For some of us, the best auto insurance is the cheapest policy possible while others of us are seeking the best coverage options. Nobody wants to overpay for their insurance coverage but your circumstances, obligations, and budget will play a large role in discovering what your insurance plan offers you.

If you are a single person with a very old car you may not want to cover anything other than your legal obligations for liability. This means that should your car be in an accident, you won’t receive any funds for damages from your insurance company. You will simply be covered for the basic limits for damages that you cause to someone else’s car.

If you have a car that you are still making payments on, you will need to cover the car’s damages through your insurance. Technically, you can’t own the car until it has been completely paid off, so you have to make sure that the insurance can cover the damages caused in an accident.

Medical coverage through an auto policy is somewhat limited. If you have kids, a significant other, or someone that spends a lot of time in the car with you, your basic limited medical coverage stemming from an accident will make sure that everyone involved (including those from other cars) receive medical attention. Don’t rely on this coverage to become medical coverage for the long term.

You can also have your pet covered. This is a good option for someone who drives with their furry companion in the car regularly, especially if you can’t handle a hefty vet bill stemming from a car accident.

When you look at all the options and look at your lifestyle, you are often immediately drawn toward the features that you need and want. Finding a place in your budget for the relevant policy addendums is important. If you need things immediate replacement of your car after an accident, want to save money on your deductible over time, or you are considering the idea that you might prefer to get a percentage of your premium back there are programs that offer such things.

It has become easier to find the best auto insurance policy because most insurance companies are driving home good deals to remain competitive. Each company if offering something new, something different, and something that will set them apart. This is a good time to take advantage of these offers and set yourself up in a policy that will cover everything you need and doesn’t tax you with coverage that is useless for you.

In this article I will discuss the benefits of a little known but very important plan called a family income plan which is also known as family income benefit. I will explain how the plan works and further I will go into how this type of plan can benefit the average client looking for life insurance.

First of all it is important to understand the various needs for life insurance and therefore have a greater understanding of were exactly the likes of family income plans fit within good financial planning.

There is generally only a handful of reasons one would have life insurance. The obvious ones are family protection and loans or mortgage protection. Mortgage protection or loan is quite simple you have a liability of a certain amount of money, so best advice dictates that you should insure exactly that amount in the event of death, and if funds allow in the event of a critical illness. Family income benefit does not cater for mortgage or loan protection for reasons that will be later explained.

Family protection is where family income plans fit perfectly. Family protection is all about making sure that your family or your dependents are adequately taken care of financially in the event of your death. In order to suitably meet this need you invariably have to have a figure to insure, an amount of money that your dependents would need in order to maintain their standard of living in the event that the worst actually happens.

A lot of people tend to use their incomes as a good benchmark to work from when ascertaining what level of cover they actually need. The reason for this is during life you may support your family to the tune of 25,000 for example, so it is fair to say that in the event you die they would need 25,000 per annum in order to maintain their standard of living.

Before the likes of family income plans people only had lump sum insurance plans to to take out as protection. This meant people would have to work out what size of lump sum they needed if they wanted an annual benefit of 25,000. Due to the fact tat they would never know what future inflation or investment returns would be meant this was far from an exact science and again from a good financial planning point of view was a poor and risky way to work.

Along came family income benefit. In short this plan pays out the annual required benefit. So if you wanted 30,000 per annum you took the plan out with that level of sum assured and then if the worst happens the plan pays out 30,000 per annum.

The plan went a bit further to ensure that it did the job correctly, by including something called indexation. This meant that each year the value of the benefit actually increased to ensure that if and the when the worst actually happened the amount your loved ones would receive would be the right amount regardless of how high or low inflation had been. Furthermore once claimed it would continue to rise with inflation making sure that continued to maintain that value from the benefit.

So in summary if you are looking for family protection and it is a level of income you are looking to protect, which 99% of time it really should be, then family income benefit is generally the right plan for you. It will ensure you have adequate cover to protect your family in the event of your death and it will continue into the future with inflation protection as a result of the indexation benefit available as an option within the plan.

People in California can opt for group, individual or Medicare health insurance plans depending upon their eligibility and requirement. People may purchase Individual health insurance plans to cover them in case of any major medical expense. Some employers purchase Group health insurance plans for business employees to provide coverage for many people, as well as medical expenses for their families. Individual health insurance is more expensive than group health insurance. Employers pay group health insurance premiums, however, certain insurance schemes may require part contribution by employees.

