Personal risk management

We need to accumulate savings and invest them wisely to get an adequate return that is higher than inflation. Most people invest too much of their savings in a life insurance policy that locks them up for 20 years or longer, is inflexible and gives a poor return. When they need cash for emergencies, they have to borrow on credit cards or on their own policy and pay a high interest rate.

Most insurance agents frighten them about the risk of premature death or critical illness (which is less than 10% during their working life) but did not tell them about the risk of insufficient savings for retirement or future emergencies (which represents more than 90% chance of occurrence).

The solution is to buy a low cost term assurance (covering death and critical illness) or personal accident policy (with less than 2% of your earnings) and invest the rest of your savings in a low cost investment fund. If the insurance cover is not available at a low price, it is more important to take care of the 90% risk and have adequate savings for the future.

What are your views about this approach to personal risk management? Share your personal experience.

Tan Kin Lian