Mortgage Insurance (Home Protection Scheme)

The properties in Singapore are purchase with two types of ownership if there are more than one owner . The property will be either under joint tenancy or tenancy-in-common.

JTIn a joint tenancy, the owners have equal share of the property. The ownership of the property will be automatically passed on to the surviving co-owners regardless if a Will was made. Most HDB properties are under this arrangement.

Another type of ownership i.e.  Tenancy-in-common allows each owner to have a different share of the property and to leave his share of the property to any beneficiary upon his death. The beneficiary may receive his share in equal or different percentage. This type of ownership usually occurs in private properties and in certain situation, it can be for HDB flats, depending on the scheme that the flat is purchased.


In the above example, the Husband can Will his share of 35% to the wife, son and daughter at 20%, 10% and 5% respectively.  Therefore, the total share among them will be wife (45%), Son ( 20%) and daughter (35%). This distribution can cause an issue such as the wife even though holds the majority of the share at 45% but the total holdings of the children is 55%. If they children decides to sell this property, the wife can only agree to it.

We will discuss about the distribution issues in future and for now, there is a bigger problem with property ownership with outstanding loan. In the above situation, regardless of Joint Tenancy and Tenancy-in-common, if a mortgage insurance (or more commonly known as Home Protection Scheme for HDB) is not in place to cover the husband’s share, the beneficiaries will continue with the loan. If this property has an outstanding loan of $1mil, this amount will be re-structure with the surviving owner’s financial ability to loan base on their Total Debt Servicing Ratio(TDSR) . What this means is there can be a possibilty that the bank will not approve the same $1mil outstanding loan to the new owners due to a lower TDSR because of lower income. The owners will have to pay up $200,000 if the approved loan is at only $800,000. In the worse case scenario, the new owners may have to force-sale the property instead of inheriting it.

The most cost effective way to cover the outstanding loan is to have a mortgage insurance. Typically, an owner can have an individual policy to cover or a joint-life mortgage insurance to cover the first death of the owners.

Assuming a couple took an individual policy to cover their $1mil outstanding loan, the mortgage may look like this.



The total premiums will be $5555.55

In the event if the husband passes on, the $1mil will be paid out to the family so that they can offset the loan. The surviving owner can choose to terminate or continue with her own policy. If both pass on (e.g in a traffic accident), a total of $2mil will be paid.

Alternative, some will choose to use a joint-life mortgage insurance and the couple will buy a $1mil policy to cover the first death of the owner. Will this be cheaper or more expensive?

Here’s an example


In the event if the husband passes on, the $1mil will be paid out to the family so that they can offset the loan and the policy will be terminated. The premium is $5616.60

Which is a better option depends on individual’s situation. It is uncommon the total premium of 2 individual policies cost more than a joint-life policy. Do talk to your financial adviser to have a proper assessment of your risk. Our intention of purchasing a property is always to pass down an asset, do not leave behind unsettled debt.


Do you need a million dollar of coverage?

There was a period of time when a million dollar was a unreachable figure. I’m not saying that it is an amount that is easy to accumulate today but it is more realistic. Afterall, an average HDB flat can cost close to half a million and some flats were sold above the $1mil mark in some area.

So, do you need a million dollar cover and how much do one really need as a coverage amount? Here are some methods you can use to estimate your coverage required.

1) Multipliers of  Income Approach

download (1)This is a very traditional method of calculation is taking your annual income multiply it by 5 or 10.  That is to assume if premature death occurred now, your love ones will have 5 to 10 years of your income replacement to let them adjust to the lifestyle prior to the death. This method is the easiest but it has it flaws because in practical sense, the dependents may never have the same earning power as the sole breadwinner. For e.g. I have a client who is in management and earns nearly $20,000 per month. His wife have not been working since the birth of the first child more than 10 years ago. Will it be easy or possible for the housewife to get back to employment and earn $20,000 in the next 5-10 years? It can be tricky to decide how long the family will adjust to the lifestyle without the sole breadwinner’s income.


2) Need-based Approach

CaptureAn more commonsensical method is the need-based approach. It can be very comprehensive but because of the comprehensiveness, it can be a complicated process. This method takes into account the financial obligation an individual have for each dependent and the assumed inflation rate till that dependent becomes financially dependent. The individual’s assets will be categorised into cash, near-cash assets such as shares and unit trust which can be converted to cash within days assuming market valuations are not an issue. However, assets such as properties will take months to be convert into cash. The properties can be further categorised into stay-in or investment property. For e.g. if an individual own only a property which the family is staying currently, it is unlikely the dependents will sell it else they will lose the roof over their heads. But if the dependent have another property, the dependent can consider selling it to have more cash on hand if needed.

As mentioned, this method is very commonsensical and we can see it using this simple case study.

