Crucial Insurance Policies for Every Life Stage
Survey your acquaintances and it’s likely that most won’t remember their initial insurance policy or why they acquired it. If a quick recap is in order, here are five vital insurance types that everyone should possess to ensure financial protection against unforeseen circumstances.
An increasing number of Singaporeans are acquiring insurance via online platforms, making coverage just a few clicks away. However, are you aware of the fundamental plans required to cater to your basic health needs or to safeguard your dependents against sudden sickness or demise?
If you haven’t conducted your research or consulted an insurance advisor, continue reading for more insights. Then, think about scheduling a meeting with an unbiased advisor for a comprehensive financial planning session.
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Begin with these Fundamental Five
What type of insurance should you acquire? All Singapore citizens are by default covered by compulsory health insurance known as MediShield Life, providing basic coverage to assist in offsetting medical expenses for outpatient treatments and hospitalization.
When seeking treatment as an outpatient or admitted to a hospital, patients need to inform the institution of their intention to claim from MediShield Life. Under this policy, the yearly claim limit is set at $150,000, with no lifetime limit imposed on claims. Further details can be accessed here.
If you desire additional coverage, that’s where Integrated Shield plans (IP) can be beneficial. For instance, MediShield Life provides coverage only up to B2/C wards in public hospitals. An IP, however, can extend coverage to include B1 or A wards, or even private hospitals.
While MediShield Life caters to hospitalization and surgery expenses, it doesn’t cover costs incurred before or after hospitalization. IPs can bridge this gap.
An important consideration is the yearly claim limit of $100,000, which might not be ample given the healthcare costs in Singapore. With an IP, coverage could escalate to $2 million.
Who is it for? Health insurance is a basic yet crucial type of policy, as it caters to any medical expenses that arise when you are hospitalized due to sickness or an accident.
It’s common for parents to secure health insurance for their children, starting as early as infancy. Keep in mind that premiums rise as the insured individual ages, and lower rates cannot be ‘locked-in’ by purchasing the policy at a younger age.
A Closer Look at Term Life Insurance
Term life insurance provides the insured with death and permanent disability coverage for a specific duration. It’s an affordable option when compared to whole life insurance, presenting some notable differences as outlined in the table below.
Comparison: Term Life Insurance Versus Whole Life Insurance
|Considerations||Term Life Insurance||Whole Life Insurance|
|Primary Objective||Ensures financial protection for beneficiaries||Dual function of financial protection for beneficiaries and gradual accumulation of cash value|
|Coverage Span||Protection lasts for the active term duration, typically between 10 to 30 years, or up to 65 years of age||Offers coverage for a lifetime, extending to 99 years of age|
|Premium Dynamics||Initial term enjoys constant premiums, but they may surge during later terms for annually renewable policies unless otherwise stated||Promises consistent premiums throughout the coverage term|
|Cost||More budget-friendly||Generally higher in cost|
|Cash Value||Does not accumulate cash value||Builds cash value over time at a predetermined earnings rate|
|Guaranteed Death Payout||Yes||Yes|
|Policy Tenure Options||Provides flexibility with multiple term choices||Limited Premium Terms, Whole Life Coverage Thereafter|
|Limited Premium Payment||The payment period usually corresponds to the policy period||Yes|
The Dependants’ Protection Scheme is a compulsory term insurance offered upon your initial CPF work contribution if you’re a Singapore Citizen (SC) or a Permanent Resident (PR) aged between 21 and 65. The assured sum is S$70,000 until the age of 59, then decreases to S$55,000 until age 65.
If the idea of a whole life policy appeals to you, it could be a viable choice if you’re seeking coverage with a cash value component that lasts up to 99 years. Always evaluate your financial circumstances thoroughly before making your decision.
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Who Should Consider This?
Term life insurance makes an excellent alternative to whole life insurance if you’re operating on a limited budget. It’s well-suited for those who want specific duration coverage but have less to spend on acquiring a whole life insurance plan.
Term life insurance policies also provide flexibility, allowing you to decide your premium term and protection duration, contingent on the insurer you choose for your plan.
Do keep in mind that term life insurance plans do not provide a cash value after the policy term expires. If your intention is to leave a financial legacy for your dependents after your departure, a whole life insurance policy might be a better fit.
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An Overview of Critical Illness Insurance
Wondering what coverage a critical illness plan entails? The Life Insurance Association of Singapore has established criteria for defining severe stages of 37 critical illnesses.
While nobody anticipates being diagnosed with a critical illness (CI), possessing a CI plan can be a lifesaver. According to statistics from the Life Insurance Association Singapore, a staggering 90% of severe stage claims life insurers receive are for these five critical illnesses:
- Major Cancer
- Heart Attack of Specified Severity
- Stroke with Permanent Neurological Deficit
- Coronary Artery By-pass Surgery
- End Stage Kidney Failure
These insurance plans offer varying levels of coverage, including CI riders, which could provide comfort not only to you but also to your caregivers during challenging times. CI plans typically cover diagnosis, treatment, and death, and some insurance providers even extend this coverage to your dependants.
The most effective approach is to gather comprehensive information, allowing you to make an informed comparison before deciding on the CI plan that suits your needs best.
Who Benefits from This?
Critical illness insurance is a prudent choice for individuals of all ages since critical illness does not discriminate. These policies generally provide a lump sum payout upon the diagnosis of a critical illness.
Most individuals prefer not to impose a financial burden on their families during a health crisis. A critical illness plan grants a lump sum upon diagnosis that can be used for any purpose, whether medically related or otherwise.
Beyond covering medical expenses, you can also utilise the lump sum to compensate for the loss of a family member’s income if they decide to leave their job to provide full-time care for you, pay for mental health treatment, and more.
Determining Your Insurance Expenditure
While some financial gurus suggest allocating no more than a specific portion of your salary to insurance premiums, the exact amount varies significantly based on individual circumstances and requirements.
Undeniably, insurance coverage safeguards you and your dependants financially during periods of illness and death. For individuals supporting their families, this coverage can offer financial relief during challenging times when you may be unable to fulfill your provider role.
To gain a broader understanding, consider examining what others in Singapore typically spend on their insurance portfolios. Additionally, utilising a protection gap calculator can assist in determining the suitable coverage amount tailored to your unique life stage.
In conclusion, securing the appropriate insurance coverage is crucial in all stages of life. It ensures that both you and your loved ones are financially safeguarded during unforeseen circumstances, such as critical illnesses, accidents, and death. Understanding the various insurance types available and identifying those that best fit your current life stage and future goals can be challenging.
For this reason, we highly recommend consulting with our experienced financial advisors. They can provide valuable insights, helping you make informed decisions about your financial future. To get started on this journey towards financial security, reach out to us today for a comprehensive financial planning session.