How To Pay Lesser For Insurance Premiums While Getting Higher Coverage?

Do you know that insurance is a big part of our lives? In one way or another, most likely we would have more than one insurance policy throughout our lives. Some policies were bought with a clear mind while others were not. We would have spent hundreds of dollars per month on insurance without knowing what exactly we have or will we benefit from it?

Instead of paying a hefty sum on insurance premiums, there are ways to pay lesser and still get a higher coverage. You would be surprised many of us are actually under-insured even when we are paying so much for insurance premiums. Let's look at how this happens:

Paying A Lot Of Premiums but under-insured

Case 1: Buying too much endowment policies

You may have heard of endowment policies or even have one of these, but what exactly are these policies and how much coverage you are getting?

Endowment policies are basically more of a savings plan. The death or critical illness coverage is very little as most of the premiums are put into a fund to earn about 2-4%. Basically, if you pay about $100/month for an endowment policy, the coverage you would be getting will be less than $50,000. For my own endowment policy which I bought many years ago while I was still a student, I pay $80/month and get only $12,000 death and critical illness coverage. This really isn't a lot of insurance coverage.

Case 2: Buying too much Whole Life Insurance policies 

Another popular insurance policy is whole life policy which many people have today. This policy is so popular because insurance agents push it out so much arguing that we need insurance coverage for life.

However, if you have this policy, chances are you would be paying a lot of premiums for this policy. A simple comparison on a local insurance comparison portal shows that for a $100,000 death and critical illness coverage, the premiums would be around $2300+ per year. This is about $150-$200 per month. $100,000 death coverage is really little so most likely we will be getting $200,000-$500,000 insurance coverage. How much will the premiums be?

For the $200,000 whole life insurance policy, the premiums will be about $4800+ per year.

For the $500,000 whole life insurance policy, the premiums will be about $14000+ per year.

If you're paying about $400-$500/month for whole life plans, the coverage you would be getting will only be around $200,000-$300,000. Is this enough for your dependants or your family if you pass on?


Mixing up insurance with investments

From the above examples, it is clear that the wrong policies bought will result in undermining the true purpose of insurance which is to insure us. There are so many policies in the market but which should we look into to get the most out of our insurance needs?

The problem with being under insured is mixing insurance with investments. Every $1 we pay for an endowment plan, only 10 cents may go into insurance while the rest of the 90 cents goes into a fund for investment. This is similar for whole life plans. This is the reason why the insurance coverage can be quite low even though the premiums we pay is higher.

If we want to get higher insurance coverage, we should look into term life plans instead. Term life plans are true insurance policies with the purpose for insurance only. There are no investment elements in it. We would get the highest coverage for every premium we pay.


The Attack On Term Life Plans

However, term life plans get attacked and branded "not a good plan" most of the time by insurance agents. There are good insurance agents around who advocate the best for their clients so I have to clarify this does not applies to all.

There is no one size fit all approach. Each of us will have different insurance needs and yes term plans may not cover for life so we can get additional minimum whole life insurance for life coverage.

Why term plans are not that popular for insurance agents to market out is simple because of the commission structure. For the first time, the commissions of insurance agents will be revealed in this post, credited to DIYInsurance for writing an e-book to defend term insurance. You can download the free e-book here on term vs whole life insurance.

In the e-book, various scenarios were listed out to compare the premiums and agent's first year commission. Here's a scenario for insurance plans to cover $500,000 death/TPD:

	Term Plans Premium	Traditional Whole Life Plans	Whole Life Hybrid Plans
Company A (Premium p.a.)	$1,922	$15,670	$7,410
Agent's First Year Commission	$748	$7,052	$3,335

As we can see, the premiums for terms plans are definitely much lower as compared to traditional whole life plans for the same amount of coverage. This also means the agent's commission will be much lower too.

