MoneySENSE 3: Life Insurance

12 06 2009

Excerpt from the ‘diary’ of an Economist.com correspondent:

The topic was insurance. One of the volunteers felt strongly that because the women were single mothers, they should have life insurance. She explained that means someone will receive a payment upon the insured’s death.
 
Patrice spoke up. “I don’t want that, someone betting on you dying, no way! Once you have that and you live with someone—friend, boyfriend, family or whoever—they will want to kill you.”

The volunteer tried to explain to Patrice that she can choose her beneficiary (and urged her strongly to select her child), but that did not help. She wanted nobody to profit from her death.

Do you agree that taking life insurance encourages others to scheme against your life? Also, what other factors would you consider before getting life insurance?

 
Suggested Readings:
– ‘Correspondent’s Diary’. Economist.com. 5 December 2008. <http://www.economist.com/daily/diary/PrinterFriendly.cfm?story_id=12675257>.
– ‘Your Guide to Life Insurance’. MoneySENSE. October 2007. <http://www.moneysense.gov.sg/resource/publications/guides_publications/YGLIEnglish.pdf>.

Advertisements

Actions

Information

36 responses

12 06 2009
Narinderpal Singh Dhillon

I really think its a matter of opinion. Patrice is a single mother which would tend to make her a little paranoid. There have been the occasional cases of murder in order to inherit one’s life insurance which made Patrice behave like she did towards life insurance. however, i personally do not believe that life insurance encourages others to scheme against my life, given that a worthy beneficiary is chosen. Just as mentioned above, i think if your beneficiary is your child, there is a very low probability for him/her to plot against your life. however, if your spouse is your beneficiary, i think there is a higher chance of a scheme against your life. However, this does not apply to all spouses. If you have been happily married for ten years, i think its prettty safe to make him/her your beneficiary. As for Patrice, i think she can make someone worthy her beneficiary in secret. this would still allow her to have a life insurance without the threat of having someone out to kill her.

there are also factors needed to be considered before taking life insurance. Such factors are the terms and conditions for the money to be given to the beneficiary, the monthly payment to the insurance company and the financial stability of the insurance company. These factors play an important role in deciding whether one can afford the life insurance or whether one can depend on a certain company.

12 06 2009
Garrett/VJC/VJC001

I do not think that taking life insurance encourages others to scheme against one’s life. Often, the beneficiary might not know that his spouse has a life insurance and placed him as the beneficiary. Even if he knows, it is extremely rare for the beneficiary to scheme against his spouse’s life just for the money as he would be the prime suspect for the murder, and be easily arrested. This is especially so in Singapore with advanced forensics techniques and an efficient police force. With the death penalty in effect in Singapore, virtually no one would commit murder just for the money.

There are several crucial factors that one must consider before getting life insurance. One such factor is the stage of life at which one is at, because people at different life-stages have different needs for the different kind of insurance policies. People who have dependants, especially young children, will have a high need for life insurance protection against death especially if he is the sole breadwinner in the family. People in the retirement life-stage will have a lesser need for life insurance, but have a higher need for protection against major illnesses, and the Critical illness Insurance policy would be more suitable.

Another factor would be whether the insurance would be primarily for savings or for protection. If savings is the main aim of the life insurance, then the endowment insurance and investment-linked life insurance would be a better choice. If protection is the main aim, then the term insurance and whole life insurance would be a better choice.

Lastly, one must be sure of the terms and conditions of the insurance policy, such as the cash value, and the premiums to be paid in future. One must make sure that he has sufficient funds set aside to meet any unexpected expenses, as he may not be able to service the future premium of the policy when an emergency arises, resulting in his policy being lapsed.

23 06 2009
Chng Wei Yang/HCI/Team 5

I thin that Garrett’s point about having different types of policies in different stages of your life is valid.

I would like to add on that for young people who have just started their careers, life insurance is not that important because we have no dependents and because our probability of dying is not very high. Instead, I would recommend policies that insure you in the event that you are injured or disabled, and cannot work in the meantime. At a young age, such circumstances are more probable.

However, as Garrett mentioned, we would probably not require life insurance payouts at an old age. So when would be a good stage in our lives to start a life insurance policy? We will have to balance the cost of the life insurance policy and the possible benefits that we get: the probability of an insurance payout at the stage of life where our spouses our children or parents are most reliant on us. Does anyone have a suggestion?

12 06 2009
Elvis/DHS/DHS02

Do you agree that taking life insurance encourages others to scheme against your life?

No.

Some assumptions I made:
1. The life insurance is one that pays out proceeds to the beneficiary after the insured’s death. (this makes scheming worth the effort)
2. Individuals (scheming against the insured) are rational.
3. Individuals are the direct beneficiaries, or can in some way gain from the proceeds handed out.

As economic students, the question can be approached from the MB-MC framework.

The MC’s “richness” cannot be overemphasized. By scheming against a life, you risk a death sentence, in which case you won’t get to spend the proceeds. Even if you manage to elude justice, you risk feeling guilt, and likely grievance (since the beneficiary is likely to be close to the insured).

The MB would be the utility gained from the proceeds, which would seem insignificant in light of the MC.

Also, what other factors would you consider before getting life insurance?

Another important factor to consider would be your health status, specifically, how prone you’re to death. Obviously, when one schemed against the insured’s life, one would not choose direct murder. They’re likely to take the insured’s life in such an indirect manner that it seems ‘natural’. For example, if the insured have, say, heart attack; he/she can be easily ‘murdered’ by agitation, but in which case would seem ‘natural’ since a heart attack is highly unpredictable. For such cases, it may be more apt to keep the beneficiary secret.

