For someone who just graduated and entered the workforce, how should they start planning their insurance in an unbiased way, cost effective way since there are countless products out there? - Seedly
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Darius oh

Asked on 29 Jul 2020

For someone who just graduated and entered the workforce, how should they start planning their insurance in an unbiased way, cost effective way since there are countless products out there?

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Top Contributor (Aug)

Level 7. Grand Master
Answered on 03 Aug 2020

For insurance, it will be to ensure you are well insured should there be any cases of emergencies. Thus, it is essential to find plans that are well suited for you.

Ensure the basic such as hospitalisation and critical illness plans that would cover you from the hefty medical fees in the unfortunate event that you encounter a medial emergency.

Some good health insurances you can consider are AXA Shield by AXA (only insurer with outpatient and PA benefits embedded into the cash rider) or the Great SupremeHealth by Great Eastern. To ensure you are well covered, you can add on riders for Critical Illnesses.

Feel free to reach out to us here if you are looking for personalised and unbiased advice.

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ūüĎć
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Hi Darius,

Congrats on graduating and starting work! For a young graduate, in order of importance, here is what you should be looking at:

  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 and limit your out of pocket expenses. Depending on your budget, you can take a private hospital plan and downgrade later, or just go for Goverment A ward.

  2. Critical Illness coverage. 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. Usually recommended to cover at least 5 years of expenses and an additional sum to cover out of pocket. This is usually via a limited payment life plan, or a term plan, depending on your budget/needs.

  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.

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. This helps you to narrow down your options from the numerous products out there.

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.

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Above all, there is a basic standard type of insurance that most people look into:

Healthcare

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.

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.

I share quality content on estate planning and financial planning here.

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