An individual has a wife, a son age 5 and a daughter age 4. The wife is financially independent on him and he provides $500/mth to each child. He wants to provide the children till they are age 21. We can use the following to calculate the amount of coverage he need.

(Age of child’s financial independence  – current age of child) x $500 x 12

For the son, it will be 

(21 – 5) x $500 x 12 =$96,000

For the daughter, it will be

(21 – 4) x $500 x 12 = $102,000

The total amount of coverage required for him will be $198,000. 

Do note in an actual planning, a financial advisor will take into consider that inflation rate to ensure the $500/mth is in line with the cost of living.

3) Income Protection Approach

 c95b3987f397973cd66558ff419555dc--make-money-today-make-more-money (1)One of the easiest is to look at the potential income a person can earn till his retirement. The retirement age can be 50,55,60,65 or even beyond that. This method is similar to how workman compensation or a court decide on a disability or death compensation.  The disadvantage is it is difficult to assume the increment rate. The amount can be derived using the following

(Retirement age – Current Age) x Current Income

However, in a real life, a person’s income will increase over the years because of his experience or promotion and we have to take into account the salary increment over the years. The amount after taking into account the increment can be compute using a financial calculator

PMT= Annual income

Ir= Assumed increment annually 

np = No. of  working years (i.e. Retirement age –  Current age)

Click “FV”. The figure shown on FV is the potential income one stands to earn.

Assuming the retirement age is 55, a person with the below income at different age will generate $1,000,000 of income assuming there is a 3% increment annually.


What the chart above means is if a person is age 25 years and earns a minimum of $21,020 annually, he should protect his loss of income of $1,000,000 that is potentially in the bank if nothing goes wrong.

Please note the 3 methods of calculation are meant to be informative only. For a proper assessment, please speak to a financial adviser.






Love, Hate feeling in cheque.

Many people reject a career as a financial adviser because they think it is a difficult sales job. Unlike someone who is selling a dress which a consumer can immediately see how good she looks in it or someone selling a weight reduction pills which a consumer can see the effect in week or months, financial products can be very intangible.

The effect of a financial adviser’s proposal will be felt by the client only in years to come when the client manage to retire comfortably. In some cases, a financial adviser’s proposal may be tested much earlier than he wished…. that’s when a claim arises.

20170804_172735_mh1501838966531(One of the cheques made out to a client.)

As usual, mixed feeling when we deliver cheques to clients. On one hand, I know what I have been doing really help the client. To know the client can have a peace of mind and not to worry about their medical cost as well as loss of income due to sickness is fulfilling. On the other hand, we are sad that clients have suffered.

To all the financial advisers out there, keep up the noble work despite the rejections that you may had faced.


Coverage for diabetics

AIA Singapore had launched, AIA Diabetes Care, a first-in-market critical illness plan tailored specifically to the needs of patients aged 30 to 65 and diagnosed with Type II diabetics and pre-diabetics  .

It is challenging for diabetics to purchase additional insurance cover as the insurance applications are often rejected, or the insurance cover is often subject to exclusion, or an extra premium is loaded. Instead of the usual long medical questionnaires, AIA Singapore made the process of application easy for the applicants with just 5 simple questions.

AIA Diabetes Care provides coverage for key diabetes-related conditions, ensuring you have the financial support you need in case the unexpected occurs.You have the option to cover against Major and Early/Intermediate Stage Cancer.

The 5 key diabetes-related conditions covered in the policy are

download        Blindness

Heart bypass       Coronary Artery By-pass Surgery

Heart attackHeart Attack of Specified Severity

kidney      Kidney Failure

stroke       Stroke

For more details on AIA Diabetes Care, please contact me via the contact form below.

Enjoy 10% discount off first-year annual premium for applications before 31st May 2017.


Comparison of Endowment policies

Endowment policies are commonly known as “Saving plans”. The main objective of getting an endowment policy is to accumulate a sum of money at the end of a period of time. For e.g. to provide a education when the child gets into university or to create a retirement fund at age 55.  While endowment policy is not the only way to achieve those financial goals, it is still a good method for those who are risk averse.

An endowment plan consist of a death benefit but that is usually not the main concern. Most will look into the guaranteed returns or total returns. It can be difficult to compare a plan with another these days due to the different features. For a 15 year saving plan, one company may require the policyholder to pay for the full 15 years while another may require you to pay for as short as 1 year, 3 years or just 10 years in what we called as a “limited-pay endowment policy”.

This is a case study of my client who have the following financial objective.

  1. An endowment plan to mature in 15 years time
  2. Expect about $70,000 in maturity amount.

A typical comparison of endowment plans starts with the plans that are able to achieve the client’s financial goal. In this case, there were a total of 8 plans from various companies.

Table 1

Those highlighted were the “best” in their respective feature. The premiums used above were inclusive of any riders included. I prefer to use this premium instead of the basic premium because it is the actual amount paid and it should be used as a reference to the returns. However, other financial advisors may just use the basic premium and exclude any riders or premium loadings.