In just one example, we would have seen why there is always selling pressure for whole life insurance as compare to term insurance. This article may get more attacks but I hope it benefits consumers as a whole. The next time you get your insurance, think of it solely for your insurance needs first. For investments, there are many other ways to invest like all the many articles I've written. For insurance, getting term insurance to cover most of our insurance needs seems more practical to me. Nevertheless, we can still get some whole life plans to complement if needed.

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What is cooperative insurance ?

Cooperative insurance is form of insurance policy offered by organizations such as trade unions, corporations or associations to its members. It is a mutual form of aid where premiums are shared by member in order to establish a mutual fund or assets that can later be used by members to aid or help them at the time of unexpected eventualities. Unlike any compensation paid out by traditional insurance companies, pay outs or aids given out under cooperative insurance are not strictly compensation but a form of aid for members to help them go on with their daily lives in spite of of the unexpected contingencies. Cooperative insurance can cover a number of contingencies and losses such as financial deficit, burglary, health and hospitalization, damage to property such as a house and even car or road accidents.

Cooperative insurance only covers its members and properties or eventualities considered to be under the organization’s jurisdiction. 

For example, when one buys property managed by a cooperative, corporation or an association such as an apartment or housing unit, the property is already under the jurisdiction of a cooperative or a corporation, of which the buyer is already a member and has shares in it. The property will already be covered by an insurance policy that covers it for various claims and eventualities. The policy will be extended to the shareholders and this form of coverage is what is called cooperative insurance. Owners of the units will be covered under the units or apartments they have acquired. The owners can make claims eventualities they encounter under the buildings such as exposure to harmful radiations and damage to the building due to accidents. In case of the radiations or sewer problems for example, the health of the member will be the responsibility of the corporation. In case of damage to personal property inside the units or apartments, the policy will cover this eventuality since it has happened inside the apartment which is under the jurisdiction of the corporation or organization.

Since cooperative insurance does not necessarily work like the traditional insurance, it is not automatic that cooperative insurance must work in the same way in all corporations or organizations. It is advisable that one does some personal research on the scope of what is covered under cooperative insurance in terms of personal cover or property cover in a specific corporation or organization before joining or subscribing to it.

CPF's The Big 'R' Chat Roadshow 2016

CPF is such a big part of our lives where we use it for housing, retirement, healthcare etc. I've written various articles on how we can use CPF to have a better retirement as well as how CPF actually helps us to purchase our first home. It is indeed an integral part of our lives living in Singapore.

The CPF system is here to stay regardless if we like it or not. There have been many changes to the CPF system over the past few years where recently it was announced on more flexibility for us to invest our CPF monies in funds which would yield more returns than the 2.5% we get in our ordinary account. I will blog more on the details in due time when its released.

CPF board is holding a series of roadshows and financial talks in the months of August to November with the first one starting this Saturday at Suntec. This is a free to attend event and I think it is a good opportunity for us to learn more on financial and retirement planning. Personally, I'll be going for the event somewhere in October where I'll be more free.

Some of the highlights of the road show includes:

VR EXPERIENCE

Through an interactive and immersive 360° virtual reality experience, members can find out what is their retirement personality.

RETIREMENT ESTIMATOR

Visitors can calculate how much savings they’ll need to achieve their desired monthly income, and it’ll be given to them in a receipt!

MESSAGE TO MYSELF

After finding out more about their retirement plan, visitors can send a reminder to their future selves to keep them on track!

FUN FOR THE WHOLE FAMILY

For those of you with children, do bring them along. We have activities such as a DIY First Aid Kit for the kids, and lots of other premiums and activities for the whole family.

RETIREMENT PLANNING TALKS

One of the highlights are the free talks they have. I've looked through the topics and think it is quite good especially for those who are planning to buy their first home or planning for retirement.

They have invited good speakers who are prominent in the financial world to give their insights. Some of the topics include buying your first home and future-proofing your retirement plan.

For more information on the event, you can go to the website here.

