Gotten my first job, what type of insurance should i look at?

Hi anon,

Congrats on graduating and stepping into the workforce! Now that you are working, you have to protect the most valuable thing you have: Your income earning ability.

There are a few things that can derail your ability to earn income, so you'll need to cover yourself for the following things:

1. Hospitalization plan. This covers any hospital bills and associated pre/post hospitalization costs. This would be from an integrated shield plan, with a rider to take care of the deductible/co-insurance. Depending on your budget, you can take a private hospital plan and downgrade later, or just go for Goverment A ward.

2. Income protection in the event of Critical Illness. This provides a sum of money for you to cover your day to day expenses and other out of pocket costs should you fall critically ill and are not able to work. Usually recommended to cover at least 5 years of expenses and an additional sum to cover out of pocket. This can be via a limited payment life plan, or a term plan, or a multipay plan, depending on your budget/needs. Many insurers offer such plans but not all plans are similar and you should take time to understand the differences, for example, scope of coverage, payout structure, premiums, etc.

3. Death coverage. This provides a lump sum of money should something happen to you. Not mandatory if you have no dependents or liabilities. Usually takes the form of a term plan. For the coverage amount, you could use a multiple such as 10 x of your current income, or calculate based on your current liabilities.

4. Personal Accident. For the minor stuff like TCM claims, etc.

Generally, you should not have to spend more than 10% of your income on coverage.

Now, about getting another life plan: This is actually very possible and common. When your parents got the life plan for you when you were young, the amount of coverage was probably more suited to 20-25 years ago; now that you are working, things have changed and whatever payout from that life plan is probably grossly insufficient for your needs now. In fact, some life plans may not even have CI cover, which means it is essentially only coverage for death and TPD.

Getting insured under a new life plan with CI means that you can take advantage of various changes over the years. For example, changes in mortality rates means that premiums have generally come down over the years. Furthermore, scope of coverage has improved, CI plans cover far more than the standard 37 CIs that you might have on the old plan. Also, most life plans now have a limited payment term which means you can continue to be covered in retirement without the worry of sustaining the premiums.

Paying monthly will be more expensive than paying quarterly, half yearly, or even yearly. Yearly would be the cheapest and can be around 2%-4% cheaper compared to the monthly mode.

Most cashback cards will award cash back for paying your insurance premium, if you are a mile chaser, please refer to https://milelion.com/2021/01/10/whats-the-best-...

However, most insurers do not accept credit card for the reneweal premiums.

Ultimately, you can work with an independent financial advisor who can provide multiple options and explain in detail what you will need to know about the types of insurance as well as the options from various insurers before you come to a decision, especially with respect to cost effectiveness as well as the minor differences between the plans.

You will want to be comfortable to share your fiinancial details with your advisor as that will be important for the advisor to consider your current situation before suggesting suitable solutions.

Firstly, I will suggest for you to have a complete understanding on your existing insurance policies. Thereupon, it gives us a clear picture on what we should do with the plan, and how the new plans will complement one another.

Healthcare

Assuming that you have no other insurance policies, the first priority should always be healthcare. The reason is simple - medical inflation hits 10% in 2019. Consequently, a single medical treatment could potentially wipe out all your savings. Therefore, it is always good to know the healthcare insurance policies available in the market and to evaluate whether you should enhance your coverage.

More Details:

Is MediShield Life enough in Singapore?

Integrated Shield Plan Singapore: A Starter's Guide

Life Insurance

After we have set up the basic foundation, the next step will be your life coverage. This is because you are the biggest asset that you own. Therefore, greater emphasis should be placed on protecting your wealth (before we grow it further).

Generally, most insurance policies in Singapore will cover for pre-mature Death, and Total & Permanent Disability. While optional, one of the crucial coverage to have will be (early) Critical Illness.

There are many options available in the market, thus take your time to learn more about it. Alternatively, speak with your insurance agent or choose an experienced consultant who is capable of guiding you through the process.

More Details:

What is a Term Insurance Policy?

What is a Participating Whole Life Insurance Policy?

Term vs Whole Life Insurance Singapore

How much insurance coverage should You have?

As a general rule,

10% to 20% of your annual income on healthcare insurance and life insurance

Basic Life Cover = 10 times your annual income

Critical Illness Coverage = 5 times your annual income

More Details:

Understanding Your Personal Cash Flow

Having mentioned that, this is a general guideline that may or may not work for you. The best way is always to have an in-depth understanding on your cashflow, current situation and future goals. It is only when we know you well enough, then it is appropriate to give you the best advice or suggestion that fits into your needs.

What if I have more than one life insurance policy?

If you have more than one life insurance policy, then each policy will issue a payout so long as you fulfil the claim criteria. As a matter of fact, just because you already have an existing life insurance policy doesn't automatically mean that you will be sufficiently covered - above is a generic guideline on how some consumers calculate their insurance gap.

As for the rest of your questions, e.g. mode of payment, credit card perks, I will suggest you work out the above first - it is more important to get the planning right. Thereafter, the rest will fall into place. This is because there is no fixed answer as well, e.g. some plans are cheaper when you pay it annually. Since we don't know which plans are suitable for you at this stage, it is pointless to go in depth.