When one is still young and healthy, it’s normal to feel like insurance is not a necessity. However, insurance saves you a lot of money when it comes to health emergencies and unfortunate accidents. However, with all the insurances available out there, it’s unlikely that you’ll need every insurance, even if you can afford them all.
In this article, we’re discussing five basic insurances that you may need in your life and how they can help you and your loved ones.
Many financial experts consider life insurance as an integral part of your financial plan. To those who are young and single, the need for this insurance is minimal, but investing early has a high cover at a relatively low cost. Starting early also enables you to pay lower premiums.
However, if you have a family that’s dependent on your salary, this is something that you may want to consider. Life insurance has the ability to replace lost income, help pay off debts, or pay for your children’s college education.
This only covers death, though. This won’t help if you can’t work due to an illness or disability. If your budget permits, you might want to aim for an amount that will replace your income for at least 5-7 years.
You might also want to check your employee package, and if it includes death benefits. If it does, you might not need additional life insurance, or perhaps just a top up.
One of the common causes of bankruptcy include expensive medical bills. This is because medications, serious surgeries, emergency stays, regular hospital visitations can all add up quickly, and cause a lot of debt for those who aren’t financially prepared. Hospital insurance, though helpful, has also become a luxury that fewer people can afford due to rising healthcare costs.
Every Singaporean has mandatory and basic health insurance, in the form of Medishield. This hospital insurance can cover most hospitalisation costs, provided that you stay in a public hospital and in a C to B2 class ward. However, if you choose to stay in a private hospital, Medishield won’t be enough to cover all expenses.
One thing to know about Medishield is that your claims are limited to SGD 100,000 per year. There are also limited claims on specific treatments such as chemotherapy, or kidney dialysis.
On top of that, there’s a co-pay involved where you have to foot 20% of the bill before Medishield can cover the rest.
This means if your total hospital bill is SGD 9,000, you’d have to pay SGD 1,800 first, which can still be a painful out of pocket expense for some.
This is where Integrated Shield Plan (IP) comes in. It extends claim limits, allows you to stay in a better ward in a private hospital, and adds coverage to your existing policy. However, you have to pay double if you want this upgrade.
To overcome these limits, a private insurance which offers a more comprehensive coverage may be more suitable.
Those in physical professions, where their livelihood depends on their physical health should definitely have this insurance. Disability happens more often than people think. Having disability insurance will replace a percentage of your income in the case that you’re unable to work. It’s advisable to buy enough coverage to replace at least 70-75% of your income. This means if you earn SGD 5,000 monthly, the amount you pay should cover about SGD 3,500-3,750 monthly.
However, disability income cannot be claimed immediately. It can come within 2-6 months of your inability to work. This is also called the deferment period, and if you want a shorter deferment period, you have to pay a higher premium.
Personal Accident Plan
This insurance overlaps with your other existing plans, but can still be pretty useful for when you get into unfortunate accidents. Your health insurance may not cover x-ray scans, but your personal accident plan might, which could still save you a few hundred dollars.
In fact, one of the best (and lowest!) accident plans can be purchased for as low as 23 SGD a month! This isn’t necessarily a must, though, as policies mentioned before are sufficient, including employee benefits.
Critical Illness Plan
Should you suffer from an illness such as stroke, cancer, or heart attack, this plan will give you a lump sum pay out. Just be sure to check the insurance policy to know what kind of critical illness is covered as there are different policy terms for this plan.
Some have coverage for 10, 20, 30 years, or even until you’re 99, perfect for those who are only looking for protection for a certain period of time. Some even cover cancer survivors who have remissioned after 3 years, while others only cover the early stages of cancer.
Find out what kind of insurance is right for you
Deciding alone on this matter can be difficult and too risky, especially if it involves money and the future of your loved ones. You might need a financial advisor to know what kind of insurance fits your current financial situation best.
Get in touch with us, and we’ll connect you with licensed financial advisors who can help you assess your financial needs, and help you secure valuable insecure coverage.