Asked on 25 Jul 2020
As a start, 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.
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.
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
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.
In my personal opinion based on importance, it would be as follows;
1) Integrated Shield Plan - This is a policy that provides reimbursement for hospitalisation bills. As medical costs are on an upward trend, we definitely want this coverage to ensure our income is protected in the event of hospitalisation. Do note that there are 2 kinds of plans you can consider, 1 for where you can choose to be warded in both private and public healthcare and 2 where you can only choose to be warded in public healthcare, but you can choose to stay up to a Class A ward if you want to. Do note that with the current regulations, you will only be reimbursed up to 95% of the bills as MOH advised a co-insurance component so that we can also take personal responsibility for our healthcare.
2) Personal Accident Plan - This plan provides Death, Total Permanent Disability and Partial Disability in the event of an accident. This also provides reimbursement if you were to visit a GP due to an accident like a cut or sprain. Some insurers would also allow claims for visit to TCM for treatment for injuries sustained due to accident as well. Certain infectious diseases would also be covered like Dengue and Hand, Foot & Mouth Disease as well.
The 2 plans I just mentioned are definitely affordable and should be looked into first if you have no coverage at the moment.
3) A Whole Life Plan - Yes, a whole life plan is one that provides you with coverage against Death, Total Permanent Disability, Critical Illness and even Early Stage Critical Illness for the whole of life, thus the name of the plan. This is definitely something you should have and it's ideal to use this plan to provide coverage against Critical Illness for our lifetime as Critical Illness can occur at any point in life. How much to be insured?
10x your annual income for Death & Total Permanent Disability
5x your annual income for Critical Illness
2-3x your annual income for Early Stage Critical Illness
Also for most whole life plans now they have a limited pay option, meaning you pay the premiums for a fixed period and after that you are covered for life.
Once you have all those in place, I think you can add additional coverage as needed by getting a term insurance to enhance coverage during your working, active years prior to retirement as actually we do have a huge potential earnings during this period actually.
Do reach out if you have further queries
Here's the insurance generally people will need:
1) Health insurance (relatively affordable depends on age)
2) Accident insurance (relatively affordable)
3) Critical illness (can be expensive if older but it is important)
4) Whole life plan (important and get it young with limited pay is good)
5) Retirement plan (good to plan for if the rest 1-4 are covered)
(most important) Health insurance - reimburses your hospitalisation fee. This plan has different tiers covering Private Hospitals, Government Class A, B and C. Go for a plan that suits your budget. Also, different insurers have different features, some offering longer pre and post hospitalisation coverage, so don't necessarily go for the cheapest. Purchase this even if your employer already covers this.
Life insurance - lump sum payout for death and total permanent disability. There are different arguments if you should purchase whole life or term life but they have their pros and cons.
Critical Illness Insurance - can be added as a rider to item (2)
Seedly has great articles on insurance. Do check them out!