It can be difficult to compare since the premium, premium term and returns all varies from one plan from another. So, a more accurate way is to compute the internal rate of returns which are the percentage illustrated on the yield table.

It can be rather confusing for a client to make a decision if they have to consider all 8 plans so the plans are usually presented after filtering out the not so ideal plans as shown below.


Table 2

From the above, the plans will be explained to the clients in detail and together with the comparison table, it will be easier for the client to make an informed decision.

A client with a budget constraint or concern with death benefit may choose plan 3 that has the lowest premium and highest coverage amount although it may not be the best option.

For someone who is extremely low risk taker may decide to take up Plan 1 for the highest guaranteed yield. What this means is in the worst case scenario that the insurer did not pay any bonus for the next 15 years, the principle amount is not only guaranteed but you still get a yield of 0.76% per annum.

If the client is very optimistic of the market or the insurance company, he may decide to look at either Plan 1 or 6 since they have the highest yield base on 3.25% and 4.75% projection respectively.

There is no hard and fast rule to suggest one should choose a particular plan. It all depends on an individual’s personal choice. My role as a Independent Financial Advisor is to provide an objective view so that the client have a clear answer to his financial goals.







Insurance industry in 2016

2016 was a challenging year for the insurance industry. Other than the economical changes that affected the financial sector, FinTech became more common to consumers and they have more choices when it comes to buying an insurance policy. There were several regulatory changes too. So, how did the insurance industry ended in 2016?

According to reports from Life Insurance Association(LIA), the total new business underwritten rose 10% to SGD3.29bn  in the year 2016 from 2015. Out of this amount, SGD 2.26bn were from annual premium products .

Therewas a minor shift in distribution channel of insurance policies as well.


Policies extend benefits to cover Zika Virus


The number of cases for Zika Virus in Singapore have increase to more than 300 in less than a month since Patient Zero was identified. The preventive measures advised by NEA is the most effective way to minimise the risk of becoming the next Zika virus patient.

Insurance companies have also taken the initiative to extend the benefits of some plans to cover Zika virus at no extra cost. The following are the policies that cover Zika virus at the moment. I will update the list accordingly.

Personal Accident 

Juvenile Personal Accident 

Travel Insurance

Home Insurance

Maternity Plan

Medical Plans


I will update the list when more companies include Zika virus in the benefits. For more information, please contact me by submitting the form below.

By submitting this form, you agree that Avallis Financial may collect, use and disclose your personal data, as provided in this entry form, for the following purposes in accordance with the Personal Data Protection Act 2012 :

(a) to contact you for the purpose of the reply to your queries.

Selection of products via the intangible way.

My colleagues and myself carry almost 95% of the life insurance, general insurance and unit trust available to the retail market.
There are reasons why although a product from one company may look cheaper n better but we choose not to recommend it especially for general insurance such as travel insurance or personal accident plans. I dare say commission is usually not the main reason cos the commission across companies are the same and it’s peanuts regardless what we choose.
One main reason is the ease of claims or the ease to speak to a human being after-sales service. As a financial adviser, our job do not end when you buy. On the contrary, our job starts when you buy because that’s why a claim is likely to happen. Neither the client nor financial adviser likes to make a claim from the minor issues such as travel delay to a major one such as death claim. As a financial advisers, we super-duper hate making claims cos the client is making one claim but we are assisting to make multiple claims from different clients. We really appreciate a company that pays out claims without asking too many questions. Once, a claim officer asked questions to & fro 6 email correspondences asking silly questions over a claim of $500 despite providing them with all document necessary for claims while another claim of same nature with another company made at the same time had paid out a week earlier!  My 7th email to them was to tell them if they cannot afford to pay, just close the file and don’t pay. As these insurance companies are still our partners at the end of the day, we refrain from speaking bad about them and the best we can do is not to recommend that company’s product.
Recently, I did a review for a long time friend and suggest a change of personal accident from Company A to B. The friend decided to discuss with his insurance agent from Company A who sold him the plan and later told me he will stick with it. I asked him why and the reply was ” The agent said Company A is easier to claim.” My reply was,” I am able to do both Company A & B on top of many others. I had claim from both company A, B & the few others to know who is easier to claim. Have your insurance agent tried to claim from Company B before?? If not, how is he suppose to know Company A is easier?” I could had counter-proposed to say I am able to sell Company A’s product too. Why not place it under me but I choose not to cos I don’t deal with difficult claims. I leave the choice to him.

I trust my fellow Independent Financial Advisors to do the same as me cos we have the choice to choose the better solution for our clients.

CPF Medishield Life

Officially certified to advice on matters and products concerning CPF Medishield Life.
Feel free to ask me if you need any advice.


