007 Do you want to replace your insurance policy?

Do you want to replace your insurance policy?

A friend made an appointment to discuss her insurance policy. I happily agreed.

It was a raining afternoon. She was a little bit late due to it. We met in my discussion room. We can still hear the rain fall, heavier than before she came in.

She said an insurance agent reviewed her insurance policy and proposed a new one to replace the old one. The agent's arguments is she can lowered her monthly premium from RM300 to RM200 while increasing her medical card coverage. She also asked the agent is it a good idea to replace a new policy. Then the agent said she may keep both policies. She was confused does the new deal is as good as it sound

My questions to her was which of the benefits attracted her? She is actually unsure. To her, her on hand policy is suffice at the moment. She doesn't think she needs high life insurance coverage; maybe higher medical coverage is needed in view of the escalating medical costs.

So, I go on to analyze her needs and wants. Since she thinks higher medical coverage may be helpful, I lead her to untangle her mind.

I said I am strongly against replacing older policy with newer one. To me, this act is just too risky. I won't want myself or my friends or clients to land in a difficult situations. Earlier policy was bought and in force when policyholder is younger and healthier. Our health is expected to get weaker day by day as we grow older. We can't put ourselves at risk should some medical condition strike us during the policy changing period. And the cash value in policy is building up and can help us to cover the policy in future.

So, replacing policy is out of the question. Now, if she wants additional coverage, she needs to think of her budget. My questions was can she afford to service two policies. Servicing two policies mean increasing her monthly premium from RM300 to RM500. Apparently, her salary is just enough for her. So, servicing two policies is out of the question.

Then I asked in all the benefits, which she thinks is the most important? She thinks medical and perhaps accident coverage are the most coverage. I said why not we explore the possibilities having standalone policies to cover them.

She is only 30+ years old. Having a standalone medical card is so affordable. The annual premium is only RM700 to RM900 depending on the coverage. Of course, the premium after age 60 can be quite high. As an alternative, she can apply for deductible plan where the premium could be 50% cheaper. For this alternative, she needs to bear a certain amount before the balance amount be paid by the extra medical card. When her first medical card finally finished its lifetime limit, she can convert the second medical card to normal plan and is ready to take over full coverage.

As for the extra accident coverage, she can buy any accident plan offered by general insurer at much cheaper cost.

My mentor said the best insurance plan is the one in force. I am against replacing old policy with new. I am surprised such practice still exist in the industry. It was a few years ago when I was approached by an agent to do the same thing.

I am hopeful the financial planning industry can rise up to promote client focused services. I am hopeful financial planner can treat their clients exactly like their own friends and family. I hope I can be a planner that take care of my clients; and that my clients would appreciate such service and in turns help me to survive in this industry.

Oh, when we finished our discussion, the rain has already stopped. She did not buy anything from me.