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4 major reasons why insurance for travel is important

Insurance for Travel is one of the categories under the general insurance. Whether you are traveling domestically or overseas, it is very important that you have a cover for your trip. Some of the trips that we make such as; business trips, holiday vacations, expeditions, seminar trips, or maybe visiting family friends, are very important.

I am sure you don’t want to find yourself in a compromising situation, like falling ill along the way and you have enough money to cater for the necessary treatment. That is very embarrassing and you don’t want to be a victim of such a scenario. This just lays more emphasis on the values of insurance for travel. In this article, we are going to venture into enlightening ourselves on the significance of this Insurance.

Now, there are different plans that exist, from which you can choose from. These are:
• Individual policy for travel
• Family travel policy
• Students insurance policy for travel
• Senior students insurance for travel

Having highlighted the different plans under Insurance for travel, it is paramount that we look at why this policy is that important. Insurance for travel is important to you and your family or anybody whom you love, for the following reasons.

1. Enables for reimbursements in case of losses and unanticipated expenses.
If you have lost your luggage while on a trip abroad/overseas, you might end up squandering a lot of cash in the effort to sort yourself out. This would have been a different case if you had Insurance for travel. The insurance plan would cater for replacing all the Items you may have lost in the mayhem.

2. Ensuring that you get any kind of help when abroad or I your domestic trip.
When you are traveling you can’t predict fully how things will unfold while out there. Remember you are far away from your residence. For example, if by dad lack you are involved in an accident while on your vacation, your insurance for travel will enable you to get the best medical services. Furthermore, any expense that will be required to get you back home will be catered for by your insurance plan.

3. In the case of disruptions along the way, the insurance cover will help you out.
Imagine you had booked for a flight, but due to technical or insecurity related problems the trip is canceled. This means you have to go back home or find a place to rest until another flight is ready for you. This means that you will be required to use extra expenditure in dealing with the situation. With insurance for travel, you would not have to worry about such occurrences. The cover makes sure that you are protected from incidences that are out your powers. Therefore, you will not have to spend personal cash in sorting things out.

4. Medical expenses protection.
In case you need some medical attention while on your trip, and you don’t have an insurance cover, then you will have to cater for the expenses from the money you have maybe in your bank account or you use your credit card to get some credit. But if you have insurance for travel, the expenses will be sorted by the insurance plan. Remember that any treatment away from your native country could be very exorbitant. On the other hand, your medical cover will not work will abroad. This is why you need insurance for travel.

There you go, reasons why insurance for travel is important. As you mull over the issue of having insurance cover for your travel, just remember that tragedy strikes when least expected. Always be prepared.

INSURANCE FOR HOME PROPERTY

Home property insurance is a form of protection from the risks that might occur in the future. These risks include damage from floods, landslides, earthquakes, fires, and others. Basically, no man in this world who wants his house damaged by the disaster. As a form of prevention and protection against home security in the future is to insurance. With the insurance on our homes, if one day there is damage and losses it does not need a headache thinking about the cost of repairs. Because all costs losses will be covered by insurance.
Benefits of Home Insurance
Here are the benefits of home property insurance.
1. Freedom from financial loss
2. Got safety and tranquility
3. Protected from the risk of disasters
4. Protect all materials (treasure)


Considerations before insuring homes
Various considerations that must be considered before insuring homes, namely:
1. Warranty protection
Pay attention and understand carefully the risk of occurrence of protected and which are not included in the home insurance (not protected). Suppose the only protection for the house or building and its contents. Keep on the type of disaster risk what is included in the protection? Eg floods, landslides, earthquakes, and others. All of it must be clear that you are not disappointed and felt cheated in the future.
2. The value of coverage
The insurance or financial turnover is the total value of turnover against all the damage costs to be incurred in the home insurance to the original condition (before the disaster). Replacement value should be based on the present value is not on the current value used to build.

