2018: What Are The Key Insurance Policies You Should Get in Singapore?
Insurance is your life’s GOALKEEPER – your last line of defence. If all else fails, you will need to count on your insurance to be there especially for financial woes. We get this question frequently in our close-knit community:
“What are the key insurance I really need?”
3 Worst Case Scenarios:
- You die, your dependents (e.g family, kids) inherit your debts, loans and lose a source of income
- Came down with a terminal illness (commonly Cancer, and get hospitalized often with expensive treatment sessions)
- You get into an accident (you don’t die but face expensive hospital bills and follow up treatment)
Insurance Is A Complicated Product? Let’s Make It Simple!
A lot of people believe that insurance is like a pain in the ass. I believe that is the case of mis-selling and over-selling with sales as a key driver. In reality, it should be focused on sufficient coverage for the right reasons at the lowest cost.
No Longer “Ownself check Ownself”
When you enter the working world, your financial planning friends will most likely approach you for coffee. I urge you to go ahead, and take this opportunity to learn from them, BUT do not buy immediately.
Read up beforehand or after and have your structured doubts to challenge their recommendations. This article serves as a simple guide and feel free to show this to them as a counter-check.
Editor’s note: We do not get any commissions from any of these recommendations hence this would probably be one of the most unbiased guides in Singapore.
We Suggest: A Quick 30 min Exercise
- Review your insurance policies (either by calling up your agent for a review, Google search)
- Look for these 2 key essential type of policies: A Health policy (hospitalisation & surgical, private hospital cover) and A Life policy (Understand if it’s a term or life)
- If you still need help, feel free to post it in our community where many have done so before
- Everything else is a bonus to have based on varying situation (The policy names may be fancy but their updated websites should clearly state which type of policy it is)
Disclaimer: Do note that all recommended benchmarks are not financial advice but rather the sole opinions of the writer who researched deeply about this.
The 5 Most Important Types Of Insurance Voted By Our Community
As seen above it’s clear that out of over 200 people who participated, more than 185 voted for health, followed by more than 80 on term life, whole life, disability and personal. Here is our breakdown based on the above distribution and let us understand why the community chose those options! You can also find out more about their comments here.
We also did an FB LIVE with Christopher, who is well versed in Nov 2017 to really bring forward some of these points again and share with you what is most important when buying 🙂
The next time your financial planning friends ask you out for coffee, just show them this table and use it as a guide for your discussion. If he/she starts asking you to look at investment components to mix into coverage, you should ask for the reasons behind that recommendation. In fact, with today’s technology, you can do much of these investments on your own online in a few clicks, starting with ETFs.
By keeping the investment component separate, here are the major positives:
- You are in control of your own finances (knowing what is happening etc.)
- You pay way less fees to more middlemen transacting the deals
- You have more flexibility to withdraw, or reallocate the funds with way less fees (low or no lock-in)
However, that being said, the path to learning to self-invest requires a lot more patience in learning, hard work and also risk appetite which most people may not be entirely committed to. So it’s really up to you if you are willing to commit the time and effort to do this.
Also, after posting this article, we got a huge surge of questions. Here are the top 4 questions that people normally have about insurance in Singapore.
Further Reading: More On Each Policy Type
Rank 1: Health insurance (ESSENTIAL)
- What: This covers the really expensive Hospital and surgical bills and outpatient care, usually this is an enhancement to Medishield Life, which is a government basic health plan which is for public hospitals up to B2 ward/service.
- Recommended Benchmark: Private Hospital (or at least public A). Reason because I have personally seen the differences in treatment from both private vs public hospitals and it’s quite a world of difference.
- Why it’s important: MOST IMPORTANT. This is the one that usually causes the most damage financially. Because you are neither dead nor 100% healthy. It can be very painful to survive using your own cash or have less than the best care for you. One cancer chemotherapy session can be $5-6k and a surgery can be anywhere between 15k to 40k for a private quality standard. If you need more on this you can my personal story here.
Rank 2: Life insurance (ESSENTIAL)
- Term Life: This is a purely coverage focused product, where all your monthly/yearly premiums go into coverage, so at the end of 65 years old, you are no longer covered and there is no cash component to this. This is what most savvy people recommend because they know how to use the excess cash saved to invest for better returns
- Whole Life: This is a mix of coverage product and savings component tied to it, where there is a cash value associated with your policy
- Investment Linked Product (ILP): This is a variant of the life policy where they mix in the investment component into coverage. Often with a long lock in period before seeing returns
- What: In case of death, your family gets paid the total sum assured
- Recommended Benchmark: 5 x your yearly income or your existing liabilities
- Why it’s important: Should increase when you have dependents or more liabilities (e.g loan, kids)
Rank 3: Critical Illness (RIDER)
- What: Usually designed as a rider (a fancy word for top up on your life policy) You get paid out a sum assured for a list of 37 critical illnesses when discovered by doctors
- Recommended Benchmark: Varies from policies and the payout is tied to life insurance
- Why it’s important: Good to have because the likelihood of cancer is 1 in 3 people. You can opt for also the early critical illness where you get paid out for earlier discovery to seek treatment (e.g stage 1 & 2)
Rank 4: Disability (RIDER)
- What: A monthly payout for income loss if unable to work
- Recommended Benchmark: >$3000/mth payout to match salary
- Why it’s important: Crucial if you are the sole breadwinner or entrepreneur and when you go down, at least there is a constant stream of income coming in for day-to-day expenses
Rank 5: Personal accident (GOOD ADD ON)
- What: Cover outpatient accidental medical expenses
- Recommended Benchmark: Payout based on accident expenses (e.g MRI, CT scan where you are not serious enough to get warded)
- Why it’s important: Generally, at quite an affordable price, you feel assured that if you sprain your leg or break an arm playing sports or activities you can claim for the expenses (Also, food poisoning, insect bites etc.) Also, check with your company, if you are in an MNC or SME they should usually have a group cover plan for such personal accident insurance.