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What You Need to Know When Buying Insurance in Singapore

What You Need to Know When Buying Insurance in Singapore

Last Updated on by Tree of Wealth

Imagine you just bought your dream home and it took you years to save up for it. After spending a sum to renovate it, you are so excited to finally move in with your family and love ones. When you do, you get diagnosed with early stage cancer. Now you are unable to work and all those years of blood and sweat of work down the drain, not to mention the loss of income you’ve sustained.

Now you have to pay for not only your treatment but also for the bills as well as loss of income. In one fell swoop, your entire financial situation can be utterly annihilated at no fault of your own. Fortunately, there is a way to protect against this and it is called insurance.

There are over twenty different forms of insurance and they are all equally important depending on your lifestyle, budget, and situation. They are designed to provide a financial safety net for unexpected events such as accidents, illness, or even acts of nature. However, if you are still young then chances are you’ve probably haven’t given this much thought but it is never too early to start.

The Kinds of Insurance Available in Singapore

The problem with insurance, especially for younger people is that it costs money. And when you live in one of the most expensive countries in the world, the last thing that you will want to do is give yourself more expenses. However, even though it may seem counter-productive to be spending more money annually rather than saving or investing it, it could very well pay off when you least expect it. Insurance is something that is always better to have and never need to use it, rather than need it but you do not have it.

So, even if you are on a tight budget, you may still want to shop around and take a look at some of the different insurance policies out there and see how they can protect you. Some of the more common insurance types are health insurance, life insurance, and travel insurance.

Health Insurance: Do You Need It?

Hands down one of the most common and important types of insurance available is health insurance. This is because healthcare in Singapore is anything but cheap and even the most healthy people may find themselves stricken with a serious illness or even in an accident that requires intensive care and treatment. These events can quickly decimate your savings if you are not prepared for it. Hence, the reason why this kind of insurance is so common.

Health insurance is designed to cover medical treatments, hospital bills, and even other expenses depending on your policy. Health insurance is so important that the government provides a basic plan that every citizen and permanent resident has, called MediShield Life. Although, this program is only designed to get your foot in the door and offer help in an emergency.

It is very basic and only covers your hospitalization bill if you stay in a B or C ward in a public hospital. If you want additional coverage or better accommodations, you will need to pay extra for that or get a better health insurance policy.

MediShield Life is your most basic health insurance plan but you can upgrade it, add on to it, get insurance riders, or get better plans. You can even use your MediShield in order to pay for the additional premiums if you would like to upgrade.

Even if you are young and broke, health insurance is something that you definitely want to make sure you have. You never know when you will need it and you will be grateful that you have it when you do it.

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Life Insurance: How Important Is It?

Life insurance is something that we are constantly hearing about but do we really need it? When you are young and do not have any dependents, should you consider spending money for something that won’t directly help you? The answer is actually yes, for a number of reasons including:

Accelerated Benefits

You can actually pull out money from your death benefit in the event of a critical illness or a disability that prevents you from working or taking care of yourself. This ensures that you will still have some cash flow to pay for your treatments and needs, while also keeping your dependents afloat if you have any. However, this will depend on your policy and the parameters they have for certain kinds of events such as illness or accidents.

Cheaper Rates

Getting life insurance when you are young and healthy is a good way to plan for the future. This is because you will be able to get a great plan at a much more affordable rate, compared to when you are older or have a family already. This can also make sure you can keep your premiums low, even when you get certain health conditions later on. So, it does pay to get life insurance early, especially when you are looking to start a family later on.

Future Proof

If you want to eventually get married and have children of your own. Getting life insurance will ensure that they will be in good hands if something were to happen to you. This means you will be able to rest easy knowing that they will have the resources to take care of their needs when you are gone or too disabled to provide a proper income.

There are two different kinds of life insurance that you can get:

Whole Life Insurance

This is the more common option but it is also the more expensive of the two types of life insurance in Singapore. You can expect to pay thousands per year for whole life insurance compared to hundreds for term life but it is usually worth it. This is because not only will you have coverage for your entire life but you can also enjoy a number of different whole life insurance subtypes, such as endowment plans.

