Getting The Best Out of Insurance

In the second of our series on investments for seniors, Chamila Nagendran, Managing Director/CEO of Infinity Trust Wealth Advisors (PVT) Ltd. talks about the need to invest in an insurance policy. The insurance options available to senior citizens reduces with advancing age, it therefore makes sense to acquire cover as early as possible.

What are the Insurance policies available for seniors? For example after 50 is it possible to get medical or life cover. If not at what age would you consider getting insurance in order to reap the best out of the available policies?

Most of insurance companies prefer clients who are less than 60 years since there is a lesser risk of illness compared to seniors. However, many insurance companies do provide an insurance cover for seniors with a higher cost and after a health check up.

We need health insurance because we cannot predict what our medical bills will be. Given the high cost of healthcare, having a health cover protects us financially in the event of an unexpected serious illness or injury.

What should a senior look for in a medical cover?

  • Maximum age limit they could continue a health cover
  • Premium of the health cover compared to the benefits and limitations of the health cover
  • Claim procedures (is it a reimbursement or will they settle the full bill directly to the hospital)
  • Exclusions (such as will it cover dental surgeries)

Can a person integrate different policies together? If yes, then how is it beneficial to get more than one policy?

Yes one can integrate different policies and create a unique cover for oneself. Ever-so-often people integrate a life cover along with health cover. Most of the life covers are include an investment strategy to provide a lump sum amount after a long period of insurance.

Till what age do the medical policies provide cover? Are policies something you renew every year or are they valid for a couple of years? Also can you get lifetime cover?

Normally all medical insurance providers initially grant cover for a period of 12 months. Thereafter, we can renew the policy annually up-to the required number of years.

Does the premium increase with age?     

There are a number of factors that influence the annual increase in premiums. The main reasons though, are medical inflation and the increasing age of the insured person which increases the chance of illnesses or injuries.

How do deductibles normally work?

By having a deductible there will be a reduction in the premium payable by the member. A deductible will be applicable on an annual basis and depends on the claims made by the member.

Many people don’t have medical insurance. What are the best policies available to seniors in Sri Lanka internationally and locally? Is it a good idea to get international cover as opposed to getting only local cover?

When one gets international health cover, usually the member can get medical treatment locally as well as in hospitals located overseas, and the limit of cover is very vast and substantial. Local cover is applicable only for treatment in local hospitals and limits of cover are not very much in comparison. This is because there is a huge difference in the price of medical care in Sri Lanka and abroad.

If you are unable to get a cover due to medical reasons are there any other options available for seniors?

If an insurance provider declines a client’s application for cover there is unfortunately no other option available for a senior citizen to obtain medical cover.

At the time of cashing in your life policy, what are the options for re-investment?

Some prefer to reinvest their money into another insurance cover; however this could depend on person to person.

How does travel insurance work for young seniors and older seniors (75 and above)?

Travel cover can be obtained form the age of 18-70years.  Following options are available to prospective client.

Annual cover – The member can make any number of trips but in each trip minimum stay of 30 or 45 days should be adhere to.

Single trip cover – cover can be obtained only for a stay overseas for a particular number of days required by the member.

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Invest for a Secure Retirement

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What are the first things to consider when one wants to plan one’s retirement?

First thing to consider is savings savings savings! Someone who’s thinking of their retirement hopefully is still working. Best thing to do is start saving the excess between your income and expenditure. It’s best to have an idea of your retirement needs so you have a target as you save.

The traditional equation is Income – Expenses = Savings

But I recommend Income – Savings = Expenses

This way you decide how much you are going to save and manage expenditure accordingly.

Expert says you need about 70% of your pre-retirement income to maintain the same lifestyle.

Does retirement necessarily mean a dip in lifestyle options?

Not at all. If you start as early as possible and plan your retirement smartly, the compounding effect will make sure you get there without putting away large sums of money. However, if you haven’t started yet, it’s never too late to save, you will only have to bear the cost of delay. The longer one takes to plan, the more investments might be needed in order to achieve your objective. Retirement means you have more time to enjoy your remaining life and that’s why it’s important to plan way ahead when you are at a peak of your career and earning capacities.

Does a retirement plan vary hugely between a young retiree (about 60 years) and an older senior (70 years and above)?