3. Ability to pay insurance premiums
Home insurance premiums represent premiums economically. This means that the greater the value of coverage and expansion of collateral taken, the greater the premium cost.
4. Choice of insurance
Choosing a standard insurance policy and the expansion is a good thing. The standard policy usually will replace the risk posed by fire, lightning, explosion, aircraft downfall but did not want to risk caused by natural disasters such as floods, hurricanes, earthquakes and others. To protect homes from the risk of natural disasters it should extend additional premium to the clause. And if the house is located a disaster-prone areas should take out an insurance policy manifold Property All Risk.

5. Ease of insurance claims
Note the procedures and processes of insurance companies claim that followed. This can be done by finding reliable information on lunge insurance companies will be selected.

6. Insurance Policy
Learn about the policy the insurance company to be taken by both the insurance company and ask if there is a policy that is unclear and how easier access to up to date with the latest information about insurance that will be followed.

Health insurance

This is cover in opposition to the possibility of incurring therapeutic expenses’ amongst individuals. However, by means of estimating, in general, the danger of healthcare as well as wellbeing system cost, amongst targeted crowd or group of individuals in any given country. On the other hand, an insurer of this type of insurance can develop practice finance arrangement, for example, a monthly payment, in order to make sure that cash is accessible to pay well-being care compensation or benefits as it is been specified in the cover agreement.

Nevertheless, the remuneration is administered by bodies such as government organization, a private company which is not for the turnover entity .However, any �coverage with the intention of providing the fee of benefits as a consequence of illness as well as the injury will be defined as insurance for health.


Health indemnity policy is an agreement struck between an insurance, for example, the insurance business as well individual The agreement can be renewed for instance annually or monthly. However, in the case of the private cover might be compulsory for every one the resident in the case meant for the national policy. This kind in addition to the sum of healthcare fee will be enclosed by the health indemnity supplier are particular in writing.


United State [Us] specific this is provided by means of ERISA plan the business, in general, publicize that they comprise a large insurance company. However, in the case of ERISA the indemnity company does not employ in operating act of insurance, they immediately do admin. For that reason, the ERISA arrangement is ruled by centralized law which is under the authority of the United State of America subdivision.


Obligation for insured person may take different form


Payment or the premium this is the sum of the document holder or the one who is sponsoring them.


Deductible; this is sum been insured have got to pay out sooner than the well-being insurer compensate its share, for instance, the policy owner may have to pay $5000 deductible per annual. However, prior to their any physical condition care cover by means of the health insurer. It might take quite a few doctors visit or else prescription refill sooner than the insured individuals reach the deductibles in addition to the insurance company start towards paying in support of care. Furthermore, for the most part, policies don’t pay for the visit of the doctors.


In this regards, every individual in any given country should have health insurance since patient more often than not pays a copayment as well as prescription medicine cover for all the equilibrium of medication enclosed in the formulary thus resulting to the easy way of settling hospital bills.

Top 10 reasons why your Cars should be Insured

Cars insurance is a form of general insurance under the Motor Insurance plan. Most new drivers perceive car insurance as a waste of cash as opposed to being a benefit for them. This is because of the premiums they are required to pay. But on the contrary, this is very wrong.Cars insurance is a great plan to make sure that they are covered in the nick of an accident. There are many benefits of having your car insured.

