STI: They put 20% of wages in insurance

Apr 27, 2004

They put 20% of wages in insurance
by Rachel Lin

WHEN it comes to insurance, the Chia family has certainly got it covered.

About a fifth of the household's annual salary of $144,000 goes to paying insurance premiums.

Dr James Chia and his wife Jackie - who have three children - are not just enthusiastic holders of policies.

Dr Chia, 49, is involved in the financial planning industry, being the associate director of a financial planning firm, IPP Financial Advisers, and Mrs Chia, 47, has worked for insurance giant Prudential as an agent.

Yet when the Chias first ventured into the world of insurance, they made the classic mistakes that most newbies do.

This was back when they had both landed their first jobs, and knew little about insurance.

They bought a hotchpotch of policies recommended by friends who had become insurance agents and may not have reflected the Chias' real needs.

Dr Chia was a site engineer with MRT Corporation then. Mrs Chia was a credit administration officer with DBS Bank.

Of those early days, he said: 'We bought insurance from people who just happened to come along and talk to us. I got my whole-life plan from someone who bumped into me and convinced me to buy insurance from him. As for the Great Eastern policy, my friend had just become an insurance agent and asked me to be his first client. I thought, 'why not?' '

Acting on the advice of friends, the Chias bought a whole-life plan for about $60,000 with annual premiums of $1,200 and a Great Eastern endowment plan of $50,000 for their children at $1,800 a year.

'If you've got no insurance at all, buying plans like that can't hurt,' said Dr Chia.

The mistake they made was that the cover from these policies was insufficient: It amounted to about $100,000 in total which wouldn't have met the family's needs in the event the main breadwinner was incapacitated.

'Fortunately, we managed to review it early enough, in our late 30s, when our health was still good,' he said.

Dr Chia recalled: 'We didn't buy anything more for the next five to six years, until someone came to do financial planning for us. He did a proper job of showing how little cover we had, and in that session alone, I laid down almost $8,000 to top up my insurance. I bought even more when we both became involved with financial planning and insurance.'

He became a financial planner and Mrs Chia entered the insurance industry. It was then that their eyes were opened to just how vital a carefully thought-out insurance plan is.

'Now, we're aware of the benefits of insurance. It's the first step in any investment plan, that's how important it is,' said Dr Chia.

And the Chias have planned their coverage according to this maxim. They bought more plans to make up for the gap in coverage, but held on to their old policies.

The lion's share of the family's insurance covers Dr Chia as the principal breadwinner. His personal plans amount to a total of $2.5 million in life insurance, split equally between term and whole-life plans, $350,000 worth of critical illness cover and $70,000 in annual disability cover.

Insurance for loved ones in the event of your death can be a rather grim topic, but he said with a chuckle: 'Two-and-a-half million dollars, if invested properly, could give my wife an income of $10,000 a month lasting for 20 to 30 years - that should bring her a smile at my funeral.'

Mrs Chia herself has life insurance cover of $1 million and $200,000 in critical illness cover.

Both of them - busy these days running a multi-level marketing distribution business with Nu Skin Enterprises - also subscribe to group hospitalisation and surgery plans through Dr Chia's financial planning firm as well as ElderShield.

As for their three children, aged 17, 15 and 13, they are insured for $100,000 each in whole-life policies.

But Dr Chia said that this protection is 'incidental', and part of an insurance-linked savings plan rather than an instrument wholly devoted to covering the children.

Aside from personal cover, the family has also insured its property, a 5,600 sq ft freehold semi-detached house in Seletar Hills, for its replacement construction costs in a fire policy worth $570,000.

With all their various plans and policies, do the family's premium payments weigh heavily on their shoulders?

'We should be happy to pay them,' Dr Chia declared. 'It covers my family, and that's what is most important.'