Another factor to consider is the way the proceeds are handed out; this can be tailored with the insurer. Preferably, the proceeds should be paid as an annuity instead of as a one-off lump sum. In this way, the proceeds in the future will be discounted for, and the MB effectively lowered.

Taking a step back from all these, buying life insurance (particularly those that gives out proceeds after one’s death) seems to be attaching a price tag to your life, which seems to remove the sanctity of human life which so many have claimed. Any takers on this?

13 06 2009
Goh Zuo Qi/TJC/Scimonoce

Do you agree that taking life insurance encourages others to scheme against your life? Also, what other factors would you consider before getting life insurance?

The primary function of life insurance to to provide a guarantee for one’s debts in the event that an accident takes place and to provide for your family.
This especially important if you have children – a loss of the parent’s regular income would prove quite crippling financially to the family. Hence i was rather taken aback that Patrice, a single mother, was so stubbornly unwilling to take up life insurance.

Rather than encouraging others to scheme after your death, which is a very shallow reason, I would think that unless you are extremely wealthy, this would not be a motivating force at all. It is rather irresponsible for her as a mother to not think of the consequences and make sure her child is provided for in the case of an untimely death. After all, life is full of uncertainties.

Thus, factors that need to be considered in taking up life insurance should be the amount of current debt you are in (e.g. mortgage which is important because you would want to ensure a roof over your child’s head), your child’s education and basic neccessities and hence the amount of life insurance should be able to cover your present debt and future expenses of your beneficiary.

13 06 2009
Jacqueline/HCI/Team 6

Although it seems pretty counter-intuitive that people would kill their loved ones over insurance benefits, it is not unheard of. I think Elvis has already explained this rationally with the MC-MB framework so I’ll move on to my opinion on the other factors that should be considered before getting a life insurance.

There are many sorts of insurance packages with different companies (as the article has mentioned), and different packages offer different benefits in the case of accidents/death and so have different premiums as well. Picking up on a cost-benefit analysis discussion, I think we can analyse this from two perspectives- the insured and the insurer.

To the insured, if they cannot relate the premium paid (monthly/annually etc.) to the amount of coverage the insurance provides, then they would rather incur the cost of the medical expenses even in the event of death. Of course, this may seem unlikely at first glance, since within a short period of time and so the insurance cost incurred seems negligible compared to the coverage. But in the long run, if I pay $500/month for an insurance plan, I could very well exceed the amount they will pay me if I expect myself to live a long and healthy life. This brings in the factor of ‘risk-exposure’, IMO, since from the insurer’s point of view, I’m not going to bother insuring you if you work as a circus acrobat that leaps over starving crocs or something. I think this example is illustrated best with the movie Along Came Polly, in which risk management and appraisal is emphasised. Hence, I would definitely appraise my own risk in the future and whether investing in this plan would benefit me in the future.

14 06 2009
Khor Kai Zong/VJC/VJC001

One other factor to consider when getting life insurance – which is very relevant given the causes of the current financial crisis – would be the financial strength of the insurance company itself. If AIG had been allowed to go under by the US government, nobody who had paid insurance policy premiums to AIG would be able to make any sort of claims whatsoever; effectively, AIG insurance policy holders would have paid the premiums for nothing.

Rating agencies like Moody and Standard & Poor’s do provide assessments of the financial strengths of insurance companies, but given that different agencies may use different rating scales, the savvy insurance policy purchaser should take the time to read up and understand the differences between the rating scales used by different rating agencies, and look beyond the ratings highlighted by the insurance companies themselves, which definitely have vested interests in showing us only the most glowing reviews of their financial strengths. When it comes to investing in an insurance policy, there definitely has to be work done on the behalf of the purchaser in understanding not only the policy term and conditions, but also in understanding the ratings of an insurance company, and in digging for rating information beyond that highlighted by the insurance company itself – in short, another advantage of being financially literate, as pointed out in another blog post here.

Granted, some economists have pointed out that one factor contributing to the financial crisis was the low standard of risk assessment provided by the rating agencies, as evidenced by how these agencies gave AAA (highly safe) ratings to various complex financial derivatives that few in the industry really understood. This later led to overconfidence in these derivatives and subsequent investment in them, with catastrophic results as we all know by now. The case might be made that this laxness in standards might extend to the rating agencies’ assessment of the financial strength of insurance companies as well, in which case we might not be certain whether we really could trust the ratings provided.

In the absence of other sources of information, the best we can do is trust in the assessments provided and cross-check the ratings provided by the different agencies. Nevertheless, the key idea that we should consider the financial strength of insurance companies still stands, as the stability of an insurance company is clearly very relevant to whether or not we will be able to receive any form of returns on our investments in insurance policies from that company.

