6 MIN READ
You’ve heard it all before. Buying insurance is an act of responsibility, blah, blah
But while everyone knows they need insurance, most people aren’t clear on what type or how much they require.
That’s right: it’s possible to buy too much insurance, and end up wasting your money.
Here’s the real lowdown on how this insurance thing works:
What are the types of insurance you absolutely need?
In order of importance, these are the types of insurance you should have to survive in Singapore:
Critical illness coverage
1. Health insurance
Every Singaporean has basic health insurance, in the form of MediShield. Now, basic MediShield can cover most of your hospitalisation costs, if you stay in a public hospital, and in a C to B2 class ward.
Image Source: Ministry of Health
But if you go to a private hospital, and you elect to have a B1 or A class ward, MediShield probably won’t be enough to cover most of the expenses.
That’s where an Integrated Shield Plan (IP) comes in. This policy comes from a private insurer and complements your MediShield, so you have enough coverage to go for a better ward.
The good news is if you have an IP, you already have MediShield Life by default and there’s no duplicate coverage or double premium payment.
“But I’m not fancy, and I don’t need a nice ward.”
Fair enough, you might not need air-conditioning in your ward, but there are still advantages to getting an IP.
The first of this is your claims limit. With MediShield, your maximum health insurance claims are limited to SGD 100,000 per year. There are also claims limits on specific treatments. For example, chemotherapy treatments have a limit of SGD 3,000 per month, kidney dialysis has a limit of SGD 1,000, and so forth; you can find the complete list here.
Having an IP can extend these claims limits. For example, some IPs can extend your total claims limit per year to SGD 1 million. It’s pretty reassuring to know that your insurance isn’t going to run out, even if you suffer from something major like cancer (touch wood).
The second advantage to having an IP is that you can buy a rider. To put it simply, a rider is an add-on that lets you add coverage to your existing policy for an additional cost.
When you make a health insurance claim, there’s a co-pay involved. This is usually around 20 per cent of the bill. You need to pay for this first, before your health insurance pays the rest. If your hospital stay and surgery costs SGD 7,500, for example, you’d have to pay SGD 1,500, and your insurance will cover the rest. That’s not bad, but it’s still pretty painful.
If you have an IP however, you can buy a rider. This costs just a few hundred dollars a year, but it reduces your co-pay to just five per cent. Even better, having a rider can mean you get a cash bonus (hospital cash incentive) for staying in a lower ward.
If you haven’t got an IP yet, talk to a financial adviser. This is probably the one of the most important insurance policies you need.
2. Disability insurance
Disability insurance replaces a percentage of your income, if you’re unable to work. Those of you in physical professions, like professional dancers and yoga instructors should always have disability insurance.
The premiums for disability insurance rise depending on how much of your income you want to replace. In general, it’s advisable to buy enough coverage to replace 70 to 75 per cent of your income.
If you earn SGD 4,000 a month, for example, you should buy enough disability insurance to get SGD 2,800-3,000 per month.
Disability income isn’t immediate. It can come within two, three, or six months of your inability to work; this is called the deferment period. The shorter the deferment period, the higher the premiums.
3. Critical illness coverage
Critical illnesses give you a lump sum pay out, if you suffer an illness such as stroke, heart attack, cancer, and so forth – check the insurance policy to determine what kind of critical illness is covered (although most of them are largely similar).
There are two ways this can pay out. One type of critical illness coverage immediately pays out a lump sum, once you’re diagnosed. This is the type of policy we suggest you get.
The other type of policy only has a pay out when you get to a certain stage of an illness. Now we don’t know the difference between, say, an “intermediate” stroke and an “advanced” stroke – all we do know is we’d want a pay-out as soon as we get the freaking stroke.
The thing to consider here is how much of a pay-out you want. The bigger it is, the higher your premiums. Our advice? Ensure the pay-out is enough to cover at least five to seven years of your income.
