It seems a perpetual question on Singaporeans’ mind – How do I get sufficient insurance coverage without paying too much every month? Health care costs are definitely not cheap in Singapore, which explains the need to buy insurance here, especially for the lower income group where a single incident might be able to wipe out your entire life’s savings.
However, paying hundreds of dollars for insurance coverage may not be what you can afford as well, since there are more immediate needs to be taken care of – food, utility bills, mortgage/rent. So which kinds of insurance are most essential and can get you the coverage you need?
A life insurance policy pays out an agreed amount under certain circumstances, such as when the insured becomes permanently disabled or critically ill, if your policy provides for this, or payout a lump sum to your beneficiary when you are no longer around. This money is intended to help you meet your financial needs or those of your dependants if these events happen. Life insurance provides financial protection or coverage against these risks.
There is some life insurance that comes with a savings or investment components to better help one plan for retirement and investment purposes. These are known as endowment and investment-linked policies(ILPs). You can also get term insurance for similar type of protection without the endowment and investment components.
Health insurance helps to provide some financial assistance for an accident, illness or disability that may leave you with some financial loss. Other than incurring medical and hospitalisation costs, you may not be fit for work for awhile, so certain types of health insurance can help to provide some financial support during your recovery.
There are different health insurance policies to help you and your family cope with expenses at these times. Some of these types of insurance include medical expense insurance, hospital cash insurance, critical illness insurance and disability income insurance.
General insurance usually provides some financial help in the case of damage to your assts, such as car, house or your belongings. Some of these include motor insurance, home insurance and travel insurance.
You can obviously try to take on as much coverage as possible to protect yourself from any likely incidents that can happen, but that will incur a huge insurance bill every month. In order to work out what is essential for your needs and affordability, you’ll need to examine your life stage and figure out which insurance needs are at the top of your priorities.
You might be young and starting out to work after your studies, and getting an insurance might be the least of your concerns. But it is also exactly the ideal time to get some protection because premiums are cheaper when you are young, and because you might not have built up a pool of savings, you can do with the extra financial coverage in a unfortuntae event.
For this group of people, you might want to consider an integrated shield plan which can help to offset any potential hospitalization bill you may incur.
In your thirities, you start to have more responsibilities – building your own family, a home mortgage to pay, support for parents and you might start thinking about making longer term financial plans.
For those who are breadwinners in the family, getting insurance is especially crucial because your entire family depends on you. If an accident or health issue prohibits you from working, the entire financial support for your family may collapse. To protect yourself, you may want to take up a term insurance that provides pure protection without cash values.
Term insurance provides you with insurance protection for a fixed period of time, ranging from 5 to 40 years. This makes sense if you plan to provide for your dependants for a limited time, for example, until your child completes university or is financially self-reliant.
Term insurance pays the sum assured only upon the death of the insured or if the insured becomes totally and permanently disabled during this period. It is a cost-effective solution for those who do not need any savings or investment feature as they cost less than whole life and endowment insurance policies for the same level of coverage.
Those who are in their middle age can consider themselves most in need of insurance, if they haven’t bought any in their younger days. This is because you face financial pressures and risk from many aspects. On one hand, you need to ensure you have enough for retirement, your kids might be attending college and need you to foot the bills of his/her tuition, your parents may be getting old, and you enter an age where you need to be more vigilant about your health.
You’ll also need to ensure you keep your job in this ever-changing economy and to ensure you have some income support should you become unable to work.
Other than term insurance, you might want to take up additional coverage on health insurance. Some examples include hospital cash insurance that provides payout in the case that you are hospitalised and unable to work. A disability income insurance is also important for the breadwinner, giving you a monthly income when you can’t work. Lastly, you can also look into a critical illness insurance that pays out a lump sum to help with expenses in case of a major illness.
Taking up insurance can be tricky because you cannot foresee what can happen ahead. But taking a hard look at your priorities in life can help you section a small part of your salary to give you a peace of mind when you need it. If you are keen on taking up term/life insurance products, you can make use of Comparefirst, a portal started by a collaboration of government agencies to help consumers compare and find life insurance products more easily. It provides much information about these products and will help you understand what insurance suits you better.