14 06 2009
Nguyen Duc Chinh/ NJC/ High In Demand

The purpose of life insurance is to take care of your dependents. As such, it’s an important part of your financial plan. If someone depends on you financially, the likelihood is that you need life insurance. Life insurance provides cash to your family after you die. The money your beneficiary receives (the death benefit) can be an important financial resource. It can help cover daily living expenses, pay the mortgage and other outstanding loans, fund tuition, and ensure that your family is not burdened with debt. Having a life insurance policy could mean your spouse or children wouldn’t have to sell assets to pay bills or taxes. Another advantage is that beneficiaries won’t have to pay income taxes on the money they receive. And it is, in my opinion, quite farfetched and paranoid to think that life insurance would become your beneficiaries’ motive to kill you. I mean of course you hear about those incidents every now and then on TV, newspapers, shows etc, but i think it would be more reliable and rational to look at statistics. I couldn’t find the exact number but here’s a wild guess: among billions of insurers around the world, the number of those murdered for insurance money is rather small. The odd is rather astronomical and especially so in Singapore, an Asian country with comparatively shy and conservative population compared to Western countries where most of these cases happen. It would always be best if we can act in a rational manner, with the MC-MB mechanism as mentioned above, but unfortunately we are human and thus, are subjected to emotions, more specifically fear in this case of the paranoid mother. And evidently, emotion is the archenemy of rational decision.

As to the factors I would consider before getting life insurance, there are plenty. First of all is the decision to buy life insurance, obviously. As mentioned above, as long as one has someone depending on him/her financially, one should have life insurance. I would have to choose the type of life insurance I want and that suites me the most, financially and everything else. Then i would do some research and choose the insurance firm. I would advise to choose those firms that are reliable and have a good reputation. Also, just don’t listen to whatever people say, your source should be reliable, i.e should be from some one with either authority or experience or in the field. I would recommend meeting some financial advisers to discuss your situation to make the best decision.

14 06 2009
Lan Anh/SAJC/Sparks

Before taking up a life insurance, the policyholders should understand that the insurance companies will invest the premiums in low-risk instruments, mostly bonds and mortgages and therefore they should find stable companies with good financial history. Usually, the policyholders cannot participate in how the companies manage the fund. However, there are also some companies offer policyholders the opportunity to share the company’s profit, just like shareholders do. As such, by receiving the dividends paid by the companies based on the company’s success in the previous year, they do not only have their money kept safely for their retirement but also earn profit from their premiums.
Moreover, policyholders should also consider their affordability, in other words, their ability to pay the premiums based on their financial states. For example, for young people whose are highly likely to earn less income; it is more rational for them to take up term policy in which their premium increases as they age to account for the fact that they will be more prone to health problems. In essence, this condition of term policy will not only make premiums less a stress for young people but also allow them either renew the term policy when it expires or change to a different policy depending on their purpose of taking an insurance at that time. Thus, a careful consideration of affordability is important because if they cannot afford to pay their premiums during the grace period, the company will pay for their insurance but this payment by the company will be counted as a loan and the policyholders have to repay the company the loan together with the interest. As such, they have incurred an unnecessary debt.

14 06 2009
Jolene, Meiyun and Chunying

Though tempting to agree, I do not believe that buying life insurance encourages others to take your life. It is most definitely plausible, but that only happens in extreme cases and would stay as such. This is because our society is guided by morals. Since young, we have been taught to differentiate from right and wrong and learn about the sanctity of life that have been deeply entrenched since a very long time ago. Just because I know my spouse has bought insurance with me as the beneficiary, does not mean I will attempt to kill him. That situation requires a whole lot of extremities such as a morally misguided mind and immense boldness. The chances of that happening all at once are probably near zilch.

One factor to consider for one who is buying life insurance would definitely be the circumstances of the beneficiary. Let me explain in the context of the single mother. Children of single mothers are often placed in a more precarious situation because they have only one dependent – their mother. As such, should anything unfortunate happen to their mother, they will most likely be required to fend for themselves. Even if the single mother may have the help of her friends and families to help take care of the child, who can ensure that the child will not be ill-treated? Insurance provides financial assurance for your loved ones which ensures that they will be taken care of even after you’re gone. Thus, if the life of the beneficiary is deeply entwined to the life of the buyer, the buyer should purchase the insurance.

Another factor do consider is the type and cost of insurance. For example, life insurance has term insurance as well as whole life insurance. Whole life insurance brings about better benefits as it can also be a form of long term savings, yet it is also more costly. Thus, one has to look at their financial status before deciding whether they can afford the insurance. It would make little sense for one to live a miserly life just to buy insurance which charges premiums that they cannot afford.

The last factor to consider would be the type of insurance agent you have. Buying insurance is fundamentally risky and the myriad of choices available for one makes it hard for even the literate to choose the package that best suits their needs and requirements. A good insurance agent is one that is able to offer sound advice to his/her clients based on their respective needs, taking into account their financial capabilities and not coercing them into purchasing the insurance. As appalling as it may sound, there are indeed such instances where agents do not practice good work ethics and are solely motivated by reaching their quotas (or tiers) of their sales. As the majority of people fall into the “layman category” when purchasing insurance, it is hence prudent for them to approach a trustworthy and wise agent advisor (possibly through recommendations or family) to avoid being at a disadvantage.

16 06 2009
Fong Whye Kit / NJC /nationaljc

In line with Patrice’s argument, a well-documented case in 2006 exemplified the insidious effects of taking up life insurance. In this episode, two elderly women took in homeless men and provided for them. Under this ‘provision’, they took out life insurance policies for these men, naming themselves as beneficiaries, after which killing them and claiming the payout.

However, despite the occurrence of such a horrendous case, I feel Patrice’s fears are unfounded. Such cases are, first and foremost, the minority and are the few black sheep that have caused people like Patrice to become unduly worried about taking up insurance – something which, ironically, is meant to give a person a sense of security to know that he or she is covered for in the event of an unfortunate occurrence. Besides, under normal circumstances, the beneficiary named is usually someone trusted by or close to the insured. As such, the beneficiary would definitely feel that the friendship or kinship between them is worth much more than money and is very unlikely to harm the insured for merely that sum of money.

