our deposits up to S$50,000 are automatically insured under this scheme.

    Sounds attractive enough? Let me know what you think!

    If you’d like to get a personal loan or a credit card, you can also visit BankBazaar.sgto easily compare and apply for the best offers in Singapore.

    Disclaimer: This post was written in collaboration with BankBazaar.sg.

    With love,
    Budget Babe

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