Another type of health insurance plan is COBRA plan or Consolidated Omnibus Budget Reconciliation Act passed by congress in 1986. Cal-COBRA plan has similar provisions to those in federal COBRA. Some people may prefer this plan as it is cheaper than individual health insurance but has a higher premium than group health insurance plan. The COBRA plan includes certain former employees, retirees, spouses, former spouses, and dependent children as also temporary continuation of health coverage at group rates. Group policy obtained under Cal-COBRA may cover two to nineteen employees, covered on at least fifty percent of working days. Employers do not contribute towards premium of this plan and COBRA participants generally pay the entire premium by themselves.

Generally health insurance plans do not cover the entire cost of treatment. It contributes towards a share of the cost depending upon agreement. It is advisable to purchase a group health insurance plan that covers the whole family, as it proves to be cost effective in the long run.

In India, Unit Linked Insurance Policies (ULIPs) are insurance policies that combine risk coverage with investing in the stock/debt markets. In effect, they are designed to behave as normal insurance policies plus mutual funds.

An investor’s contribution to ULIPs gets invested in specific types of portfolios that he/she chooses. The policy typically pays back based on market returns on investments at the end of the insured period. Therefore, it forms an interesting savings instrument that can get good risk cover.

Features of ULIPs include:

1. Units allotted under ULIP schemes have Net Asset Values (NAV) declared regularly, like a mutual fund

2. Investors can invest across types of portfolios similar to mutual funds – growth equity, balanced, debt funds, etc. Investors can move across portfolios, typically at nominal costs

3. Investors can invest as a lump sum (single premium) or make premium payments on an annual, half-yearly, quarterly or monthly basis. Premium amounts can be changed over the course of ULIP’s life

4. Investments qualify under Section 80C of the Income Tax Act. Maturity proceeds from ULIPs are tax free. There are no long term capital gains tax and 10% short term capital gains tax on equity portfolios within ULIP. For debt funds, long term capital gains tax is 10% while short term is at the investor’s marginal tax rate.

5. However, charges charged by insurance companies can be quite confusing – therefore, investors should compare them with similar mutual funds to see if charges quoted are reasonable.

Despite their interesting structure and potential benefits, investors are better off clearly understanding portfolio types offered, performance of fund managers and expenses/fees before investing in ULIPs.

Insurance is the most common risk transfer technique in risk management.

There are 3 layers of insurance protection.

Firstly, the social layer, provided by national schemes. For Singapore, it will be the insurance from CPF like DPS, HPS, Medishield, Eldershild, CPF Life. They are usually the most basic required and premiums are most affordable. Secondly, the group layer. This is coverage provided by employers, unions or associations. Their premiums are also relatively affordable. However, they will no longer cover when leaving the organization and there is usually a age limit, resulting in a drop in coverage when it is most needed. Thirdly, the individual layer. This is purchased from insurers at the personal level to supplement the first two layers. Enhancing the coverage in scope and depth.

Classes of insurance:
- Life Insurance
- Investment-Linked Policy (ILP)
- Health Insurance
- Personal General Insurance

Life Insurance
The 3 main types of traditional life insurance are term, whole life and endowments. The most basic term policy is the Dependent Protection Scheme (DPS) by CPF. The premiums are the lowest in Singapore and can be paid by CPF OA. However, the limitation is that coverage is up to $46,000 and age 60. Another decreasing term policy by CPF is the Home Protection Scheme (HPS). A compulsory mortgage insurance for those using CPF to purchase their properties.

Investment-Linked Policy (ILP)
ILPs are mainly yearly renewable term insurance coupled with investment in unit trusts and the addition of more charges. They are subject to a different set of rulings, do not need trustees and fund selection is restricted to those within the insurer umbrella of funds. One advantage is the charges are transparent. However, they are numerous, tedious to compute and allows so much variation that it aims to confuse. They include:

(1) Initial sales charge – This is a one off charge factored into the bid-offer spread of the fund. Usually about 3 to 5% of the investment amount.
(2) Fund management fee – This is paid to the fund manager regardless of the performance of the fund. Usually 0.5 to 2% per annum and it is priced into (deducted from) the unit price.
(3) Benefit charge – The insurance coverage premium including all the riders are funded by deducting units. The premium is usually increasing based on the new age band.
(4) Policy fees – A flat monthly fee is charged regardless of the premium amount, to cover administrative expenses.
(5) Administrative charges – Additional fees paid for record keeping, transaction services, bank services, trustee services, and miscellaneous fees. Usually about 0.2 to 0.4% per annum and it is priced in as well.
(6) Fund switching charges – This will be charged when changing investment funds. Usually free for one switch per year.
(7) Premium holiday charges – This will be charged when the premium holiday feature is activated.
(8) Surrender charges – Charges imposed when surrendering the policy.
(9) Allocation – Amount of premiums used to purchase units is usually not 100% for the initial years. Example: 20% for 1st year; 40% for 2nd year; 60% for 3rd year; 80% for 4th year; before finally 100% from 5th year onwards.
Suitability of ILPs will be for those who have sufficient insurance cover and have excess budget which they would like to use to support their agents instead of investing in unit trusts directly.

