Do You Need Insurance After 65?
A discussion between a prospective client (“C”) and myself the advisor (“A”)
A: “Why are all your insurance plans term policies?”
C: “My financial planner told me that I don’t need insurance beyond certain age.”
A: “Do you agree with this advice?”
C: “Of course, and he also told me that term insurance is cheaper than whole-life insurance. Why would I want to pay extra for something I don’t need. Anyway, I don’t intend to leave anything to my children, I have already provided them with a good education. That’s much more than what I had.”
A: “Did you discuss the need for critical illness insurance after you retire.”
C: “Oh, he told me that critical illness insurance is a form of income replacement. I only need it until age 65. After that, all I need is comprehensive hospitalization insurance so I have upgraded my plans to cover all the way to private hospitals.”
A: “So, your plan is to self-insure after age 65?”
C: “What do you mean by self-insure?”
A: “Did your financial planner tell you what is not covered by hospitalization insurance?”
C: “Hmm…what do you mean? I’ve got the comprehensive one, even top-up extra cash to cover everything.”
A: “What about the costs that are not part of hospitalization?”
A: “Do you know of anyone who had been seriously ill and managed to recover?”
C: “Yes, a relative of mine.”
A: “What sickness was that?”
C: “Well, my uncle had cancer.”
A: “Do you know what happened?”
C: “Thank god he found out early and had the full works. Surgery, chemo, medication and all types of stuff. He recovered but it was tough.”
A: “Was his life the same after the diagnosis?”
C: “Of course not, the family did a lot of research and he started on some TCM supplements and installed an alkaline water dispenser at home. He’s much more careful about diet and my auntie was saying that she tries to buy organic food whenever possible. They also got a maid to help out around the house and takes taxi more often when going out as my uncle tires easily.”
A: “Is your uncle a wealthy man?”
C: “No, average like you and me.”
A: “How did he pay for these extras like tcm supplements, alkaline water, organic food, maid, taxi fares…etc?”
C: “Oh, he got 5 filial children and they all chip in. He’s ok lah.”
A: “How many children do you have?”
As financial planning professionals, people rely on our advice to make decisions that impacts them at moments where it really matters. We should not let our personal preferences affect our recommendations.
It is not uncommon to hear financial planners proclaim that term insurance is the best because it’s the cheapest. Yet, in many other important areas of our lives, we don’t use “cheapest” as the benchmark for “best”.
How many of us stay in the cheapest house we can buy, drive the cheapest car we can find or even eat at the cheapest restaurants on our birthdays?
Term insurance serves a specific purpose and is the “best” option if one has a financial need for a defined period of time. For example, a mortgage loan for 30 years or a newborn child whom you need to provide for the next 21 years.
However, term insurance cannot be the “best” way to insure just because we are not supposed to need insurance after a certain age. It shows a lack of appreciation for the practicalities of life.
I recently did a test for myself. I asked my mother how much insurance she would like to have if the government is giving it away for free. She is 74 years young, still running a small rojak store by herself and by all measurements, still relatively healthy for her age.
“What’s the maximum?”
“Pioneer Generation got extra or not”
“No lah! Just think of it as a PG extra already. One million is the max!”
“I’ll take one million.”
“But you are debt free and have no children to provide for. Why would you want any, let alone one million?”
“To make sure you and your sis will treat me well”
To understand why we need insurance beyond the age of 65, we have to ask those who are older than 65. In my next article, I will share some of the reasons people have about why they need and want insurance beyond retirement.
After all, isn’t whole-life insurance one of the best way to impact generations positively?
Article By Lee Meng Choe, FChFP