Asked on 19 Nov 2019
What should take the highest priority?
Hi anon, definitely insurance will be the key consideration, not investment. It is the safety net that will always be there regardless of market condition.
Insurance will pay you the amount of money you need when you need it.
Had a hospitalization, and covered by a shield plan? Your hospital bill is taken care of.
Out of work due to CI and fighting to recover? Your expenses can be taken care of by your payout.
Even if you can invest $2K a month, and have a porfolio size of $25K after a year, that will only generate $1K in dividends at 4%. How long will that last you if you fall ill in your second year?
So sort your insurance out first. Make sure you have that safety net. If you never use it, it's not a problem either. No one expects to use the airbag of their car, or the lifevest on an airplane. But if you think about it, which is more expensive, the airbag or the car? Insurance is your plan B you never hope to use, but when push comes to shove, you will be glad you have it.
Assuming you are relatively young, definitely get adequate insurance first. Even if you get a 10% return on your investments, a medical crisis might wipe out all your returns and more. You also want to be sufficiently covered earlier as premiums tend to increase with age. More information such as age and available capital would help to provide more relevant answers.
I think the first priority is protecting yourself first, so definitely insurance should be the first thing you look at
Personal thoughts on the priority of insurance is;
1) Hospitalisation + Rider
2) Personal Accident
Once you have those 2, then we can look into
3) Whole Life or Term
Why Whole Life and Term is crucial is because these policies look into CI, where statistically 1 in 3 Singaporeans has a likelihood of getting CI in their life-time.
Once you have these, then definitely look into retirement planning, this can come in the form of investments and even wealth accumulation plans, where the returns are more stable if we are personally not comfortable with taking risk
Actually, I'd say it depends on your age and your life stage. If you are a fresh graduate and don't have a family to support, you really only need hospitalisation plan. If you're worried about having to pay for massive bills due to critical illness, then you cover for critical illness. Don't fall into the trap of becoming overinsured. You can also consider getting term insurance and investing the rest of your money (as a lot of advisers will ask you to get whole life, and it'll look as though you're getting 'free insurance' as you get back some money at the end of xx period, but you lose out in terms of opportunity cost). If you have parents or kids/spouse depending on your income, then yes, make sure you have some insurance first, just don't fall into the trap of becoming overinsured please.
Hi anon, I would definitely say get adequate insurance cover first. If we were to invest without having enough insurance protection, we could be forced to liquidate our investments prematurely to pay for any hospital bills, etc, if the need arises.
We just published an article on Seedly on what to do before investing (insurance coverage is one of them) and it can be found at https://blog.seedly.sg/checklist-to-do-before-investing. Hope it's useful for you!
Definitely protect yourself first and once you have that safety net, you can then look into investing.
Get a hospitalisation plan, and if you have dependents (parents, spouse or children who will be affected should something happen to you) look into a term plan with critical illness coverage so it will not affect you and your family's financial position significantly should anything untoward happen to you.
Find an insurance agent who is trustworthy and will calculate the right amount of coverage you need (not what you can afford) without overstretching yourself. You should spend no more than 10% of your salary on insurance each month.
Finally, if you are going to learn about investments on your own, don't mix insurance with investments as investment linked policies have a lot of hidden charges.
All the best!
Insurance when bought young is the cheapest (eg: Term Life Insurance) so if you are in for the long term then getting some basic coverage like hospitalisation/PA is affordable at at start. You can concurrently start small like a Regular Saving Plan (RSP), with a min of 100/month while you learn the ropes of investing.
I think it can be done concurrently, you do not need to choose either or. Have a game plan!
I actually done this
Get basic medical insurance (using CPF, no cash needed!)
very basic Personal accident policy (I think i got a basic at less than $100 a year)
Thats it, i went to find out abt stocks, start buying some. only when I have more money I started looking at other insurance such as critical illness and other term plans.
I followed the above using advice from a very good sensible financial savvy guy who advised me not to save money via insurance policies, only buy term policies to protect oneself. He has abt 7 figures by the time he reached 30 yo, so i kinda trusted his advice.
Insurance first. It's like a sports analogy I heard before. You have defense , strikers etc. No matter how good your striker is , you still need a goal keeper and defenders.
You can only answer this question yourself.
Question 1: If you are unwell, will your insurance (always a guaranteed value) take care of you. or your investment (always a non-guaranteed value)?
If your answer is insurance, then start by understanding yourself and your needs. In most cases, the key priority is always healthcare insurance regardless of whether your are a Singaporean or not. If you are a Singaporean, here is why: https://www.blog.pzl.sg/is-medishield-life-enough-in-singapore/
If your answer is investment, then the second question is: Are you happy if your investment return is used to pay for your health needs? And what if the investment is not doing well but you still need medical attention?
As always, we are our biggest asset. Therefore, we should always take care of ourselves first before we do anything else. Without us, what is the value of money?
Here is everything about me and what I do best.
Before investing always settled all this.
No matter how rich you are, a grave illness will wipe them out. So make sure got protection.
Incase you kena retrench.
Insurance should be about your protection needs (don't get the ILPs which is a mix; its better fee wise to do each part seperately).
So if you are young/no dependents etc - then go investments until you have family or other needs arise then reasses insurance.
Insurance first. Protect yourself and your loved ones from huge bills and loss of income.
If a big medical bill hits, insurance will help but your investment might not even be enough to cover.