1. Previously, when a policyholder denominated a spouse and/or childern as beneficiaries, a trust was automatically created in their favour. As a trust can only be amended with the approval of all the existing beneficiaries, this created difficult situations. Ex: a divorcee could not change the beneficiaries to his new wife without the consent of his ex-wife. Worse, the loss of benefits includes payout made for claims such as critical illness of total permanent disability.
2. The nominations were restricted to spouse and children.

The new system now offer you a choice between a trust nomination, and a revocable nomination. With the latter, you retain all of your living benefits, you can amend or revoke nominees as you see fit, and you can  nominate non family members. The only drawback is that your benefits are not protected against bankruptcy as they are with a trust.

A good piece of legislation.

If you have a life policy but did not nominate beneficiaries, you should do so ASAP. Your family / beneficiaries will be able to receive the payout from the insurance faster and easier.

If you are in this situation, I invite you to ask yourself the two following questions:

(1) does your company compensation and benefits scheme protection you as per your needs ? And I do not limit this question to healthcare only, life, income and disablement cover should also be reviewed…

(2) What does happen when you move on, or when you retire ? Can you keep your cover and benefits ?

Stripped down to its core, a life insurance provides your loved ones with cash after your death. This money can help your loved ones meet many important financial needs like your funeral costs, your children’s education, your spouse’s daily expenses and retirement plans, and much more. It gives ensures the people you care about the most will be provided for, even if you’re not there to care for them yourself.

The first question you need to ask yourself is whether you need a life insurance or not. To figure this out, you need to imagine the worst case scenario. What would happen to your loved one financially, were you to die tomorrow?

To help you answer this question, you will find here under a few common scenarios I come across regularly. So whether you’re in your 20s, a bit older, a bachelor, married , have children, or not, you will be able to make up your mind whether you need a life cover or not.

You’re Single
If you are single, you don’t really need a life insurance as no one depends on you financially. I only see three reasons for a single person to get a life insurance: (1) when you support your parents or siblings; (2) when you carry significant debt that you wouldn’t want to pass on to your family; (3) As you can guess, the best time to get insurance is when you don’t need it. And you need it least when you’re young, healthy and have a good family health history. So it can make sense to lock in coverage while you’re young and single, eliminating the risk of your not qualifying later in life because you’re older and not as healthy as you once were.

You’re a Couple
Many start thinking about getting a life cover when they get married. After all, once married you share everything with your spouse, including your finances. Therefore, it makes sense to protect your loved one should something happen to you, whether it is to make sure they can maintain their standard of life, or simply cover your debts (credit card, car loan, or mortgage). It also is a good idea to get a cover for the mother-to-be before she is pregnant as some companies don’t issue a policy to a woman during her pregnancy because of the potential health complications.

You’re a Family (Parents + Kids)
This is a no-brainer. Unless you are very wealthy, or your spouse family is, the only way to ensure your families well being is to get a life cover. And do not under-estimate the importance of getting a cover for your stay-at-home spouse. The replacement value of contributions such as child care, cooking, cleaning and other household activities are often underestimated. Think about your quality of life, or your partner’s, and get a cover for both of you.

You’re a Single Parent
If you don’t have a life cover as a single parents, go get one NOW! Your children’s financial future rest on your shoulder. What does happen if you’re not there anymore?

You’re Retired
Once retired, you don’t really need  a basic life cover *. Nevertheless, a life cover can still help your family as its proceeds are payable immediately, ensuring your beneficiaries can take care of funeral costs, and other debts without having to hastily liquidate your assets.

You’re a Small Business Owner
As a small business owner, you have one more reason to get a life cover. What would happen to your business if something happened to you tomorrow? Or maybe to your partner? Or a key employee? You got life cover options like a buy-sell agreement or a keyman insurance which can provide you with enough security and flexibility to help you get through these tough times.

At the end of the day, Life Insurance is the best way to ensure your loved ones well-being. Knowing when to get one, and why you get it, will help you define and optimize your estate planning. Now, did this post make you think about your current life cover? Do you plan to review it any time soon? If so, do you think I missed something here? Please feel free to react in the comment section here under.

* I am not discussing ILP cover and other schemes shielding your assets from the tax-man. I am focusing on simple, stripped down, life cover.

This tend should strengthen in 2009 thanks to the global stock market corrections and dramas we experienced in 2008. One of the good thing from the current melt-down is it is getting people to think.

After trying to position their portfolio so as to weather the markets, and building up their emergency funds and cash reserve to prepare for a tough 2009, many will think hard about their personal finance situation, and will realize their protection needs.

At the same time advisers may also start pushing protection products more, as hedge funds and offshore investments platform may suffer from the Madoff effect. One thing for sure, William Russell will push them to:

The fear of global recession has made many expatriates and their advisers focus more on protection products than investments and we are seeing strong growth in demand for income protection plans as well as life insurance and international PMI.

While it is likely that some international businesses with expatriate employees will rationalise their operations, the market is huge and unlike domestic PMI provision, which has become commoditised, the scope for market growth and increased product penetration remains considerable.
James Cooper – William Russell Sales Director

I received a lot more email asking for advices and insurance portfolio review over the past few weeks than I used to in 2008. A good sign in my opinion as expatriates are starting to open their eyes and realize their needs.

Of course, feel free to contact me should you have any question…

Emergency Fund

An emergency fund is cash you set aside in a dedicated account to cover your unanticipated emergencies. You need to set aside a minimum of 3-months-worth of basic living expenses. It is difficult to precisely define what an emergency fund encompasses. The better you get at dealing with your finances, the more your emergency definition becomes strict; hence, things that you see as an emergency today may not be in a few months time – funny how that works isn’t it?
An easy way to get yours started is to open a dedicated savings account for your fund. Once you create it, you just transfer a few dollars every month, and you have it. Try to only take money out for emergencies.

Insurance

The emergency fund should help you manage unanticipated emergencies. But sometimes you will faced with bigger surprises than you can cope with. For such times, you need to subscribe to insurance. The concept is similar to the emergency fund: you set money aside now to secure for potential difficult times. The difference is that the insurance system protects you against bigger risks by transferring them to a large group of subscribers. The essential ones are health, home and car insurances; I see life as a non essential one for non-parents.

I personally like to have a 6-month emergency fund, and only subscribe to insurance covering risks I know I won’t be able to cover on my own. This means I cover my laptop risks with my emergency fund and only subscribe to house, car and health insurances for now. What about you?