Some people are lucky enough to be fully insured since young by their parents. For those that are not fully insured or not insured at all, ‘What insurance policies do you need in Singapore’ is a commonly asked question especially after one starts working and thinks about their future.
Worst case scenarios if you don’t have insurance
- You die and your debts will be passed on to your family/dependants and lose the source of income that you’ve been providing to them
- Contract a critical illness(commonly cancer) and pay for expensive treatments out of your pocket
- Get involved in an accident and pay for expensive hospital bills and follow-up treatments out of your pocket
Factors to consider when buying insurance
People sometimes get confused by many different insurance policies available in the market and, they sometimes end up buying insurance which they may not need. In fact, there are only 3 factors that you should account for when buying insurance:
- Adequate coverage
- Right reasons
- Lower cost
It’s important to get yourself adequately covered for the right reasons at the lowest cost.
Do your due diligence
If you get approached by your financial planning friends, you should go ahead and listen to their recommendations. Take this opportunity to learn and, check whether you really need what has been recommended to you, but do not buy immediately.
In addition, you should
- review the proposed policies (Google for reviews or talk to your agent)
- Look for 2 important policies
- Health policy for hospitalization (public or private) and surgery
- Life policy (Whole life or term)
- Everything else is just a bonus and the needs for it vary depending on individual circumstances
The 5 most essential types of insurance in Singapore voted by Seedly Community
|1||Health (H&S)||Hospital and surgical bills and outpatient care||Private hospital or Public A|
|2||Term/Whole Life||In case of death, your family gets the sum assured||5 x your yearly income or based on liabilities|
|3||Critical illness||Paid out a sum assured when discovered critical illness||Payout tied to life insurance|
|4||Disability||A monthly payout for income loss if unable to work||>$3,000 per month or based on existing income|
|5||Personal accident||Covers outpatient accidental medical expenses||Payout based on expenses incurred|
Further analysis on the most essential types of insurance in Singapore
Rank 1: Health insurance (ESSENTIAL)
What it does – Singapore being the most expensive city in the world, the hospital and surgical bills do not come cheap. The health insurance covers those expenses and it usually is an enhancement to Medishield Life, which is a basic healthcare plan provided by the government for Singaporeans for public hospitals up to B2 ward and service.
Recommended Benchmark – Private hospital or public A because the differences in the treatments and services provided by private and public hospitals are worlds apart and it is always better to opt for at least the public A coverage.
Why it’s important – This is the coverage that everybody MUST have because it has the highest impact on your finances once you are hospitalized. A cancer chemotherapy session can cost SGD 5,000 – 6,000 and a surgery can be anywhere between SGD 15,000 – 40,000.
Rank 2: Life insurance (ESSENTIAL)
There are 3 types of life insurance namely – Whole Life, Term Life and Investment Linked Product. If you would like to find out about the differences between Whole Life vs Term Life, check out this article.
Whole Life – Whole life insurance covers you till your death and there is a savings component tied to it as there is a cash value associated with your policy.
Term Life – A purely coverage product where all your premiums go into this monthly or yearly. This premium covers till the age of 65. However, there is no cash value associated to it. This is more suitable for investment-savvy people as they know how to invest excess cash saved for better returns.
Investment Linked Product (ILP) – There is an investment component tied to this policy and it often comes with a long lock-in period before you see your returns.
What it does – Your family/dependants get paid the total sum assured in case of your death.
Recommended Benchmark – 10 x your yearly income or existing liabilities
Why it’s important – If you have a lot of people depending on your income or you have a lot of liabilities, this is especially important as your death will leave them a huge financial burden when you are no longer around. It is also recommended to increase it when you have more liabilities or dependants.
Rank 3: Critical illness (RIDER)
Critical illness rider usually comes in two types: one that covers the early stage and, the other one that only covers the advanced stage.
What it does – Usually a rider (add-on) and you get paid out the sum assured for the list of 37 critical illnesses when discovered by doctors.
Recommended Benchmark – The sum assured varies for each policy and the payout is tied to life insurance.
Why it’s important – Good to have because you never know when you are going to have any type of critical illness and the probability of contracting cancer is 1 in 3 people. There is an option for early critical illness where you get paid out earlier to seek treatment for early discovery of critical illness.
Rank 4: Disability (RIDER)
What it does – You get a monthly payout for income loss in case you become disabled and cannot work anymore
Recommended Benchmark – Minimum SGD 3,000 per month or higher for those who have a higher income or more liabilities
Why it’s important – This is especially important if you are the sole breadwinner in the family. If you are unable to work due to disability, this will cover your day-to-day expenses for you and your family.
Rank 5: Personal accident (GOOD TO HAVE)
What it does – Cover outpatient medical expenses for accidents
Recommended Benchmark – This payout is based on accident expenses such as MRI scan and CT scan where your injury is not serious enough to be hospitalized.
Why it’s important – Personal accident plans are normally very affordable. In case of injuries such as leg sprain, or breaking an arm during an accident, you can claim for the expenses incurred for the treatment. Some companies also provide a group coverage for such personal accidents for their employees.
In a nutshell
The next time you are asked out for coffee by your financial planning friend, you can use this as a guide for your discussion. It’s always important to do your own due diligence before buying any policy to ensure that you are not over-insured or under-insured.