Endowment plans are a form of savings plan that can be used for milestones such as paying for your child’s college education or for your own retirement. It offers compound interest, allowing you to grow your money a lot more than you would be able to in a conventional savings account.

Another subtype that is fairly common is the investment-linked plan or ILP. This is an investment plan that has insurance included. Which is great as it allows you to grow your finances, while minimizing risk.

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Term Life Insurance

This is the more affordable option and that is because it only lasts for a term ranging from ten to thirty years. This plan is great for people that want to provide protection for their kids but once their children grow up, they can stop paying for life insurance they do not need anymore. However, the main disadvantage that comes with term life insurance is that you will not get any money back if nothing happens to you during the term, which can be both a good and bad thing.

When you are looking to get life insurance, there are a number of factors to keep in mind, such as the sum assured or the payout amount. It will not do you any good to get life insurance when the payout can’t even keep the lights on. So, there is a general rule to help you figure out what sum assured you will need to keep your family living a comfortable lifestyle when you are gone. Your sum assured should be around eleven times more than your annual income.

For example, if you are making $36,000 per year, you’ll need a sum assured of $400,000. However, this is not a cement rule. Just figure out how much money your family will need in order to continue living their lifestyles without you.

Travel Insurance: Is it Worth It?

Another common kind of insurance in Singapore is travel insurance. This one might seem like something you may not need but it can actually be quite helpful. The main purpose of this insurance is to offer some financial security in the event that the airline loses your luggage, you become stranded at the airport, or even get sick while traveling. These are all events that can be very expensive, especially when you need to change a ticket to fly home or get treatment in a foreign country.

Travel insurance covers a number of things, including:

  • Medical Expenses
  • Baggage Delays
  • Lost Baggage
  • Trip Delays
  • Kidnapping
  • Hijacking
  • Missing Your Flight
  • Canceling Your Trip

Also, many policies offer emergency assistance. This means that the insurance provider can arrange for you to be brought back to Singapore in the event of an emergency or they can help get you the aid and treatment you need if an accident or illness occurs.

This kind of insurance is fairly affordable, especially if you get a group package if you are traveling with family or friends. You can expect to pay around $30 per week, if you are traveling around Asia. However, make sure to read the policy carefully and figure out what is covered and what is not, as insurers love using exclusions to reject a claim. It is also a good practice to get this insurance right when you confirm your trip, that way if your travel agency dissolves, you can still put in a claim.

Interested to learn more?

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Other Useful Kinds of Insurance in Singapore

Type of Insurance Why You Need It
Car Insurance Car insurance is compulsory in Singapore if you own a car.
Maid Insurance Maid insurance is compulsory in Singapore if you employ a maid.
Home Insurance Your house is likely your most expensive investment, so you’ll obviously want to protect it with insurance.
Mortgage Insurance This insurance will pay off your mortgage in the event you become disabled or pass away, so the mortgage does not become a burden to your family.
Fire Insurance This is compulsory for HDB flats if you have a HBD loan. Not compulsory for condos, as it is typically covered by the MCST.
Pet Insurance When you own a pet, this insurance will cover their vet and kennel bills. It also offers compensation for the death of your pet.
Business Insurance If you own a business, then business insurance is a must. It can be used for preventing disputes, protecting employees and products, and some are required by the Ministry of Manpower.
CareShield Life This is a government program that auto enrolls you at the age of 30. This program is designed to help individuals with severe disabilities pay for long-term care.
Freelance Income Protection This is a great thing to have when you are a freelancer, as it offers a financial safety net if you become hospitalized or sick.
Prenatal and Child Insurance This insurance is not needed but can still be useful. It is also quite affordable.
Personal Accident Insurance If you do risky work or commute using a risky form of transportation like a motorcycle, this insurance will payout in the event of disability or death.

Need Help?

Not sure what are the ideal and suitable coverage for you and your loved ones? Feel free to drop us an inquiry below to get in touch with our partnered Financial Advisors for professional advices.

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