Instead of worrying of whether taking up a life insurance policy will put oneself in danger, it will probably be more appropriate to devote time considering other factors before getting life insurance. One such factor, I feel, is a sense of security (as mentioned above). Taking up an insurance policy allows a person to take comfort in the fact that should anything untoward occur to him or her, the people that he or she care about most will still be financially taken care of. Also, for a policy that covers the unfortunate event of terminal illness, the insured will not have to worry about expensive medical bills and such during the last periods of his or her life and instead enjoy the remaining time meant for spending with treasured family and friends.

Of course, in Singapore, the government has put into place schemes like Medisave to help citizens cope with the financial aspects of all illnesses (not only terminal ones) but, hey, it doesn’t hurt to get life insurance and take up on that extra sense of security.

17 06 2009
Yang Zhengzhi

Yang Zhengzhi/SAJC/Sparks

Beneficiaries will get monetary profit when insured people die, but it is quite incredible that beneficiaries will act against insured ones’ lives for the sake of getting that amount of money, and this will rarely happen in our society.

In fact, this depends on the level of civilisation of the place. Respecting others’ lives is one basic value, and most ot humans take this as priority as well. Therefore, most of people will not do against insured people’s lives to get money.

Humans are consummating law system to perfect all the time. Majorities regard murder as one of the most severe crimes, and the punishment is usually quite serious. The coercive forces help to enforce the law, which ensures that most of the criminals will be punished. Compared between the punishment and the monetary benefits, people will certainly not kill insured people, unless they are mad.

Most of the time people indicate their relatives and closest families as their beneficiaries. Good relationships ensure that beneficiaries will never do against insured people’s lives. Although some similar cases have taken place in China before, it is quite rare. Therefore, the probability for this to happen is almost zero.

In addition, people can freely issue anyone as beneficiary. Therefore, they can make life insurance as some charitable activities. After the death, the money will be given to poverty areas and poors. By doing this, it becomes impossible for beneficiaries to kill insured people. Therefore, beneficiaries will hardly be encouraged to scheme against insured people’s lives.

17 06 2009
Chua Zhi Ying/HCI/Team 07

As already has been discussed, I think it is safe to say that the beneficiary of your insurance would not plot to kill you to profit from it. It would be safe to assume that the person that you place as your beneficiary is one that you trust. Therefore I would like to focus on what would be important in deciding what to focus on when picking up insurance schemes.

I think it would be important to measure one’s ability to bear the risk (of not taking up life insurance) vs paying the annual or monthly annuity. This can also be done with MC-MB analysis. Generally, one’s ability to bear the risk of not taking up life insurance can be measured with respect to one’s age, health, and family history, among other factors. The ability to pay the annuity will then depend on one’s disposable income and how much one can afford to put their income into something as “illiquid” as insurance.

20 06 2009
ZOE

I do not agree that taking life insurance encourages others to scheme against your life. But in times of desperation, when financial crisis is prevailing, I would definitely say yes.

Money makes the world go round, without money, even survival is a question. Given the huge insurance payout when you are in need of money, I strongly feel that even the beneficiary you are closest with or you trust most will harm you just go get that sum of money. Otherwise, why is there a need for insurance companies to practice private and confidentiality? It is to protect the welfare of the insurer and insured.

Besides considering the returns and affordability of the life insurance, I will consider the necessity of one, depending on different situations. For instance, if I were the sole breadwinner of the household, I would definitely take up a life insurance. As if I were to pass away due to whatever reasons, my family would be stranded with no income. In contrast, if I were not the sole breadwinner, I may consider taking up other insurance policies, such as home insurance, casualty insurance, and property insurance, instead of life insurance, as I feel that they are more practical.

20 06 2009
ZOE/ NYP/ Team A

I do not agree that taking life insurance encourages others to scheme against your life. But in times of desperation, when financial crisis is prevailing, I would definitely say yes.

Money makes the world go round, without money, even survival is a question. Given the huge insurance payout when you are in need of money, I strongly feel that even the beneficiary you are closest with or you trust most will harm you just go get that sum of money. Otherwise, why is there a need for insurance companies to practice private and confidentiality? It is to protect the welfare of the insurer and insured.

Besides considering the returns and affordability of the life insurance, I will consider the necessity of one, depending on different situations. For instance, if I were the sole breadwinner of the household, I would definitely take up a life insurance. As if I were to pass away due to whatever reasons, my family would be stranded with no income. In contrast, if I were not the sole breadwinner, I may consider taking up other insurance policies, such as home insurance, casualty insurance, and property insurance, instead of life insurance, as I feel that they are more practical.

Furthermore, life insurance benefits the decedent’s family or the designated beneficiary. Will the monetary benefits help them or harm them?

20 06 2009
Zhi Cheng/ACJC/John Nash

Patrice is overly sensitive and unreasonable.

I think it is highly unlikely that taking life insurance encourages others to scheme against your life. Usually, the designated beneficiaries will be one’s closest kin, whom the insured person places most trust in. Also, getting a life insurance is a personal and private choice. That means usually no third party is cognizant of the fact that one has life insurance coverage. Plus, upon getting a life insurance, there is a period of time, usually at least 1 year, before a specified sum of money can be paid on the insured’s demise. Overall, I would say the chances of someone plotting against one’s life over the compensation from one’s death are very low. Definitely, the deterrents to such a crime far outweigh the financial compensation for one’s death.