These are the reasons you should insure your car.
1. Your car is a valuable asset. I am sure it has taken you many years to finally have that attractive car you are driving today. Therefore your car is a treasure that you can’t imagine losing. It is important you protect it, and the only way you can do that is by getting insurance cover for it.
2. The law requires that every car should be insured. You don’t want to face criminal charges just because you have ignored the idea of getting insurance for your car. In all the states, the law clearly stipulates that you should have insurance for your car. For you to be able to enjoy the privilege of owning a car then adhere to the law. On top of being charged, you might also lose your driving license, and above all face a jail sentence. I am sure you don’t want any of these to happen. Always remember that nobody is above the law.
3. In the case of an accident, the cost is always exorbitant. You can avoid the fear through cars insurance.Through the package policy on cars insurance, you don’t have to worry of how you will cater for medical expenses due to an injury inflicted on you or any other person who might get injured in an accident. The insurance will also cater for your car damages.
4. If you had purchased your car through a loan from a Lending Company, remember they will always want to be paid back their money. This mostly happens when your car gets damaged beyond repair. With the cars insurance plan, you don’t have to worry about how you will repay the loan. The insurance will enable you to continue repaying the loan.
5. Your cars insurance is a form of legal shield. Remember that in the case of an accident the other party may decide to sue you for damages inflicted on his or her car. This means there will be a lot of money required to cater for the services of an attorney who will handle the lawsuit emanating from accusations. Your cars insurance helps you in handling this stress-free.
6. The cars insurance will help you in avoiding bankrupt. If you have not insured you car, and an accident occurs, it is possible to end up bankrupt if you don’t handle the situation well. In the aftermath of an accident, you will find that you are spending a lot of money through public transport. As a result, you might end up taking a loan and excessive use of credit cards. To avoid all this, just get an insurance cover for your car.
7. Provision of protection against accident non-related scenarios. Take a case whereby you have been carjacked and your car is stolen. In case this occurs, your cars insurance will help you in getting another one.
8. Protection during natural calamities. Think of a situation whereby, a tsunami, hurricane, earthquake, or maybe a landslide damages your car. If you have not insured your car, it means that you are back to square one. Let your cars insurance be your shield and defender in such times.
9. Your car helps in getting to work in time. It is, therefore, important to provide an insurance cover for it. Your car being damaged doesn’t mean that your boss doesn’t require you to be at work. The seat only gets hotter for you. Be in a position to have your car repaired stress-free by having an insurance cover.
10. The source of serenity/peace of mind. Since the cars insurance takes care of most of the issues related to a car accident, you are able to relax and wait. At the same time, your job performance will remain excellent.

Now, you have all the reasons to go to the insurance company and insure your car. Your cars insurance= “ a happy life.”

General Insurance-5 Major insurance plans

There are 5 major categories of General insurance. General insurance is one of the essential insurance types that exist- the other one being Life insurance. General insurance is meant to protect against damages and losses that are unpredictable. For instance, protection against assets damage e.g. motor damage due to road accidents. On the other hand, home appliances are protected through a home cover/insurance plan. It is important that we look at these General categories.

1. Health Insurance
Poor health condition will cause inability to carry out the daily duties. Furthermore, the high costs involved in disease diagnoses, prevention and treatment procedures require large amounts of money. You may be caught off guard by this, and the best way to avoid it is through a health Insurance cover. The insurance will cater for all the expenses that will be required. Therefore you are able to get the best treatment without fear of how you will clear the bills.
There are different insurance policies under this one, and here they are.
• Cover for Surgery
• Personal cover
• A comprehensive Family policy
• An all-inclusive Health Insurance cover
• Critical illness cover
• Individual accident cover
• Daily Hospital cash allowance

2. Insurance for Home property
Your home is among the biggest monetary investments that you have done in your life. It is important to protect it from any unanticipated disaster. This cover will protect all the treasures and assets that are in your house.

3. insurance for motor vehicles
You like speeding while driving on the highways and you boast about it to your friends. The question is, have you insured your flashy car? Since you have spent a lot of money in acquiring your car, it is paramount that you protect it from unforeseen road accidents. Motor insurance cover will enable you to get your vehicle repaired or even replaced with a new one in extreme cases of road accidents. You may decide to have a package policy (which offers protection for the damages caused to the vehicle as well as any injury to you or another individual) or have the Liability Only Policy that covers for death, personal injury and/or injury incurred by another person in the event of an accident.
Motor insurance has got some common plans, which include:
• Insurance for Commercial Vehicles
• Insurance for Two wheeler vehicles
• Insurance for your car

