According to a 2016 survey by Prudential, 70% of Singaporeans are underinsured. Many do not know the required amount of insurance needed, and have an insufficient amount of coverage. Perhaps you have thoughts on increasing your financial security; here are 5 questions for your financial advisor when you are considering taking up an insurance plan:
How well am I currently covered?
This is a question that may be missed by some, either because they believe that their current insurance is sufficient, or because they are unaware of their needs. Although financial advisors are obligated to assess their clients’ needs and existing coverage, but a good analysis is determinant on the accuracy and the comprehensiveness of the information given by the clients. Hence, it would be beneficial to provide your cooperation.
What kind of insurance is it?
This seems like a duh question, but it is actually very important and many people do not clarify it. Under each category of insurance, there are usually sub-types that fulfill different objectives. For example, for life insurance, there are term, whole-life and endowment plans. In short, term plans are for those seeking temporary coverage and/or those that cannot afford permanent plans at the moment; whole-life plans covers the insured for life and comes with a cash value (savings element); and finally, endowment plans, which deliver a pay-out given the death of the insured in the given period or his/her survival after the stipulated maturity date, usually taken up to achieve a future financial goal.
Are the benefits guaranteed?
Some insurance plans come with non-guaranteed returns, such as bonuses and/or being investment-linked. In such cases, it would be wise to understand the structure of the benefits and its potential up and downside. In addition, it is vital to note that the values given under the surrender value table in the Benefits Illustration are projected values based on a given rate of return; and they are in no way guaranteed. However, such plans are attractive as investors associate higher risk with higher return.
How are benefits/pay-outs claimable?
Again, this seems to be an obvious question to ask, but the key lies in the details. Most insurance plans offer coverage for death, total and permanent disability (TPD) and critical illness (CI). But what exactly do they mean? TPD refers to the total and irrecoverable loss of sight in both eyes, or two limbs at or above the ankle or wrist, or one of each. The benefits for CI can only be claimed given that certain eligibility criteria for the covered CI specified by the insurer (which differs among different insurers) is met. It would be prudent to be sure of the requirements of your insurer.
What are the available riders for my plan?
Riders are attachments on the main insurance plan that provide different functions/benefits. Some standalone plans can be available as riders as well; and it would be more cost effective to purchase them as riders to an existing main plan than as a separate insurance. Even if you may not have the financial ability to afford the riders, you can inquire about the possibility of attaching them in the future. A side note to make would be that some riders cannot function independently without a main plan, thus you would have to consider cancellations carefully.
These are just some suggestions for you, and are not exhaustive. There are definitely more areas to delve into as different people have different needs and considerations; but what is common to all is that it is an important long-term financial obligation. To ensure that you are well planned out to manage it, why not try having Seedly to handle your finances?
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