Medishield Life

One of the common question my client asked is should they terminate their private integrated shield plan once CPF Medishield Life starts in later part of 2015. They had read in some articles that they should not terminate while some suggest they should. I cannot comment what is the best action for an individual but let us go through what’s in for us before we make an informed decision.

medical-pillFirst, nothing much in procedure had changed from CPF Medishield to CPF Medishield Life. At the moment, if you are paying for a private integrated shield plan, a portion of the premium that is deducted from your CPF Medisave account goes to the private insurer and a portion goes to CPF Medishield. For example, Mr. A purchased an NTUC Enhanced Incomeshield “Preferred” plan and the annual premium payable for his age of 30 is $244. The premium for CPF Medishield is $66. Therefore, the amount of $244 will be deducted from Mr. A’s CPF Account. CPF will take $66 and NTUC Income will take the balance of $178.  These are transparent to the policy holder and it’s all settled behind the scene. There are some wrong information that you have to pay for both plans i.e. $244+$66. Likewise, when a claim arises, the claims are paid by both CPF Medishield and Private Integrated Shield plans. This system will work the same when CPF Medishield Life kicks in so don’t worry about paying extra premium.

Next, I must stress that CPF Medishield Life is a vast improvement from the current Medishield. 

In additional to the enhancement, one of the best improvement must be CPF Medishield Life provide coverage for pre-existing conditions.

Despite the increase in annual limits from $70,000 to $100,000 which is a more reasonable amount considering the medical cost in Singapore today, we need to look at the item limit. This is the maximum amount you can claim for respective items. For example, based on the ward charges posted on SGH website, it cost S$428/day for a Standard Ward Class A1 which is commonly known as a Single-bedded room. For the same ward type in Raffles Hospital, it cost $588/day. The “ward limit” for CPF Medishield Life is $700/day so you can claim the full amount regardless the stay is in SGH or Raffles Hospital.

Now, let us look at the limit for surgical procedure.  We use a case of Appendix surgery and we shall use the 50th percentile for discussion purpose. (Source:

A 3 days treatment in Ward A at SGH will cost about $6,907. If we less of the 3 days of stay which cost $428/day, that means the surgical procedure will cost around $5,623. Let us assume 50% goes to doctor’s fees, lab fees and other miscellaneous cost, the actual cost of surgery will be around $2,811.

The same treatment will take an average of 2 days in Raffles Hospital and if we use the same assumption as above, the estimated surgery cost will be $7978.

The surgical procedure limit is maximum of $2,000. What this means to you is he excess of $2,000 is not claimable. In the case given above, $811 and $5,978 needs to be pay from your own pocket if you had stay in SGH & Raffles Hospital respectively.

In order to enjoy subsidise from the government which can be as much as 80%, most will choose to stay in a lower ward. However, does this help? To a certain extend, it may….
It may also be of an interest to know that mean testing for medical subsidies had taken effect on 1st Jan 2009. This is to Below is a chart of how it works.

Ave. Monthly Income

Of Patient

Class C Subsidy (Citizens) Class B2 Subsidy (Citizens) Class C Subsidy (Permanent Residents) Class B2 Subsidy (Permanent Residents)
3,200 and below 80% 65% 70% 55%
$3,201 – $3,350 79% 64% 69% 54%
$3,351 – $3,500 78% 63% 68% 53%
$3,501 – $3,650 77% 62% 67% 52%
$3,651 – $3,800 76% 61% 66% 51%
$3,801 – $3,950 75% 60% 65% 50%
$3,951 – $4,100 74% 59% 64% 49%
$4,101 – $4,250 73% 58% 63% 48%
$4,251 – $4,400 72% 57% 62% 47%
$4,401 – $4,550 71% 56% 61% 46%
$4,551 – $4,700 70% 55% 60% 45%
$4,701 – $4,850 69% 54% 59% 44%
$4,851 – $5,000 68% 53% 58% 43%
$5,001 – $5,100 67% 52% 57% 42%
$5,101 – $5,200 66% 51% 56% 41%
$5,201 and above 65% 50% 55% 40%

Let us look back at the same Appendix surgery in Tan Tock Seng Hospital and assume the earning of Mr. A is $3,500/mth and Mr. B is $5,000/mth. It will cost $1,288 for both but they will receive different subsidy.

Patient Subsidy How much patient needs to pay?
Mr. A 78% x $1,288


$1,288- $1,004.64


Mr. B 68% x $1,288


$1,288 – $875.84


Mr. B will have to pay more as he is a higher income earner than Mr. A. This might make Mr.B stay in a higher ward since he is going to pay more anyway. With these in mind and knowing CPF Medishield or Medishield Life is intent for Class B2/C wards of public hospital, you have to decide if Medishield Life will be sufficient for you and your family members or private integrated shield is a better option.

Always speak to your financial advisor if in doubt.