15 Jan 2021
Should I get life insurance or critical illness insurance first, then add on the other after, or get both insurances together? I'm looking at term till 65 or 70 yo. What is a good sum assured? Any policy recommendations?
24yo female, 2 dependents (parents), annual salary probably about 32k-35k.
I'm going to work on the assumption that you have hospitalization coverage already. If not, that should be the priority.
You will then need to protect yourself and your income. This is where critical illness insurance comes in. This provides a sum of money for you to cover your expenses and other out of pocket costs should you fall critically ill and are not able to work. I usually recommend to cover at least 5 years of expenses and an additional sum to cover your out of pocket.
This is usually via a limited payment life plan, or a term plan, depending on your budget/needs. Based on the information you provided, you need to get at least around $150K CI cover. If you want early CI cover, a limited payment life plan with a multiplier should be cheaper than a term till 65/70 with the added benefit that your coverage still remains after 70.
I won't be giving any recommendations here, but I can say that you can speak to an independent financial advisor to get an idea of which insurers provide such plans as well as their features and cost. This will aid you in making a decision.
Next, for death/TPD cover, you'll also need this to provide a lump sum of money should something happen to you. For the coverage amount, you could use a multiple such as 10 x of your current income, or calculate based on your current liabilities (how long you think you need to support your parents for times how much you need).
This is most cost effective on a term plan. If we use 10 x annual income, you will need around $350K, but it is not that much more expensive to get $500K as there is a discount if you get a larger sum assured. However if you calculate based on liabilities, the amount could be more. It really depends, and I'd suggest you sit down and work things out with an advisor (and also to get quotes). As for the recommendations, term plans are pretty straight forward and practically similar, so the cheapest plan would be the best.
I'd recommend you get both together. It's very possible to cover hospitalization, CI and death/TPD with less than 10% of your income, especially more so now that you are young.
Good to be prioritizing getting a CI plan especially before August due to the change of definitions of CI industry-wide (counting down to 2 months) that will probably narrow CI definitions, affecting your claims experience. Sum assured can range from 3-5 months of annual income to cover for the years you might be unable to work.
Term insurance is a good choice, it's highly affordable for a high coverage compared to a Life plan, especially at your age. In general, a good sum assured will be sufficient to cover liabilities like mortgage loans etc. My client's coverage usually range from $500,000 to $1,000,000 so they can hedge against a liability and leave something behind. Do take note that you look out for insurance that allows you to nominate beneficiaries since you have dependents.
Whether you should get both or not now highly depends on your budget as well. Nevertheless, it's always best to settle the insurance side ASAP at a young age. You don't want to be in a position where a pre-existing condition sets in unexpectedly and affect your insurance applications in the future. Also, it tends to be cheaper the earlier you get it. Insurance should generally not take up more than 10% of your monthly income.
Will love to help you with recommendations if you need :)
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Now there are life insurance covering death, TPD and (early) CI. So you can buy one policy to cover ...
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