Why such a big pay-out? Here’s a simple reason:
If you’ve been diagnosed with cancer, which do you prefer: several months to spend with your loved ones and focus on recovery, or continued morning meetings and budget reports?
4. Life insurance
Life insurance gives you a pay out (a sum assured) for death, and Total Permanent Disability (TPD). TPD generally covers situations such as being blinded, losing limbs, becoming wheelchair bound, etc. Remember to always check the terms and conditions of the insurance policy, to see how they define it.
As for death, the sum assured goes to your loved ones if you pass away. If you have young children, or parents who are dependent on you, this is important.
The size of the sum assured determines the premiums. As with point 4, aim for an amount that will replace your income for at least five to seven years. This will give you enough time to re-skill and find new income sources if you’re disabled, or for your family to recover from your loss.
(Note: life insurance may come with investment-type benefits (i.e. Investment-Linked Policies), such as annuities or cash bonuses. We’re not talking about those here, because this is strictly about insurance).
5. Personal accident plan
This provides a pay-out for unfortunate accidents, like if you break a leg while trekking. While there might be some ‘overlaps’ in coverage with your other plans, Personal Accident Plans can still be useful.
For example, going back to that broken leg: your health insurance may not pay out for the X-Ray scans, but your Personal Accident Plan might, which could save you a few hundred dollars. This one is a “get it if you can afford it” policy. The good news is that you usually can, as premiums are low at about SGD 20+ a month.
Frankly though, most people can get sufficient coverage from the other policies mentioned before, or even from their employer’s group insurance.
- Decide how long you need coverage. ...
- Calculate how much life insurance you need. ...
- Think about other objectives. ...
- Name a beneficiary. ...
- Talk with a trusted advisor.
There are, however, four types of insurance that most financial experts recommend we all have: life, health, auto, and long-term disability."What are the 4 major lines of insurance? ›
- Health and Disability.
- Health Insurance. Health insurance mitigates costs for illness, injuries, and accidents. ...
- Disability Insurance. ...
- Life Insurance. ...
- Long-Term Care Insurance. ...
- Automobile Insurance. ...
- Homeowners and Renters Insurance. ...
- Liability Insurance.
The five “P's” include premium, plan, providers, participation, and performance. Consider these five elements of benefits design and rank them by importance.What are 5 common types of insurance people have? ›
Home or property insurance, life insurance, disability insurance, health insurance, and automobile insurance are five types that everyone should have.What are the 6 major types of insurance? ›
- Property & casualty (P&C) insurance.
- Health insurance.
- Long-term disability insurance.
- Life insurance.
- Long-term care insurance.
- Identity theft insurance.
- The bottom line on essential insurance.
- Health insurance. It allows the insured to cover up medical expenses while visiting a doctor and other major costs usually involved during surgeries. ...
- Life insurance. ...
- Rental or property insurance.
- Auto Insurance. Driving without auto insurance is against the law in almost every state. ...
- Home Insurance. ...
- Renters Insurance. ...
- Umbrella Insurance. ...
- Life Insurance. ...
- Health Insurance. ...
- Disability Insurance. ...
- Long-Term Care Insurance.
Health insurance is arguably the most important type of insurance. A 2016 Kaiser Family Foundation/New York Times survey found that one in five people with medical bills filed for bankruptcy. With a stat like this, investing in health insurance can help you prevent a significant financial hardship.
- One: Life Insurance. ...
- Two: Disability Insurance. ...
- Three: Health Insurance. ...
- Four: House Insurance. ...
- Five: Car Insurance. ...
- Check your policies, check your life.
- Utmost Good Faith.
- Proximate Cause.
- Insurable Interest.
- Loss Minimization.
What are the 5 P's of Marketing? The 5 P's of Marketing – Product, Price, Promotion, Place, and People – are key marketing elements used to position a business strategically.What are the 5 P's to success? ›
- Positivity: A positive outlook in both your personal and professional life can have a major impact on your success. ...
