A recent expeience in a death claim

2 days before the Chinese New Year eve, one of my client passed away. It was a bittersweet event, as he had been in coma for a few months after a series of heart attacks since last September. Death, as much as is a painful separation of the dead and the living; it is also a relieve to the client of physical pains and sufferings; not to mention the mounting financial stress on the family members.

My role is to ensure the insurance dollars reach the widow in the soonest possible time. Below is what I did:

15/2/07(Thurs), 8am: I received an SMS that the client has passed away. I alerted the insurer that a death claim will be filed on the client's 2 insurance policies.

16/2/07(Fri), 10 am: I visited the widow at the wake, photostated the death certificate, the ICs of the deceased and the widow, and submit to the insurer immediately.

17/2/07 to 20/2/07: Chinese New Year holidays.

21/2/07(Wed): Finalised the proper claimant (as the deceased dies without a will) amongst relevant family members, and endorse the death claim form.

22/2/07(Thurs): Submit marriage certificate of deceased and widow to proof relationship to the insurer.

23/2/07(Fri): The insurance cheques were issued and delivered to the widow.

When you discount the public holidays, the insurance dollars were available to the widow in 4 working days. Notice that in time like this, insurance dollars (of substantial amount) are not only made available to the widow, but also the quickest amongst ALL other assets including CPF, cash at bank, unit trusts etc. This is life insurance in action.

Maximise your life insurance surrender value.

Most of my clients are age 50 and above. Many of them have hold on to their life policies for 20 over years when their children were young. It is quite normal that some of them are seeking to surrender their policies for the cash values since the life insurance is no longer required.

Below are some experiences i have in assisting this group of clients to get the maximum cash value from their policies. I shall limit my discussion to traditional whole life policy. In my subsequent blog, i will touch on the investment-linked policy matter.

1. Get a current cash value illustration from the insurance company.

The annual statement which the insurance company send to you show only the sum assured and reversionary bonus of the policy. This is the value realise upon claim, and not upon surrender.

Therefore, you can request a copy of illustration showing the cash surrender value.

2. How to read the cash value illustration

The cash value illustration will show the (a) Guarantee cash value, (b) cash bonus or dividends. For policy that is above 20 years, some insurance company might have a third cash component call (c) terminal bonus.

Your surrender value will therefore be the total of item (a), (b) and (c).

3. Time your surrender

Time your surrender to approximately one month after the anniversary of your policy. This is to gain the maximum bonus/dividend and terminal bonus of the policy. This is because the insurance company declares the rate of of bonus after one full year of your policy.

Let me further illustrate this point. Assume your policy anniversary date is October each year. Try not to surrender your policy before October (say September). In this way you will lose out on the declare bonus for this year (as most insurance companies practise "yearly rest" accounting treatment for the bonuses or dividends). Instead, surrender your policy on November or December. In this way, you will enjoy the full bonus declared on your policy for that year.

4. Ask about the terminal bonus or dividend

If you have hold your policy for 19 years, it would be beneficial to ask the insurance company whether terminal bonus will be paid on your policy on the 20th year. Terminal bonus is a practice by insurance company to add extra bonuses onto a life policy which has been in the book for a long time. Terminal bonus can sometime be substantial.

One insurance company pays terminal bonus 100% of the total dividend on a policy which is 25 years and above! Let me show you the figures on this example. One month before 25th year of this policy, the cash value is as follows:

1. Guaranteed cash value $65,800
2. Divdend $50,000
3. Total surrender value = $65,800+$50,000 = $115,800

One month after 25th year of the same policy, the result is as follows:

1. Guaranteed cash value $66,000 (with new dividend declared)
2. Dividend $53,000 (with new dividend declared)
3. Terminal dividend = $53,000 (100% of dividend)
4. Total surrender value = $66,000 + $53,000 +$53,000 = $172,000

So, now you see the difference of one month on the same policy : $56,200!!

In conclusion, it is worth while to manage and maximise your insurance surrender wisely.

Protect your interest in private medical shield insurance

On 31st Jan 2007, a report in Straits Times generated a buzz amongst medical insurance practitioners. It was reported that a lady was rejected on her medical insurance claim by the insurer because of the definition of "pre-existing condition". The policy in this case is a private medical shield plan which replaces CPF's medishield if a client purchases it.

I followed the argument of CEO of the insurer, which is very convincing and accurate to the letter of the law. Subsequently, one response by an insurance law specialist, and also one by a health correspondent in StriatsTimes, also equally convinicing in their arguments that the insurer has done the right thing by safe-guarding the interest of majority in rejecting the claim.

I wonder, if the CEO, the insurance law specialist, or the health correspondent journalist is the insured whom claim is being rejected, will they still say the same thing?

This saga points out a few problems about private medical shield plan. Chief amongst those is that the lady in this case CANNOT revert back to her original medishield plan (which will pay the claim) HAD she not being ADVICED to buy the private shield plan. (Do you now see the predicament of the lady in the case. It was not her fault altogether as she genuinely did not know about her breast tumor, and the insurer did not insist on medical check up before REPLACING the medical policy.)

Do we now point the "missile" to the financial advisor who sold her the plan? There is no easy answer.

This is what you can do to protect your own interest.

Step 1: If you are considering purchasing a private medical shield plan, insist that you go for a medical check up with a preferred doctor by the insurance company. EVEN if the application (or the advisor) does not require you to do so.

This is becuase the moment you depart from CPF's medishield plan into private shield plan, there is no turning back IF your health is compromised, whether you know it or not.

Step 2: Declare EVERY illness, however remote or minor you ever have had to the doctor or the underwriter.

Step 3: Once you are into one medical shield plan, STICK to it and try not to hop around amongst insurers. Any changes of insurer will view you health (obvious or hidden) factors as a fresh case. And the chances of being hit by a "pre-existing condition" will be higher.

Back to the cited case and the "experts". Before we talk about "how to protect the interest of the majority" in a heroic manner, let's not forget we are dealing with a human being. If the case is not a fraud, as experts, we are to bring the benefit of insurance to that person, and not leave that person in a no-man's land.

Let me end with the same question earlier: "if the CEO, the insurance law specialist, or the health correspondent journalist is the person whom claim is being rejected like the lady in the case. Will he or she still talk like that?"