Tuesday, July 25, 2017

Shouldn't I buy Insurance Online?

You should buy Insurance online to save the hassle of having to interact with an insurance advisor. BUT this is only relevant to products which don't need any advice.
It is just like going to a pharmacy: some medicines are over the counter medicines but some medicines need a doctor's prescription as they might have side effects or certain dosage requirements.
An example would be: for a cold and cough, you can buy over the counter; but if you are seeking treatment for cancer and need to buy a chemotherapy injection that is ONLY by prescription or it could be fatal.
It's the same with trying to buy an insurance product online. Some products are simple and easier to understand hence can be purchased online like Car Insurance or Home Insurance or Travel Insurance as they have been commoditized in most scenarios; but again if you have a high end painting in your house or a limited edition sports car and that needs to be insured speaking to a qualified insurance advisor is a requirement.
Just like in medicine where it is a matter of LIFE & DEATH... you do need a trusted and professional advisor.
When planning your financial future; looking at the unique changes of geopolitical risk, health risk, or risks unknown.... getting a professional advisor by your side is worth the effort of finding the right advisor.
I HAVE BEEN ASKED: Don't we have financial planning calculators online to do that for us?
So let me ask you: Don't we have self diagnosis website for medicine as well? But after we self diagnose, getting a doctor to sign off on certain illnesses is still the requirement to buy a prescription drug.
Similarly, you need a Financial Advisor to sign off on certain advice, like what combination of products is most effective? Should I only buy Term or only buy Permanent or should I buy a Combination?
Find an advisor you feel comfortable talking your personal agendas with and be open about your life objectives; Learn to self diagnose as well for smaller issues, learn to do self reviews as well.
For that ask for the "rules of thumb" financial advisors follow (28000 - Make Every Day Count is a book that provides these "rules of thumb" which is available on www.28000days.com)
Just like we have BMI to measure the ideal height to weight ratio we have similar "rules of thumb" in financial planning:
An example:
1. 10 times of Annual Income for Family Income Protection.
2. 20% of whatever you earn towards your Retirement.
If you are a client reading this:
Speak to your financial advisor today and read up to self educate;
If you are a financial advisor reading this: please share this with clients who you believe needs to read this...
And please always remember "Do not compare GOOGLE to my Professional Degrees"

When a critical illness claim is paid out... what should you do?

An observation & A case study:
A family recently was paid out a critical illness claim which was 5 times the annual income when the husband (who is tbe breadwinner) had a heart attack. The financial advisor gave the right advice to ensure the family had enough in the event an event such as this did happen.
However; What should they have done with this money versus what they did with the money...
Starting with what they did...
1. 6 months after receiving the money; he bought a new rolex watch.
2. The family went on a long summer vacation and spent in excess of 3 months of his salary.
3. Made a down payment to a new house and took the rest of the money for the property as a mortgage.
4. Bought a new car.
5. Renovated their current house.
At the end of spending all this; they were left with less than 3 months of income from the total pay out...
Do you think they made the right decision? Some might say.. well it is their money and they have the right to choose how and when and where they use the money; plus didn't he get to fulfill his desires? Also didn't he get a loving family vacation which should have helped him recover? And they did make some long term capital investments too didn't they?
Think about it:
1. The person is surely not insurable for an income protection ever again.
2. He did make a capital investment into a property but also took on a bigger liability than his investment.. which can't be insured in the event he has another major critical illness and we all know relapse is a possibility.
3. Purchased luxuries from an advance payment of income which they wouldn't have if they didn't get this pay out. (It was not a bonus from work... but it was treated as a bonus)
A lot of families are unaware of what to do in the event they do get a critical illness pay out in the form of a big lump sum of cash.
As a financial advisor it is our responsibility to guide them:
1. Build up an annuity so they keep getting basic regular income in the event he does need to take off from work in the future.
2. Keep money aside (if extra) for commitments such as school fees and or a more comfortable retirement; we all know for a fact even after suffering a critical illness longetivity of life is still an issue; people are living longer even after suffering a critical illness; or would you prefer being a burden on the Children?
3. If investing in a property, do not leverage the property as the liability may be to big to recover from in the event of another mishap and use the rental income to create an annuity.
4. Update insurance policies for other members of the family as if anything did happen to them; the breadwinner who already suffered a critical illness may not physically be able to handle the multiple responsibilities.
If you are a client reading this; have this discussion with your family....
If you are an advisor reading this; share this with your clients as they may not be aware of what to do....
Why not have this discussion with them when they are purchasing an income protection plan; in the event they do they this pay out; what should they do with it?
If you believe this is useful information please share this with people around you.