Should undergraduates buy insurance from their friends?

Posted on 24 January 2011

FINANCE 1-ON-1: Catch independent financial advisor Wilfred Ling give his take on the important questions about financial planning and wealth management.

Hosted by Fang Shihan

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  • Landon Leo

    This is a very good interview. I myself am not a financial advisor. However based on personal experience, I would had given the same advice Wilfred had given here. Although I would had been more harsh with my replies.

  • terence

    that’s why wilfred is a financial advisor. he’s good with words 😛

    • Landon Leo

      Haha… well at least I can see him and his words are genuine =>

  • J

    Just like to add on some points:

    Most of these insurance agents do not have proper financial planning experience or training. Their companies/managers provide mainly sales training that focusses on salesmanship and profit rather than client’s benefit, and such practices are passed off as being beneficial for the client. Many young insurance agents think they are doing a good job for the client without knowing that they have left many people with “junk products” as described by Shihan in the video. They don’t even know the financial impact they have potentially caused their clients by leaving them underinsured and over-committing to expensive policies. They won’t think much of it either because of the lucrative commissions they have received.

    In any case, of course Wilfred has to temper his choice of words and tone when describing some of the practices that are rampant in the industry. There are many morally disgraceful practices that are legally tolerated by regulators in Singapore. It’s a sad situation.

    • Landon Leo

      Very true. But I won’t, considering Wilfred’s position vs mine.

  • jimbo lim

    Hello everyone,

    I think the issue is “if you should buy insurance from your university classmate”. The answer is yes, only if you are sleeping with your university mate. Otherwise, it is a bad idea because the person who is selling is usually not very qualified to give financial advice. What are the type of products sold? life? endownment plans?

    If you buy those products now, how will that affect your future? The issue becomes relevant only if you are paying too much money for your premiums and find out that your working salary can’t cope with your monthly insurance premiums. Therefore you stop your premiums and lose your policy.

    But if your premiums are low (e.g. $50 every month), your insurance plan will give you protection and a savings plan for the next 10 years. Do you need the protection? Is your father and mother dependent on you? If no, then your money in the endowment or life plan might be better off in other investment asset class, e.g. equities etc, that might earn better returns in 10 years.

    Financial Planners will say the better alternaive to buying a life policy is to buy cheap term insurance for protection and invest the rest. However, graduates will not have enough money to buy term insurance and invest the rest. Therefore, a simple endowment and life policy will suffice.

    Most undergraduates buy life policies because of their friendship or obligation to the seller – freedom to spend money on a friend. If an undergraduate is smart enough to get into a university, it should be painfully obvious that his or her friend who is also a classmate, can’t have sufficient financial knowledge to be an expert.

    • J

      “Financial Planners will say the better alternaive to buying a life policy is to buy cheap term insurance for protection and invest the rest. However, graduates will not have enough money to buy term insurance and invest the rest. Therefore, a simple endowment and life policy will suffice.”

      If a young person does not have enough money to fulfill insurance needs and retirement needs at once, the logical thing to do is to settle things in order of priority: insurance coverage first by getting a term policy, then embarking on his long-term savings when he has the budget to do so. With a small budget, getting a life plan and/or endowment plan will just mean he will be underinsured and the plan will not be sufficient for retirement anyway.

      • J

        I should correct myself when I said term policy. Insurance needs should also be prioritized. A medical Shield policy should be the most important policy one should get first, before moving onto Disability Income insurance and then a term policy.

  • jimbo lim

    Yes Terence, I agree Wilfred is good with words and good financial advisor. Looks like he is going to catch a basketball too.

  • sh

    Glad you liked the interview folks. I guess much of the problem stems from misplaced trust, and probably an under-estimation of the importance of insurance.
    Imagine you’re 23 years old, at the prime of your life, and low on cash. Planning for injury and/or death would be the last thing on your mind.

    We’re taking a break this week because it’s CNY, and cos Wilfred is down with a flu. (Maybe I should ask if he can claim insurance for flu? 😉 )

    Next episode: Are housewives under-insured?

  • http://www.repsholdings.com.sg Micky Neo

    Hi SH,

    With reference to an existing saving plan which is unsuitable,
    There’s option to continue,
    Cut loss, surrender and leave it in the bank
    Surrender and get the ‘right’ plans.
    The advisers will go thru with the policyowner the various options pros and cons in the short/long term, and the policyowner can then make an informed decision.

    Consumers should take a more proactive in their own financial matters.
    REPs Holdings is not a financial advisor and we only we deal aquisition and redistribution of resale endowment policies.
    And yes, Life Insurance Policies and be legally transferred and sold.

    Micky Neo