The risk appetite a typical client will take varies according to age. There will be a variation in the planning process. It depends on the individual circumstances too.

What is an ideal investment mix for retirement which will give us an assured monthly income and  a decent standard of living? Would this result in depreciation of assets/capital over a period of time?

A typical mix for a retired senior would be 20% in to equity based investments to beat inflation where you don’t have to eat in to capital over time and 80% in to fixed income based instruments. This again can be broken in to 60% to be invested in top rated finance companies and 40% in to banks. Your 20% invested in equities will over time grow more than the remaining 80% of your fixed income and will prevent capital erosion.

This typical mix can change again according to individual circumstances.

Does such an investment plan allow easy liquidity for unexpected calamities?

The need for liquidity is the reason why majority of the funds on a typical senior citizen plan are placed in fixed income asset classes. Also when investing in fixed income components we recommend larger deposits divided in to smaller amounts. This way you don’t uplift the whole fixed asset base and will not be subjected to additional penalties.

Do banks give special rates for senior citizens?

Yes banks and finance companies give an additional 1% to senior citizens as compared to normal citizens. Also there is a government stipulated scheme from all banks where senior citizens get a higher rate of interest on deposits of up to Rs 1 million. (Soon to be increased to 1.5%)

The stock market has been very shaky in the past couple of years? Why would one want to invest in it?

Stock market returns are not like fixed income returns. One has to be able to invest in the share market with a long-term view and with no immediate need to liquidate. If you take past performance in Sri Lanka as well as globally, stock market returns have out performed fixed income returns in the long term. Being in share market is mandatory to beat inflation and to preserve wealth. However the status of the market when you enter in to it will significantly impact your investment plan. You need to have holding power and should be able to be there for the long run.

Are there any tax benefits for senior citizens?

There is no withholding tax for senior citizens on their savings and fixed income investments.

What is considered a long term period for an investment for a senior? How would that vary with the age of the investor and the amount they have to invest?

A maximum of 5 years is considered long term for a senior citizen. Investment planning is an ongoing process and more time in hand will give better returns with less risks, and with even small regular investments.

If an instrument gives very attractive interest rates should we lock in our money for a long period?

Yes, if the instrument is above the bench mark and the company providing it has solid financial records, I would say locking in for long term is advisable. Maximum term should be 5 years depending on the strength and stability of the institution.

Many pensioners have lost their life savings to fraudulent schemes. How does one protect their savings from such instruments?  Are ratings of these institutions available to the public?

 It is always advisable to seek professional advice from a reputed qualified independent financial advisor. Having a no obligation chat with one of them will provide you with a lot of options to consider. Rating reports are definitely available for the public however understanding the content might not be easy for everybody. One should never invest with financial institutions which are not registered with the Central Bank. A lot of fraud and misleading of public have been under taken by institutions which were not registered with Central Bank.

What is the role of an investment  manager and what are the benefits of employing one?

 Investment management involves the professional management of various financial securities and assets belonging to an investor for the purpose of earning maximum benefits. It involves setting investment objectives, formulating an investment plan and establishing of the portfolio strategy.

The typical role of an investment manager/advisor is to:

  • Discern the best strategy for investors,
  • Analyze status of finances and assist in asset allocations, monitor investments on an ongoing basis,
  • Help gain maximum benefits from investments,
  • Provide advice on investment areas and finally handle investor decisions and investments with the utmost discretion.

Every individual Interested in securing his or her future through investment, should consider employing an investment manager or advisor to have a planned approach to their future.

The Senior Station Investment Specialist

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Chamila Nagendran is the Managing Director/CEO of Infinity Trust Wealth Advisors (PVT) Ltd. She is a financial professional with over 20 years experience in the banking and finance sector in Sri Lanka, as well as in the United Kingdom.  She is a qualified independent financial advisor from Charted Institute of Securities and Investments London.

Over the last 7 years she has been engaged in client relationship management, providing a range of financial services. She is passionate about providing holistic financial advice so that her clients can achieve their financial goals and dreams. She says that working together with her clients and being part of their financial success gives her great pleasure, which keeps her motivated and encouraged as she takes on this very demanding yet rewarding career.

Chamila has considerable experience working with clients who want to manage their retirement investment portfolios. Through a series of frequently asked questions, she has shared with The Senior Station some useful pointers and tips which can help seniors in managing their financial assets.

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