Before getting a life insurance, it is prudent to consider some of the following factors: the premium to be paid, face amount (protection and face amount), the necessity of a life insurance, the type of life insurance that is most useful and relevant to one, and the financial strength of a life insurance company. A life insurance company that is lacking in financial strength should be avoided at all costs.

All in all, I would say if you want to ensure that even after you have passed on, your family still has some financial support to fall back on, then get a life insurance policy. Life insurance is not necessarily a declaration of your death or profit for anyone, but a decision to ensure no one suffers after you are gone. 🙂

21 06 2009
Muhammad b Rahmat/vjc/vjc006

Do you agree that taking life insurance encourages others to scheme against your life?
Desperate people do desperate stuff. However, i am sure that insurance companies will not simply give away their money if there is evidence of foul play like a murder or suicide. this brings into play moral hazard where having insurance makes the holder less careful and thus increasing risk to the company. But insurance companies would have clauses in the policy to protect itself against moral hazard. Also for the policy-holder, this shows how important it is to pick a trust-worthy benefactor.
Also, what other factors would you consider before getting life insurance?
usually, most people adopt insurance policies due to risk averse behaviour. This is because they rather lose a little through premiums rather than take the chance to have everything or lose everything. thus insurance is a way to have certainty in uncertainty. What is unique though in life insurance is that the benefit is experience by a third party. this explains patrice reluctance, as she does not stand to directly gain from the policy she paid for. However, she should take into consideration the lives of her children after she dies, especially since she is a single mother and presumably the sole breadwinner.
A potential policy holder should also consider the premiums, benefits and type of the policy as some policies only offer protection but not the savings element.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Well, to put it crudely, life insurance is like placing a price tag on your life. Patrice might be right to some extent, but he is overly paranoid.

To Patrice: Life insurance is generally purchased by almost everyone in developed countries, and if one were to target another for murder, why would they target you and not another relative? Furthermore, the many laws that countries have erected to bar murderers are more than enough to turn these murderous thoughts away. Lastly, how could you possess such pessimism? Do you think your family members or relatives are simply money-lusting monsters without a speck of compassion and love for you?

Many factors have to be considered before taking life insurance, and these were already kindly brought up in numerous previous posts. In my opinion, life insurance should be bought as soon as you are eligible for it. The premiums increase as your age increase and you should just purchase it at your youth!

21 06 2009
Wong Theen Yew/ TJC/ Team Patrick

First thing first, if I ever take up life insurance, I do not have to tell anyone other than my beneficiary. The less people know, the better. The issue we are debating is rather simple, whether taking up life insurance will encourage people to scheme against my life, it depends on whether your beneficiary is trustworthy or not whether there is true love between you and your beneficiary. If one can be so greedy to kill you for money or out of desperation, well too bad, then you are just unlucky to have trusted the wrong person. Well, you did not do anything wrong. All in all, It’s a personal matter. There is no such thing as whether taking up life insurance will encourage people scheming against your life or whatsoever.

For me, I’ll first look around me to look for someone who trust me and whom I trust. If I cannot find anyone, my beneficiary will be a temple (I’m a Buddhist) or any charity organisation. After all I’l die, why not do a kind deed?

21 06 2009
Wu Jia Min/NYP/NYP Team A

Do you agree that taking life insurance encourages others to scheme against your life?

It’s irrelevant for me. Insurance is about planning for your loved ones, the people you trust. Life is about trust, isn’t it? If you have to guard yourself against even your close and loved ones, then you’re not living life to its fullest. It makes you feel at present that you have taken care of your loved ones. If it turns out that you’ve trusted the wrong person, well, you’re dead anyway, you won’t feel anything. It’s the other person who has to live with the guilt.

Factors which I will consider:
The returns, whether it will be enough to take care of or help my beneficiaries when I’m gone.
The reputation of the insurance company, whether I can trust that it will be ready to pay out the premium when I’m gone.
Whether my dependents need it or not, and how much help would they need to bring them through the tough times.

22 06 2009
gabriel/sajc/nineteeners

that is absurd, unless you’re living in a serial drama.
that doesn’t mean it cannot happen though.

a life insurance would not only benefit the policyholder (though i don’t know how he is going to benefit once he’s dead), but more importantly the policyholder’s immediate family or beneficiary. if a beneficiary wanted to inherit a fortune earlier, they may scheme to provide an early death for the policyholder, however the insurance may not cover foulplay. no incentive to scheme anyway then right? insurance is a long-term plan for the people you care about, your future generation. trust them not to be greedy.

factors i would consider would be the benefits of the insurance, the amount paid out if i’m permanently disabled or dead. whether it is worthwhile to take it up or just a waste of my current earnings. and whether or not the policy is flexible, in case i want to change the time period of the policy.

22 06 2009
gabriel/sajc/$ensibilities

sorry again, its team $ensibilities

22 06 2009
Lu Si Hong/DHS/DHS 7

Life insurance do not really encourages other people from scheming to profit from your life. I believe that the aim of life insurance, is to help ensure that your beneficiaries would be able to continue with their life with the loss of their loved ones, especially so in the case where the beneficiaries are children and with the loss of their parents, they may not be able to take care of themselves, and the money from this insurance would be given to their guardians to aid them in taking care of them. Taking up a life insurance means that you already believe in your beneficiaries, and love them so much such that when you are gone, they would be taken care of.

