LCF Answers Readers' Question

Question 1
In my previous post on calculating total insurance needs, a reader remarked that by liquidating all Mr Lim's assets, it essentially means there is neither a house nor liquid cash for his family to stay and use after his death.

This is correct. Therefore, if Mr Lim does not want the house to be sold and wants his wife to still have liquid cash in the bank upon his demise, he should omit both his house market value and cash from total assets computation.

Therefore, total assets available to settle his current liabilities is now equivalent to $ (890k - 500k - 10k) = $ 380k.

His insurance needs to cover for the shortfall is now equivalent to $ (1210k - 380k) = $ 830k.

How to Evaluate Retirement Annuity Plan

Retirement planning is one of the often overlooked aspect in personal finance. By the time one realizes the significance of a retirement plan, he usually discovers that there are only a few years left to retirement age. The primary focus for the years which has passed by had been on children education fund and settlement of debts or mortgage.


In budget 2012, there is this new RM 3,000 tax relief (previously RM 1,000) on contributions to private retirement scheme and insurance annuity for 10 years. This tax relief shows that the government started to recognize the importance of insurance annuity as retirement income because lump sum retirement savings such as EPF, more often that not, gets exhausted too soon.

Of Credit Card Limits and Malaysian spending habits

Starting Jan 2012, Bank Negara will impose new rules to credit card usage. This is to manage the debt of credit cardholders earning RM36,000 and below per annum.

Below are the rules:

1. The maximum credit limit extended to a principal card holder in that category cannot exceed twice the holder's monthly income (RM3,000 x 2) per credit card issuer. 
2. They will only be allowed to be a principal card holder from a maximum of two credit card issuers. Combined credit limit will be capped at RM12,000.
3. They have 24 months to repay the outstanding balances on their cancelled credit cards, if they have more than 2 cards.

Insurance nominee or beneficiary?

As a general rule, all your assets will be frozen when you die. With or without a will, your assets will be used to pay off creditors' claim and outstanding taxes before the leftover is being distributed to your family.

I guess by now everyone knows that only insurance proceeds and EPF balance are the 2 types of funds which will be paid directly to your nominee or beneficiary upon one's demise. These are said to be protected from creditors' claim even though a person is declared bankrupt prior to his death.

One thing you notice is that the terms beneficiary and nominee are always being used interchangeably.

In the context of EPF, they are the same. Your nominee is your beneficiary.

In life and personal accident insurance context, however, they are NOT. The following info are quoted and simplified from Section 166 of the Insurance Act.

A Tale of Middle Class Millionaire

This is a pretty inspiring story for school teacher Andrew Hallam, a self-made millionaire investor in Singapore. Here's some of his simple personal finance principles which we all could relate to.