There are three basic guidelines that you need to consider before buying life insurance.
1. Reviewing your needs and coverage
The golden rule to buying insurance is to evaluate your needs first before doing anything else. Life insurance is used in a person's financial plan to fill the gap in income that is needed by your loved ones after your death. A secondary role of insurance is that of savings. Most young individuals and famillies require a large amount of death protection as this is far more important compared with the need for a savings plan.
2. Selecting An Insurance Company
Always select the life insurance ocmpany before the agent as many agents represent only one company. Companies should be evaluated based on the criteria of:
- Financial stability - insurance companies operating in Singapore need to meet very stringent financial criteria. The Insurance Act and Regulations has strict rules on slovency and the quality of investments allowed by insurance companies. Since January 1987, every insurance company msut maintain a minimum margin of solvency as a cushion against inadequate reserves and unforeseen decline in asset values. The minimum paid-up share capital must be US$75million and the claims-paying abilty must be in the top three classifications by an internationally recogtnised credit ratings agency. Such strict regulations ensure the financial stability of these institutions and therefore their abitlity to meet their obligations.
- Competitiveness of products - You should pay attention to the relative costs and fees of policies that are similar but issued by competing companies. There is no doubt that the charges by insurance companies are substantially different for the same provisions and amount of coverage. But be careful in this area, compare the policies on a case-by-case basis. A S$100 000 term policy should not be compared with a $50 000 whole life policy. Thus, you should decide on exactly what kind of policy you want and then shop around to compare costs.
The choice of an insurance agent is important as you will be relying on him to give you guidance in some very important financial decisions. Even more important is that some forms of insurance, like life and disability insurance, are long term in nature and will require frequent adjsutments as your needs change through the years.
You might want to consider the professional qualification of that individual. For example, a person who has met the rigourous standards of the Certified Financial Planner (CFP) in terms of competence and ethics will be able ot help you with you financial needs to a greater extent. The Financail Planning Association of Singapore (FPAS) was set up to ensure that consumers have access to competent and ethical advice and is the guardian of the CFP mark in Singapore.
Look for a financial adviser who is committed to the insurance industry as a career. He will more likely take a professional attitude approach to your needs as he looks forward to trot through the long term with you. Good agents are honest and place the client's interest above theirs, and they make it their job to know the products available. This enables their clients to make informed decisions about what to buy.
A good agent will also try to follow up and check up on their clients to ensure that all their needs are met. Do not begrudge the commision that your agent is making as it is not an easy profession. And after selecting an insurance professional and if you are happy with his services, work with him over the long term so that he can help you with your financial needs.