- Proactiveness: Being proactive is also a trait of a successful professional. ...
- Preparedness: ...
- Promotion: ...
Why are the 5Ps of marketing management important? The 5Ps, Product, Price, Promotion, Place, and People, are a business strategy to help marketing efforts become more efficient by correctly determining target customers and creating a solid base to convert them into loyal customers.What are 5 factors that are used to determine the cost of insurance premiums? ›
Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.What are 5 life insurance uses? ›
- Income replacement for years of lost salary.
- Paying off your home mortgage.
- Paying off other debts, such as car loans, credit cards, and student loans.
- Providing funds for your kids' college education.
- Helping with other obligations, such as care for aging parents.
Term life insurance is the most popular type for a few reasons. First, it is affordable. Term life premiums are based on your age, health, and the amount of coverage you need.What are the main types of insurance? ›
- Health Insurance.
- Motor Insurance.
- Home Insurance.
- Fire Insurance.
- Travel Insurance.
There are two broad types of insurance: Life Insurance. General Insurance.
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Jonathan Lawson, an insurance agent for over 15 years, reminds you of the three P's of having insurance on a fixed budget: price, price and price.
- Provides Protection. Insurance coverage does reduce the impact of loss that one bears in perilous situations. ...
- Provides Certainty. Insurance coverage provides a feeling of assurance to the policyholders. ...
- Risk Sharing. ...
- Value of Risk. ...
- Capital Generation. ...
- Economic Growth. ...
- Saving Habits.
There are primarily seven different types of insurance policies when it comes to life insurance. These are: Term Plan - The death benefit from a term plan is only available for a specified period, for instance, 40 years from the date of policy purchase.What to look out for when buying insurance? ›
- Shop around. ...
- Only buy insurance to maintain your existing standard of living. ...
- Ask your insurance provider what the policy doesn't cover. ...
- Consider bundling several policies with one insurance carrier. ...
- Review your insurance needs on a yearly basis. ...
- Don't defer payments.
You'll want to consider several factors when calculating how much life insurance you need. These include your age, overall health, life expectancy, your income, your debts and your assets. If you've already built a sizable nest egg and you don't have much debt, you may not need as much coverage.What are the things to be considered before purchasing of life insurance policy? ›
Before purchasing a life insurance policy, check if you can afford to pay premiums for the entire policy term. If your insurance need is larger, it wouldn't make sense to go for a savings-cum-protection plan. A term insurance policy will suit you as it is cheaper and you will be able to afford the premium.What do I need to know before buying life insurance? ›
- Review Your Insurance Needs. ...
- Decide How Much Coverage You Need. ...
- Assess Your Current Life Insurance Policy. ...
- Compare The Different Kinds of Insurance Policies. ...
- Be Sure You Can Afford the Premium Payments.
Five factors can affect a plan's monthly premium: location, age, tobacco use, plan category, and whether the plan covers dependents. Notice: FYI Your health, medical history, or gender can't affect your premium.Which of the following is the most important factor to consider when acquiring life insurance? ›
The amount of coverage is one of the most important calculations. This can depend on your income, family size and total financial picture. Premiums are based on the type of policy and your age, overall health and other risks. The goal is to get a policy that aligns with both your needs and budget.What are 4 things you should look at when choosing an insurance plan? ›
- Type of Plan and Provider Network. Do the health care. ...
- Premiums. How much will you pay per month for coverage? ...
- Deductibles. What is the amount you must pay out of pocket before your coverage kicks in? ...
- Co-pay or Coinsurance. ...
- Coverage of Medicines.
There are many types of insurance available, but there are some which top the charts in terms of importance. Home or property insurance, life insurance, disability insurance, health insurance, and automobile insurance are five types that everyone should have.What are the 3 typical requirements in an insurance policy? ›
Common conditions in a policy include the requirement to file a proof of loss with the company, to protect property after a loss, and to cooperate during the company's investigation or defense of a liability lawsuit.