Are we overpaying for basic insurance coverage in Singapore? - Seedly
 

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Whole Life Insurance

Asked by Thelobang Thelobang

Asked on 02 Sep 2019

Are we overpaying for basic insurance coverage in Singapore?

Is it really possible to get $1 million of coverage for only $312 a year?

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Yes, you can get it for that amount, however, take note that it is group insurance, so you do not own the policy. Should the policy owner (MINDEF) decide not to work with the insurer, you will lose coverage.

Also, the $1 million of cover is split into $500K Death/TPD and $500K personal accident. Should you pass on naturally, your payout would only be $500K.

If you are still in your 20s, a simple personal term plan covering death/TPD can be obtained for relatively low premiums, covering you till around age 60. Maybe it won't be $312/year depending on your age, but it will still be affordable.

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Elijah Lee
Elijah Lee

03 Sep 2019

Hi there, thanks for your points. No right or wrong here, just throwing out alternate viewpoints which should be considered before a decision can be made based on individual consideration. 1) Yes, the risk is low, but not zero. Or, the alternate situation is that the insurer loses the contract. Aviva's contract with MINDEF and MHA is on a 3 year term renewable for another 3 years. They might chose not to renew the tender, or they might lose the tender to another insurer who might then changes the premium rates or the T&Cs. My relative's policy for POGIS was changed from NTUC to Aviva recently, so anything can happen. 2) Personal insurance policy for a 21 y.o. covering $1M death and TPD can be as low as $393.76/yr for ladies. So the GTL is not necesarrily the cheapest, especially with women where the mortality charge is lower. 3) Group PA does not cover some items that most other PA plans cover, such as TCM or chiropractor. So, depending on what you are looking for, but if it's pure death by accident coverage, then Group PA is hands down the cheapest.
Thelobang Thelobang
Thelobang Thelobang

04 Sep 2019

Thank you Elijah. If the focus is on BASIC insurance and how much to spend on this, then MINDEF & MHA group term life, personal accident and critical illness should be the most cost effective for most Singaporeans and their family members, including younger working people or younger parents around 25-30 years old who are becoming more aware of the need to build up basic insurance protection. Again, the risk of problems with MINDEF & MHA insurance policies will be extremely low as the Government of Singapore is involved. I have had this group policy for more than 20 years and received annual premium rebates of 20-30 percent (although recently the annual rebate seems to be translated into lower premiums).

The best is if you are able to secure premiums lower than Mindef Aviva Insurance. The first advice is always to get private insurance (be it term/whole life etc) and opt for Mindef Aviva later, when comparing private insurance, since death coverage is more expensive for private cover as you age.

However, if your age is more than 30, the most cost-effective insurance is Mindef Aviva. For CI, most cost-effective may become private.

As always, do shop around to get what you need, DYODD. Most of what I type is a guideline, and to be confirmed with Hard numbers.

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Brandan Chen
Brandan Chen
Level 7. Grand Master
Updated on 10 Sep 2019

Firstly, what is your definition of overpaying?

Secondly, premiums depend on quite a couple of factors: Age, Gender, Smoking Status, Health Status, and the type of plans you think best caters to your needs.

In a nutshell, personal financial planning revolves around 4 key pillars:

1) Health Insurance - cover hospitalisation bills, pre and post hospitalisation treatment and consultation

2) Life Insurance - Provides income protection in the event of Death, Disability, and Critical Illness

3) Retirement Planning - Consists of investments and savings

4) Personal Accident Coverage

At the end of the day, the advisor should be able to explain to you the various types of options available to you to meet both your objective and BUDGET so that you do not think that you are over-paying!

If you would like to find out more, I would suggest you speak to a financial advisor or myself. You may always contact me at https://brandanchen.manulife.sg/

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Thelobang Thelobang
Thelobang Thelobang

04 Sep 2019

Thank you for your comments. Given that the median salary for recent graduates from ITE, polytechnics and universities is about $1700, $2350 and $3500 a month, not "overpaying" for BASIC insurance should mean that MINDEF & MHA group insurance is probably the lowest cost option to get basic insurance comprising of Term Life and Personal Accident, and also Critical Illness without impacting heavily on a person's monthly take home pay. For example, a 26-30 year old male can get $1.95 million of protection for $61 a month = $732 a year (1 mil term life, 600k personal accident, 350k critical illness). Lower amounts are possible too, to fit lower budgets. And as you pointed out, still need to set aside money for Hospitalisation plans (=Medishield and Integrated Shield Plans). Once these basic components are in place to take care of themselves and their families, they can then spend more time and effort to learn about more complex products which will also take up much more of their take home pay.
Loh Tat Tian
Loh Tat Tian

10 Sep 2019

Hey. I feel neglected. Nobody answered my comments. ops