Healthy Insurance

(1) MediShield and private shield plans
MediShield is the social insurance that provides the most basic cover. The disadvantages are that it has many sub limits for each of the covered expenses, expires at age 85 and provides coverage mainly for class B2/C wards. It is also subject to deductibles and co-insurance. It is paid by MediSave. Some employers may provide the second layer of cover. However, this cover will end when leaving the employer. Medical coverage is most needed in retirement, as a result, taking up a plan then will be subject to strict underwriting conditions (i.e. it will not be accepted or existing medical conditions will be excluded). The private shield plans allow coverage beyond age 85, but it needs to be taken before age 75. It usually does not have sub limits as it is “As Charged” coverage. Some insurers even cover the deductibles and co-insurance if a rider is purchased on top of the basic plan. The MOH website provides a comprehensive comparison of all the available private shield plans. The plan is most suitable for covering medical and ongoing treatments. With rising medical cost, this insurance is most necessary to avoid cost being an issue to seek the proper medical treatment.

(2) Critical illness
It provides a lump sum benefit if the insured is diagnosed to be suffering from one of the 30 selected illness or surgical procedure. The 30 illness are chosen from a list of illnesses by the Life Insurance Association of Singapore (LIA). Their definitions have all been standardized by the LIA. The 2 types of coverage are the acceleration and additional. The acceleration coverage shares the sum assured with the death/TPD benefit. The additional coverage is a separate cover on top of the basic sum assured, hence it can be higher than the basic sum. Variations include being issued as a stand-alone policy or a rider, having an early payout for the initial stages of the illness, and providing specific coverage for only one illness like cancer. It is most suitable to provide for treatment cost that may not be included in the HealthShield like expensive overseas or alternative/experimental treatment as well as additional care giving expenses incurred when critical illness is diagnosed.

(3) Disability income
It provides monthly income in the event the insured is unable to work as a result of an accident or illness.
The definition of disability varies in that the inability to work is confined to the insured’s own occupation, similar occupation or any occupation. It is most suitable to protect against the loss of income so as to maintain the living expenses in the event of disability and differs from TPD in that the definition is less stringent.

(4) Hospital cash
It provides a daily cash benefit for each day of hospitalization. It is usually limited to a specified number of days and a life time limit. It is most suitable for the self employed who will suffer income loss as a result of hospitalization.

(5) ElderShield and private plans
It provides a monthly benefit if the insured is unable to perform 3 out of the 6 activities of daily living (ADLs), namely feeding, bathing, toileting, dressing, mobility and transferring. ElderShield is the most basic level of coverage, providing $300 or $400 monthly for 60 or 72 months. It can be paid with MediSave. The private plans enhances these plans to provide higher benefits and longer duration of payout. It can be paid with MediSave up to a limit. It is most suitable to cover disability for those aged 40 and above. TPD coverage usually ends at age 60/65, but this provides life time coverage. And it is usually limited payment of premiums.

Personal General Insurance

(1) Packaged household
It provides coverage for the building and contents.
It is usually compulsory when a person takes up a housing loan.

(2) Valuable articles
It provides coverage for items with high monetary value like antiques, fine arts, etc.
It can be an itemized or blanket coverage.
It is usually for those who keep valuable items in their homes like art or antique collectors.

(3) Personal accident
It provides coverage for bodily injury caused by solely, directly, independent, external, violent and visible means.
It is most suitable for those with a budget constraint or are involved in blue collar work or are not able to obtain any of the traditional insurance due to medical underwriting restrictions.

(4) Motor
It is a compulsory insurance available as 3 types: Third party, Third party fire and theft (TPFT) and Comprehensive. Premiums will vary between insurers depending on the make, model, age of the car, driver’s age, occupation, experience. Note the amount of excess applicable and it is advisable to purchase NCD protection if NCD has accumulated to 50%.

Based on the risk management plan, those low frequency, high severity areas should be covered with the appropriate insurance. As insurance coverage and premiums vary between insurers, it will be prudent to get quotes from as many as possible. Insurance is usually a life long commitment, it will be wise to ensure the most value and suitable one is taken up.