Furthermore, the marginal cost as mentioned by Elvis is too high for one to scheme in order to get the money from a life insurance plan. If you think about it, the money that you get from life insurance plans from scheming could also be obtained through other illegal means such as robbing a bank, or commercial fraud, and the marginal cost would be so much lower, such as a jail term as compared to a death sentence or life imprisonment, from scheming the death of someone which would be akin to murder. Thus, assuming that people are rational decision makers, they would choose logically to rob a bank or commit commercial fraud instead of scheming to take someone’s life in times of desperate economic conditions.

Factors that i would consider before taking up life insurance is weighing whether it is really worth the premiums that I would have to pay for the insurance against the risks I have in my job, and also my age, where taking up life insurance when I am young would cost less than when I take it when I am older.

22 06 2009
Rachel/JJC/RAW

The main purpose of life insurance is not for yourself, but for your family members (or beneficiaries). This is especially significant if you are the sole breadwinner of the family and have young children in the schooling age. A huge sum of money is needed for their university education. Hence, buying a life insurance may be necessary, in fact it is almost a must.

The next factor to look at would be your investments and savings. Suppose your purpose is to buy the insurance for your child’s education and you calculated that he or she would need $500K. If your current level of savings have more than sufficient to cover for his education, buying life insurance would not be an intelligent move to make. Hence, the rule of thumb is to buy life insurance only when you still do not have sufficient savings. This usually apply at a younger age and it is assumed that as you get older, you will tend to have more savings.

Also, it is important to get a trusted insurance agent or company. Be aware of their terms and conditions. If illiterate, get another family member to help you to make a better decision.

Last but not least, if you are afraid of being killed for the payouts, keep your life insurance a clandestine, or only tell your trusted ones.

Nevertheless, life insurance is not the most important. Even without life insurance, there exists various methods to increase your savings such as other good investment plans like stocks and bonds.

22 06 2009
Hong/HCI/Team 2

I would consider the following factors when buying life insurance: accountability of insurance company, premium and necessity of one. The rule of thumb is to buy when one’s still healthy but has dependents since the premium will be much cheaper.

One’s age and current financial standing play a big part in determining the necessity for life insurance. For example, if I had dependents and I still had not accumulated enough wealth to support them in the case of my death, I would buy term insurance (pure insurance coverage) with the policy that lasts long enough for my dependents when they are still economically inactive or annual-renewable term insurance. Term insurance has a pure insurance coverage and doesn’t combine investment product and cash value. This would make sure that my dependents would be not be too financially needy after my death.

Life insurance with financial product such as whole life and universal life is generally not recommended as an investment because the rate of return is low despite its medium risk. “The return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger’s Personal Finance, and Fortune magazines. The same mutual funds outside of the policy average 12%” The commission the agent gets from selling whole-life policy is also extremely high (can go up to 80% of the first year’s premium) and there are high fees and commissions associated with whole life policy as well as surrender fee if one decides to opt out.

22 06 2009
Hu Yiqing/HCI/Team2

It is certainly possible for reckless beneficiaries motivated by money to commit murder. However, the possibility is no higher than heirs killing their predecessors for inheritance. Life insurance itself does not pose extra danger for the insurers. The danger is in the beneficiary’s knowledge that the insurer’s death would be profitable for him or her. Therefore, keeping the beneficiary in the dark about the life insurance would be safe for the insurer.

The second issue is that whether the life insurance is worth your money. The insurance companies assess the expected life of the pool of applicants of the policy with their medical history, life habits, etc before they set the price of the policy. Then companies set the price of the policy such that the premium paid over the middle range of expected policy-holding years equals or larger than to the amount the beneficiary can claim. Yet only insurers who expect them to live short enough to pay lower amount of premiums over the years than the policy their beneficiaries can claim will buy the policy. Since individual applicants know their medical history, health conditions, etc. better than the insurance companies do, the companies will see that they will incur a loss if they only draw “low-quality” insurers, so they raise their premiums for the higher risks of the pool. Yet again, only people who with even higher risks will apply. The process repeats itself. If all insurers and companies are rational, there will not be any market for insurance because of information asymmetry. Therefore if you buy an insurance policy, you are not a rational player in this game. And you will surely be the loser in money terms because insurance companies cannot survive by losing money.

22 06 2009
Marcus Ng / SRJC/ M3

Do you agree that taking life insurance encourages others to scheme against your life?

Yes. In this ‘pristine’ society we all chose believed to live in, nothing can stop an impulsive man under certain circumstances to go against his moral thinking. The premium payout to the beneficiaries is indeed enticing to a man in a pressured scenario or simply man’s pure greed. If my beneficiaries are able to gain sufficient monetary gains from my death and it抯 a utilitarian one (e.g. ensure the survival of all his children), it would be encouraging for the death of mine. The second reason that the statement is possible is because of human greed. As a saying goes, “When money talks, moral walk.” greed can blur a person’s ability to make judgment calls and logic thinking causing them to work against their morals. An article wrote that the top 3 reason why a person chose to murder is money, so if the premium is attractive enough, will the person i placed trusted with scheme against my life? Despite this, my stand is based on assumptions and generalization which the anti stand might have other truths based on our new generation.

Another factor that I will consider before purchasing a life insurance is age. Due to the existence of term based life insurance. If i am a single mother with a young child, i will most probably want to be insured for say 10-20 years. This is the period of time where my child will be unable to support him/herself financially and require the insurance payout to survive in case i pass on. In this case, the insurance payout is not so much of a “bonus”; it’s more of a necessity.

However, if my child is older and able to support him/herself financially, there is less need for me to purchase a life insurance. This is because my child will still be able to survive on his/her own and do not need to depend on the payout. Furthermore, when my child is of working age, I’ll most probably be working less or not at all. Hence, I will have to depend on my child to pay the premium of the insurance if I do not have enough savings. This will then just add a burden on my working child.

