Get adequate coverage

My insurance friend from Kuala Lumpur was surprised at the low level of life insurance coverage in Singapore. He average death claim was $40,000. This represents only 10% of the amount ($400,000) that was considered to be necessary to provide financial security for a family.

Why is the coverage so low?

I explained that this was caused by the wrong type of life insurance product that was being sold to the public. The insurance agent prefer to sell whole life and endowment plans, to enjoy higher commission rate. As the premium rates are rather high, the death coverage, as most people can only afford to set aside 10% of their income for life insurance.

The consumers can get an adequate coverage (say $300,000 to $400,000) by paying only 1% of their income, if they buy Decreasing Term to cease at age 65. They can use the remaining 9% (or more) to save in a low cost equity fund to get an attractive return.

I hope that more insurance advisers will come forward to promote this solution.