I am in my mid 40s. I have life insurance 60k, term insurance 100k and Enhanced medishield. I have 800 to spare each month. Should I invest or buy more policies?

You have to consider your current and future life goals before deciding whether to buy more policies.

1) Current Insurance Coverage

• Is it sufficient to fund your liabilities, commitment, and debts?

• Is it sufficient to take care of your spouse and children for the years you are supposed to take care of them when we are still working and alive?

2) Retirement

• Is your current investment and wealth accumulation portfolio sufficient to fund your retirement expense (factoring in 3% general inflation)?

Hi Anon,

To know if you have enough coverage, there are usually 2 ways to go about it. The most straight forward way would be to use the following guideline;

10x your annual income for Death/ TPD

5x your annual income for Critical Illness

This something most advisors will use as it's the easiest way to calculate.

The other way would be to do a expense and obligation analysis, to ensure that you have enough coverage to settle those in the mentioned above circumstances. However in order for this to happen, it would be better to have a discussion with an advisor for sure. Also, based on what you mentioned, you are looking got an IFA (Independent Financial Advisor), you could keep a look out for those.

Hi anon,

Rather than look at it as your coverage for term and life insurance, I would instead look at it as such:

• Death/TPD coverage: Do I need it? If I don't have dependents or liabilities, then probably not. If I do, how much cover will I need? How much more do I need to cover the gap? Rules of thumb usually peg the amount of cover at 10 times annual income, or the amount needed to cancel your liabilities and provide for your dependents, whichever is higher.

• Critical Illness: I'll need this. How much do I have now? Is it enough, keeping in mind the rules of thumb for the amount of coverage. If not, how much more do I need to ensure a peace of mind in the event I am critically ill? Rules of thumb usually require 5 years of expenses at a miinimum with a additional sum for out of pocket costs.

• Medishield Life: Do I have at least an integrated shield plan and a rider? Regardless of whether it allows me to go to private hospitals or only restructured ones, this insurance is important

• Long Term Care: If you are a Singaporean Citizen or PR, then you should have Eldershield. But the coverage is not a lot. You could use your Medisave to get supplementary coverage.

Take a look at your policies and see which policy covers what. Just because one has a 100K term insurance, doesn't mean it will cover CI. It could only be death/TPD cover (which might be the case). If it has a rider provide accelerated CI cover, then I can consider that you have CI cover of $100K on the term plan. Similarly, a life insurance plan may not cover CI, depending on the policy. You need to understand what is covered, but if you have difficulty figuring out, you might need to speak to an advisor.

With the rules of thumb, and knowing what each policy covers (and doesn't cover), you will then be able to gauge your shortfall and decide if you need to insure yourself better, or you can move forward to invest for your retirement.

Lastly, an advisor who can distribute multiple company's products would be mostly from an IFA, such as myself.

Hi,

To make sure you have enough life insurance coverage, you should consider 4 things:

1. You should make sure you have enough to cover your living expenses. How much does it cost to maintain your lifestyle per month/year. What about your dependents? How long are you planning on supporting them for?

2. How many debts do you have? For instance, do you have a mortgage and car loan? You will need to add up all your debts to ensure they will be paid off.

3. Lump sum benefits: Will you need extra cash to cover funeral payments or do you want to donate a lump sum of cash to a beneficiary or charity?

4. What is the total of your current assets and other insurance schemes (in your case, the life and term insurance)? Use this figure to subtract from the first 3 points to see your coverage gap.

A budget of S$800 per month provides ample opportunity to top up coverage if you find that you have a gap. For instance, a simple Direct Purchase term life plan with S$400,000 of coverage that will cover you up to age 65 has an average cost between S$54-S$77 per month for a person in their mid-40's.