23 06 2009
Muhammad Halif / NYP / Team B

I disagree that taking life insurance encourages others to scheme against your life. Owning an insurance is becoming a common practice in places like Singapore. It secures certain amount of money that would be left behind in the case of sudden emergencies. Imagine a scenario whereby the husband passed on leaving a wife and young children behind. Wouldn’t it better if he has insurance to at least reduce the burden that the wife has to carry after he moved on?

I believe that it is important for us to consider several factors before considering buying life-insurance.

Firstly, they would need to consider their eligibility for certain insurance plans. For example, if you are down with certain illnesses, you might not be eligible for certain insurance plan. You would then need to pay higher premium in order to secure yourself with an insurance plan. Thus, those with such conditions have to research even further on which policy would suit them.

Secondly, the amount of that they have to contribute each month. It is important for every insurance policy holder to be aware of how much they are willing to contribute each month to such expenses. Calculating the amount that they can afford early would allow them to improve on their financial planning ensuring that they are able to sustain payments in the long-term.

Thirdly, the payback period has to be appropriate. It is important for the insurance to pay the beneficiaries in a systematic manner for certain duration of time. This duration should not be too short as this would not allow the beneficiary to make full use of the money that has been left behind. However, it should not be too long either because the beneficiary may need certain amount of money to settle all the expenses.

Lastly, the insurer has to be trust-worthy. In our current society, there are many smaller insurer who claimed to be just as good as those international ones. They will offer lower payment premium. This may be a good deal at first however they carry significantly high risks. This is because the probability of bankruptcy of such insurers is definitely higher than those international ones.

23 06 2009
Tan Jun Ren

Well, i do not agree that getting life insurance will encourage people to scheme against your life.The reason why Patrice probably said that was because that she was a single mother, who is very worried that she will not be around to provide and care for her child and is highly risk-averse. But i feel the exact opposite.By getting life insurance, she will be able to protect her child by leaving a sum of money to her beneficiary(which would be her child, i presume) and ensuring that her child will not be completely helpless in the event that she passes on.As we all know, life is unpredictable and things can happen.In the case that she has no life insurance and worse, no will, and she dies, the law will decide what assests will go to whom and the chances of the beneficiary benefiting from this are likely to be low.Furthermore, the only person who will gain from the death of the insured will be the beneficiary and in any case, the person whom you have chosen to be your beneficiary will be someone that you trust and is close to you.Others will not benefit at all. Also,you don’t have to go around telling people that you have life insurance right? All in all, i feel that Patrice is just too insecure.

Some factors to consider in getting life insurance is the nature of your job( eg is it dangerous) and whether you are providing for someone(like your spouse or your family). But i feel that regardless of what job you take or whether you are the breadwinner of the family, it is a must to get life insurance because as i said earlier, life is unpredictable and we must be preapared for the worst.

23 06 2009
Tan Jun Ren?VJC/VJC011

Sorry, for my post, i forgot to add in my school and team.
My apologies

23 06 2009
Tan Yi Sing/ACJC/Team 2

The notion that one’s life would be schemed upon by loved ones after taking life insurance is irrational. In the first place, why would you want to take up a life insurance if you feel that your loved ones are crooks who would mercilessly kill you for money? A more likely situation would be that the beneficiary/ies be brimming with tears of appreciation and thankfulness for the thoughtfulness of act: the desire to continue to support a loved one financially even when one has passed on. It will only be a matter of time before they cash in on the dead anyway.
There are many factors considered when getting a life insurance. First of all, it would be your opportunity cost of taking up a life insurance, maybe it is that other investment that will guarantee better returns than a life insurance. If your opportunity cost is far too large and you have left a big bulk of an estate in your will to your loved one, there’s probably little to no point of getting a life insurance then.
Secondly, it is your financial capability. It would be absurd if you earn let’s say $1200 and have a life insurance which require the premium of $500 monthly. There would be different packages you can choose from. Explore them.
Thirdly, whether I will need that amount of money liquidated in the near future for incidental expenses/emergencies, in other words, do I have enough liquid assets in my balance sheet? If so, what are the consequences?
Fourth, it is related to the third point: be extremely clear about the terms and conditions of the life insurance in the contract. If there is something amiss, do not commit, instead check out other companies. Key word: flexibility.
Fifth, vital things to consider when taking up an insurance, will the interest rate fluctuates with market?, which companies are able to guarantee a better interest rate?
And last but probably the most important in today’s economy, how does the insurance company take care of your money? Do they invest in derivatives which its worth is derived from a stock or bond or a mortgage such as the CDOs (collateralized debt obligations), which is linked to corporate debt but are very risky due to its ‘bubble’ and the defaulted risk of debt? FYI, experts have estimated most recently that the entire derivatives market is very large, about US$668 trillion which is 15 times the size of the world economy but the real underlying value is about US$15 trillion. How’s that for a bubble? It is one of the reasons of the downfall of AIG. So, do know what the insurance companies are investing with your money and if it will fuel another crisis. Choose an insurance company you can trust with a good investment record.

23 06 2009
Chen Wenjie / JJC / SPECTRUM

Do you agree that taking life insurance encourages others to scheme against your life? Also, what other factors would you consider before getting life insurance?

