Extended Warranty - Worth it?

Extended warranty is offered on many products these days and while some people found value in them, these plans are rarely a good deal.

Retailers are pushing extended warranties because it generates almost pure profit. It is a triple bet that that the product will breakdown, that the damage will be covered by the extended warranty and that the repair costs will be more than the extended warranty's cost. Considering that the value of electronic products depreciate exponentially these days, purchasing extended warranties will more frequently be money down the drain.

Where possible, charge your purchase to a credit card that extends the manufacturer's warranty and save the premium of the extended warranty. With the quality of products these days, by the time the gadget breaks down, enough will have been saved to replace the faulty product.

If an extended service plan is really percieved to be essential, read the fine print carefully and not rely on the salesperson's assurances. Extended warranty is being paid for to make your life easier, not harder. The terms will definitely be in the store's favour but you have to analyse if it truly benefits you too. When something does go wrong, the worst thing to find out is that you have paid for something that is utterly useless.

Singaporeans are Grossly Underinsured?

A recent study commissioned by the Life Insurance Association (LIA) has been completed with the conclusion that Singaporeans are grossly underinsured. While the methodology of such studies may stand up to scrutiny, I am always sceptical of studies that had been commissioned by the industry and subsequently arriving at findings that are in favour of the industry.

While the research found that the average Singapore adult may be underinsured by as much as $362,000 and LIA has stated that premiums of less than $4 a day to buy a term plan to cover this shortfall is possible, the reality of it is that at $4 a day for a 40-year male non-smoker, the premium of a 25-year term policy, the monthly premium is going to be around $120. An additional outlay of $120 per month is definitely something that will impact the budgeting of 40-year old male with financial commitments for the family.

If inflation, lifestyle changes and other variables are catered for, the proposed term policy coverage will be much much less in 26 year's time and additional policies will have to be purchased along the way to ensure the coverage keeps pace with inflation, lifestyle changes, etc. Insurance is a long term commitment, a long term financial planning and it is definitely necessary to keep in mind that life expectancy has been on the increase.

For the underinsured, it is perhaps more prudent to consider taking up term policies as an interim approach to address the gap in their coverage while taking the time to evaluate a proper whole life policy that holds some value that can be cashed out to fund retirement needs eventually.

Take time out to evaluate such long term commitments, trust no one but yourself to take care of your family and yourself. Question and make informed decisions.

AIA CARDWIZE

Identity theft is a growing problem and that problem gets more acute when much more of our transactions today are done cashlessly using credit cards.

AIA has this product named AIA CARDWIZE that is marketed as "keeping your identity safe and secured". The strength of CARDWIZE is that it softens, notice not eliminate, the blow of dealing with identity theft and related losses, covering against additional costs related to the loss, theft or damage of the residence and car keys, and items purchased using credit card.

At first look, this appears to be a good product. I had lost my belongings to theft before and while I did not lose much valuables, I ended up spending a bigger sum replacing my identification documents, locks and much time to conduct these administrative procedures. Such a product would have greatly cushioned the impact of that incident.

What exactly does the product offer?
Identity Theft ($10, 000)
Expenses incurred from resolving identity theft up to 12 months after a claim:

• Legal Expenses
• Lost Wages
• Loss from unauthorised account and payment to creditors

Fraudulent Charges ($5, 000)
Unauthorised charges that policyholder is responsible for on lost of stolen payment card, up to 12 hours prior to first reporting the event to payment card issuer(s).

ATM Assault and Robbery ($2, 000)

1. ATM Robbery - reimbursement for money withdrawn from any ATM around the world using payment card against a robbery that occurs within 15 minutes of the withdrawal.
2. Bodily Injury - reimbursement for reasonable emergency first aid charges for bodily injury incurred during covered ATM robbery.

Lost Wallet Coverage ($2, 000)

1. Replacement costs for a lost or stolen wallet and any payment cards and personal papers in it.
2. Application fees for replacement personal papers and/or payment cards.

Payment Card Purchase Protection ($5, 000)
Loss arising from items purchased entirely with payment card which were lost, stolen or accidentally damaged.

Keys Replacement Coverage ($2, 000)

1. Key Replacement - cost of replacing the keys of residence or vehicle if lost or stolen.
2. Break-in Replacement - cost of replacing your locks if your residence or vehicle is broken into.
3. Lock Out Reimbursement - cost of obtaining a locksmith if locked out of residence or vehicle due to loss or theft of keys.
4. Rental Car Reimbursement - cost of a rental car if vehicle keys are lost or stolen and cannot be replaced within 24 hours.

These policy benefits further come with the following notes:

• Policy will only cover amount not covered by other similar insurance policy, up to coverage limits specified.
• An excess of $100 applies per occurrence/claim.

There is a further special feature that I especially like. By registering existing financial accounts during signup, reporting the loss via a hotline can initiate the blocking of access to all financial accounts.

At a monthly premium of $58, is this product a good deal? Unless you are the type who frequently loses your belongings, it is not something worth considering.

No one pays annual subscriptions for credit cards these days. When the subscription is due, a call to the customer hotline usually is good enough to get the fees waived. When we are effectively paying nothing for our cards, does it make sense to pay to use it?

But isn't the coverage addressing important aspects such as identity theft, fraud, loss, etc? In all my years, I have only lost my wallet twice. Once when I was very young and once when I started working. Such a frequency of loss does not warrant a need for this protection. $58 per year and there is excess of $100 imposed! Even without losing my wallet, I will have made a loss purchasing this product.

But what about identity theft? It is indeed a growing problem but not one that has gone out of control locally. The policy gives up to 12 months after a claim but should identity theft occur, it could take much longer to resolve.

Based on my present lifestyle and risk profile, I do not think that this is a product worth buying. If you are the type who loses your stuff and loses it big time, then this product will be right for you. Remember to factor in the $100 excess and the annual premium of $58... Will you ever lose that much in a year to theft, etc?