4. Insurance for your Travel
Sometimes, no matter how well you have planned for your trip, maybe abroad, something may go wrong. For example, you may find that your baggage has been misplaced or maybe you need some medical attention while on board among others. Your travel insurance cover will take care of all these misfortunes.
There are different travel insurance plans that you can choose from, and they include:
• Travel policy for your family
• Personal travel policy
• Travel policy for senior citizens
• Travel insurance for students

5. Insurance for Commercial activities.
You have succeeded in setting up your dream construction business or maybe a textiles manufacturing industry. It has cost you a lot of time and money to have it running. Do yourself a favour and acquire a commercial insurance for the industry or business.
The common Commercial insurance plans that you can choose from are:
• Insurance for any Liability
• Insurance for Marine investments
• Insurance for Property
• Insurance for Financial lines
• Insurance for Employee benefits
• Insurance for Engineering
• Insurance for Energy
• Insurance for international solutions

There you have it. Five general insurance categories that will help you safeguard your personal life, your family members’ life as well as your hard earned property and assets in your inventory.

The Power of Compounding Interest

Compounding is when the interest on a sum of money, either a deposit or loan, is added to the original amount so that the interest earned also earns interest. Albert Einstein’s popular quote; ‘Compound interest is the eighth wonder of the world. Those who understand it, earn it... those who don’t, pay it’ highlights the impact compounding can have over time, and cautions that it can work either for or against you.

“When you invest in unit trusts, time allows your invested money to grow and compounding makes your money work harder for you,” says Wanita Isaacs, investor education manager at Allan Gray, an independent African asset manager. “Given a long enough period to work, compounding can dramatically multiply the value of your investment so that less of your total investment will be from your contributions and more from investment growth.”

While compounding can be seen as the magic ingredient for successful investing, the same mechanism works against you when you borrow money, for example, through credit cards or a personal loan.

Isaacs explains that the amount you owe earns interest over time and through the effect of compounding, the cost of credit can work out to substantially more than the cash amount you borrowed, depending on the interest you are charged and the length of time you will be paying the loan back.

How does compounding actually work?

In summary, the impact compounding will have on either an investment or a loan depends on:

·         The amount invested or borrowed

·         The time period

·         The growth rate (the rate of return on an investment or the interest charged on a loan)

·         The compounding frequency (the more frequently interest is added to the original amount, the greater the impact of compounding. For example, daily compounding means that you earn returns today on the amount you invested, as well as the returns you earned yesterday on the returns you earned the day before. This has a greater impact than compounding monthly, which has a greater impact than compounding annually.)

The table below uses the example of an investment of US$10 000 and annual compounding to illustrate how compounding works. “After 20 years, your US$10 000 investment will grow to US$67 275 – a gain of US$57 275,” says Isaacs, adding that if your returns had not been added to the original amount and left to grow; if you had spent them instead, the total gain from your investment would only be US$20 000. “Since you would have spent this US$20 000, you would only have the original US$10 000 still invested.”

Table 1: How compounding works

	Amount of your investment	Return rate	Total amount with return earned
Year one	US$10 000	10% annually = US$1 000	US$11 000
Year two	US$11 000	10% annually = US$1 100	US$12 100
Year three	US$12 100	10% annually =US$1 210	US$13 310

How do you ensure compounding works for you?

To benefit from compounding, you first have to start saving and the sooner you start the better. “You also have to be disciplined and not spend the money your investment makes before you reach your savings goal,” adds Isaacs.

The cliché that good things come to those who wait is especially true when it comes to compounding. Both the decision to invest and the decision whether or not to use credit are essentially choices between instant and delayed gratification. “If you choose to use credit you will have to pay for the benefit of instant gratification whereas, if you choose to save, you will be rewarded for delaying gratification,” Isaacs concludes.

Thandi joined Allan Gray in 2008. She is a senior member of the distribution team having previously worked in legal and compliance and marketing in the financial services sector. Thandi completed her Masters of Business Law at the University of KwaZulu-Natal and is an admitted attorney.

This Will Cause Us To Be Poorer Each Day

What makes a person poorer each day? Is it his daily expenditure? His compulsive spending habits? His indulgence on food? You may be surprised that getting poorer is not so easy. Spending money on food, buying clothes etc will not make us that much poorer. To be honest, how much can you spend on food or buying clothes?

In April this year, I wrote an article declaring that I will stop tracking my daily expenses. In the past, I used to track every single spending I had in an APP but it wasn't that useful for me. Yes it made me conscious of my spending and I did save a lot of money but that is not what I want to live my life on. Being too frugal can have an adverse impact on our lives instead.

Now, I only track my expenses on a monthly basis and I found that even after I stop tracking my daily expenses, the effects are not that much of a difference, only a slight increase except for a month where I went overseas.

Expenses has gone up over the years and I'm actually happy that it has happened. The irony is when expenses went up, my income went up as well.

Now, back to what will cause us to be poorer each day. The answer is LOANS. There are many different types of loans or what we call as debts but some of them work differently from each other. Let's look at some common loans and see whether will they actually make us poorer?


Car Loans

Car loans is quite common in Singapore. Due to the high price of cars now, how many people can actually affoed to pay that $100,000+ in cash for that car?

SGCarMart has a good new car loan calculator which i'm using for the below illustration:

New Car Model: Toyota Vios 1.5 Elegance
Car Price: $104,888
Loan Amount: $73,422
Interest Rate: 2.28%
Loan Tenure: 7 Years

From the above example, the monthly instalment will be $1014. Total interest paid at the end of 7 years will add up to $11,718. This is 11.17% of the original car price. This is still 2.28% per year even though we are paying a monthly instalment whic reduces the outstanding loa amount. This is because car loans interest are always calculated base on the initial loan amount instead of the remaining loan amount


Housing Loan

Housing loan is even more common in Singapore. We can choose not to have a car but we need to have a roof over our heads. For this illustration purpose, I'll be using a mortgage calculator from MoneySense.

Price of HDB flat: $340,000
Loan Amount: $306,000
Interest Rate: 2.6%
Loan tenure: 25 years

For the above example, the monthly instalment will be $1388.23. Total interest paid at the end of 25 years will add up to $110,468.61. This is 32.49% of the property price value.

The interest paid is quite scary to be honest. This means if your property price is not more than $416,469 in 25 years and you sell it, you'll be making a loss instead. Nevertheless, if we calculate the average interest paid yearly, it is only about 1.29%. This is because housing loan interest are amortised. This means the interest is calculated based on the remaining loan amount yearly as compared to a car loan which calculates interest base on the initial loan amount.


Credit Card Debt

Credit card is not considered a loan but it is a debt if we missed the payment or did not pay the bills on time. Let's see how credit card interest is calculated and what happens if we did not pay the bills.

Credit Card debt: $1000
Interest rate: 24% p.a (2% per month)
Years of Owing: 3 years

Base on the above example, if we did not pay a single cent on the amount owing, the $1000 debt would grow to $2000 in 3 years. This is double of the initial amount of $2000. The reason why it doubles is because interest is compounded on a monthly basis. To calculate how long it takes for your credit card debt to double, you can use a simple method called the rule of 72. By using 72 divided by the credit card interest rate per annum, you will get the number of years which the credit card debt will double. In the above example, it is 72 divided by 24 which is 3 years.

Another thing to note about credit card is if we were to make partial payment, the payment paid will be used to pay for the interest first before it is used to pay for the outstanding amount. For example if the credit card debt is $10,000 and interest is $240 per month, if we just pay $240, the initial debt of $10,000 will not reduce at all. We are just paying interest every month for as long as it goes without reducing the debt amount.

Conclusion

Loans or debts can cause us to be poorer without us realising it. Our daily expenditure or spending money on food or clothes can be consciously tracked but for loans, it is sometimes hard to visualise exactly how much money we actually pay for the interest.

For the 3 different loans, all 3 of them work differently:

1. For car loans, the interest is base on the initial amount
2. For housing loans, the interest is base on the reducing balance
3. For credit card debts, the interest is base on the outstanding amount compounded monthly

Before committing to a loan, we should know how much interest we are paying. For debts, we should not get into any in the first place as it can be very hard to get out base on the example above.

Make the right financial choice today!

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Consumers should be wary of short-term health plans

Consumers looking for health insurance outside of the annual open enrollment period should be wary of short term health plans. These plans may be marketed as alternatives to Affordable Care Act (ACA) health insurance, but they could leave you without adequate coverage and facing financial penalties at tax time. 

Originally, short-term health plans were sold as a stop-gap measure until you could get real major medical coverage. After the ACA kicked in, people had many other options for coverage, but these limited plans were still being marketed to consumers as a viable alternative. However, short-term  plans do not count as 'minimum essential coverage' under the ACA - meaning you'll have to pay a tax penalty. They also do not cover the 10 essential health benefits, can limit your annual benefits to $100,000 or less, and deny you coverage for any pre-existing conditions. 

These policies are sold year-round, unlike ACA-plans that must be purchased during the annual open enrollment period, unless you qualify for a special enrollment. Some states allow for coverage to last up to a year and policies can be renewed. This effectively takes people out of the insurance pool that the ACA was designed to expand, leading to increased costs for everyone. 

In an effort to bring the limited short-term health plans back to their original purpose and to protect consumers, the federal government is proposing a regulation to limit the duration of these policies to three months and increase consumer awareness of their limitations.

Insurance Commissioner Kreidler agrees with this effort and sent a letter yesterday in support of the new regulation.

Learn more about Medicare at free event Aug. 6 in Kent

Are you new to Medicare? The Office of the Insurance Commissioner’s Statewide Health Insurance Benefits Advisors (SHIBA) will be at the Kent Senior Activity Center from 10 a.m. to 2 p.m. on Saturday, Aug. 6

You will learn about:

• Medicare parts A, B, C and D
• Your Medicare benefits and options
• How to get help paying for Medicare if you qualify

Find registration and parking information for this event.

Other resources:

• Find out more events on the SHIBA calendar. 

• Read more about SHIBA and how it can help you. 

Do you have Medicare questions? Call 1-800-562-6900.

Breastfeeding and insurance: learn your rights

This week is World Breastfeeding Week, when people from all over the world celebrate breastfeeding. It may surprise you to hear that there’s a connection between breastfeeding and insurance.

The Affordable Care Act requires most health insurance plans to provide breastfeeding and lactation support, equipment and counseling to women during and after pregnancy as long as they are breastfeeding.

• While insurers must cover breast pumps, plan vary by what type of pump they cover, if they help pay for a rental or purchased pump, and if the pump needs to be pre-authorized. Contact your insurance company to find out what your plan covers. 
• Insurance plans must also cover lactation support for mothers and babies who are having trouble with breastfeeding or pumping. 

According to womenshealth.gov, babies who are breastfed have lower risks of many health conditions including asthma, ear infections, SIDS, type 2 diabetes and respiratory infections. Breastfeeding also benefits mothers’ health, promotes infant-mother bonding and is more economical than buying formula.

Find more information:

• Breastfeeding benefits: – Healthcare.gov 
• Breast Pumps and Insurance Coverage: what you need to know – U.S. Department of Health & Human Services 
• Breastfeeding a sustainable solution – The Olympian 

Read more about women’s health insurance rights on our website. Questions? You can contact our consumer advocates online or at 1-800-562-6900.