Admittedly, people who are able to benefit from one’s life insurance may scheme against that person’s life. However, those who benefit are often the ones closet to the person, who love and care for that person. Hence, it is not likely for them to plot for harm to happen to that person. Also, one can choose whether or not to disclose of their plans to others, like to keep the fact on who will benefit from the life insurance a secret. In order to protect the interest of their clients, insurance companies will be careful and discrete about the handling of the clients’ details. On the other hand, there are some cases and instances in the past whereby there are indeed people in the past who have schemed and caused the death of their loved ones in order to get that sum of insurance money. However, we have to consider the probability that such cases really do occur.

Before getting life insurances, we have to consider financial ability in order to pay for the life insurance, the possibilities of meeting harm.

The financial ability of an individual will determine the amount of money they are able to pay for each instalment of the life insurance. For example, a rich businessman will be able to afford a less frequent yearly instalment of a hefty sum at a time whereas a normal white collar worker may opt for relatively less frequent monthly instalments of a less costly sum at one time.

Also, possibilities of meeting harm may also be considered as the prospects of a construction worker and a businessman encountering harm is different. The financial ability is a relatively more important factor, as one earning little may not be able to afford the life insurance no matter the dangers that he or she faces.

23 06 2009
Sun Silu/HCI/HCI03

I think it’s absurd to think that taking a life insurance would encourage others to scheme against your life.

The money involved is certainly not worth the hassle and the risk of landing in jail. Most people, unless desperate, would not resort to such drastic measures, let alone your relatives or the people close to you.

Buying life insurance is not about protecting yourself, it’s about protecting your loved ones when you are not there anymore. Should you feel that your son may try to kill you when you get a life insurance, he is then not worth the protection anyway, why bother?

It is definitely possible that someone may “scheme against your life”, but then again, anything is possible. Aren’t many other things that we do everyday “dangerous” too?

Are we not going to raise a child since he may grow up and take all our possessions? Are we not going to open a joint account with our loved ones for fear of betrayal? Are we not going to cross the road because we may get knocked down by cars?

The world is build on trust. Even when people violate this trust doesn’t mean that trust is not there anymore, it is still the minority. It is not therefore not rationale to base our actions according to such anomalies.

There are some aspects that I would consider before getting a life insurance.

Foremost, I would definitely consider the need for such an insurance. I would consider whether I have the financial capability, whether I have anybody to take care of my loved ones, and whether I run the risk of an imminent death.

If there is such a need, then I would consider the insurance company, whether it is stable and etc. After all, life insurance is an investment. There are risks involved.

And finally, I would consider whether it’s usefulness, whether it would help me achieve my aim. If I want to ensure that my children achieve this and that, would it really happen in my absence?

23 06 2009
Ninian Ho/ TJC

Well since many have already presented their views on whether life insurance will cause others to scheme against their lives, which is definitely a possibility, I shall share more on the factors I consider before taking up a life insurance. As many have already mentioned, one should try to keep this as confidential a matter as possible, as there is no need for anyone else to know. That way, you can be sure there is something to be gained from the possibility of an early death. Better to be safe.

Anyone could do with some extra money. Let’s say an accident happened to you, would you rather die and have your next-of-kin gain financially or not at all? The answer is very obvious, isn’t it?

Having life insurance may cause several problems within the household. If selecting a beneficiary is difficult and has the potential to cause unhappiness and tension in the family which may break the household up, that family is probably not ready to receive such assistance. In this case, instead of helping your loved ones, you are actually causing them much misery. Thus, if your original purpose was to make life easier for those you are survived by, aren’t you doing quite the opposite? I’m quite sure the money spent on lawsuits and so on might actually mean they may even lose more than they have gained, on top of the breaking up of the family.

Furthermore, the chances of one dying due to illness or prematurely in an accident have to be considered. If you have a job that makes you particularly prone to accidents like one at a shipyard etc, it would be foolish not to apply for a life insurance, since that means you are risking your life for nothing.

23 06 2009
Julius Eleazar Tan / NYP / Team B

Getting life insurance is an important safety net, especially for someone like Patrice who is a single working mother. There are a lot of scenarios in which someone could pass away suddenly and no one can foresee that. Taking out a life insurance policy ensures that your dependants will not have to worry about basic necessities once you are gone. While death might be a taboo subject for Patrice, it would be irresponsibly of her to not plan for a contingency. Her main fear that someone might profit from her death is irrational, as you can na

24 06 2009
Elaine/ NP

I do not agree that taking life insurance encourages others to scheme against your life. People buy life insurance because they want to make sure that their dependants are well taken care off. After you dies, the payout, which is the death benefit, that the beneficiary receives ensures that they do not need to worry about the finances. I feel that it is unlikely that others will scheme against your life when you have life insurance, because they will be highly suspected to be the one who caused your death. I think that it is very selfish of Patrice to think that way, especially when she has a child. If she dies, her child will need someone to provide them with living expenses. If she did not buy any insurance, the child will be left with nothing. By putting her child as her beneficiary, her child will get a payout with guaranteed sum assured.
There are several factors that I would consider before getting insurance. I will first see if I need a life-long or a specified term protection. I feel that I should get a life insurance when I am young and healthy. People with a family to support should also get a life insurance too, because they have a family to feed, and their children depend on them. If someone is old, I feel that it is more important to get other insurance such as the critical illness plan as it pays for major diseases treatment. I must also look out for the terms and conditions of the insurance policy. Premiums for life insurance can be quite high, and I have to be sure that I can afford it. It is also important to find out more of the insurance company first, because it may not be financially stable. Lastly, I will look at my risk appetite and investment ability.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: