Key Insurance Policies You Should Get In Singapore
Insurance is your life’s goal keeper – your last line of defence. If all else fails, you will need to count on your insurance to be there especially for financial woes. An average working adult has critical illness cover of just $60,000 which is less than 20% the LIA recommendation of about $316,000. In addition, top 3 critical illness insurance provides coverage for cancer, heart attack and stroke, which make up 90% of all critical illness claims.
Why Do We Need Insurance?
Basically, it protects you from 3 Worst Case Scenarios:
You pass away prematurely and your dependents (e.g family, kids) inherit your debts and loans while losing a source of income
You come down with a terminal illness eg. cancer (most common) and get hospitalised often while having to foot the bill for expensive treatment sessions
You get into an accident and survive but face expensive hospital bills and follow up treatment
First, it’s best to narrow the types of agent you work with to those with a lot fewer clashes of interest. Next, identify areas of coverage that almost every working adult require, in order of priority:
Purpose: payment of hospital bills
While Medishield Life is compulsory for every Singapore citizen and permanent resident, it is necessarily a basic form of coverage to keep premiums relatively low. This means that the coverage is pegged to B2/C wards and there are various sublimits, which is why an integrated Shield plan is recommended to provide a more comprehensive coverage. I was always very against 100% coverage, and the regulators have since disallowed such riders, so most providers should now provide fairly sensible coverage vs premium ratios. This is your first priority of coverage to get before moving on to the others.
Disability Income Policy
Purpose: replacement of income while medically unfit to work
It remains an important part of one’s insurance coverage, and second only to hospitalisation coverage. Unless you have streams of passive income from rent, business, or a fairy godmother that will continue providing cashflow when you’re sick, it is essential to replace your income during your financially productive years.
Most Singaporeans are underinsured in this regard, and the fact that only three providers have such coverage exacerbates this problem.
Critical Illness & Death Coverage
Purpose for critical illness: provide a sum to cope with higher cost of living due to impariment Purpose for death: provide a sum to dependents for income replacement
The last in priority is what gets sold most often, unfortunately, due to the many, many variations it can be packaged in. There are ILPs, whole life plans, multiple payouts and more types than there are new iPhones this year.
Take my advice, stay clear from Investment Link Policies (ILPs), consider whole life policies and or term. It’s the only way you can get high amount of coverage with an affordable premium, and too often people try to get less whole life coverage to fit their budget and end up being underinsured.
Purpose for retirement where you receive decent income from insurer when you retired.
Let’s face it, retirement planning is never a fun topic. Beyond that, everyone would have a more urgent financial obligation that they need to prioritise. This is why many tend to neglect putting in place a plan.
However, the idea of working into your golden years can seem achievable. In fact more Singaporean seniors want to work into their 80s and 90s not only for income, but to keep mentally and physically active as well. Sure, there’s nothing to stop you from working your entire life. However, this does not exonerate you from planning for your retirement.
Good to haves
1. Critical illness and Death Coverage
Critical illness coverage can be more complex than life insurance coverage. For life insurance plans, a payout to your beneficiaries is triggered when you pass on or are left in a situation of total permanent disability (TPD). Some of the insurers offer a comprehensive early critical illness + life + total permanent disability policies.
2. CareShield supplement
This is quite no-brainer to get, if you are 30 and up, at least for up to $600 of premium because that can be paid for using your Medisave and does not require cash. Using your Medisave to protect any potential impact to your cash reserves is a prudent thing to do.