Written by Dave Tung | 24 Jul 2020 |
With so many different types of insurance plans available in the market, it can be intimidating to start thinking about which ones are suitable for you.
Of course, getting sufficient insurance coverage is important but without doing your own research or having a trusted financial adviser, you also risk spending too much money on the wrong policies.
To simplify things, here we outline four types of insurance plans every working Singaporean should consider.
Whole life insurance protects you and your family against financial loss in the event of your death or terminal illness. Sometimes, it also covers total and permanent disability. As its name suggests, whole life insurance typically provides lifelong coverage. As a whole life plan covers your lifetime, you don’t have to think about renewing it once you’ve bought it.
If you have dependents, the payout from life insurance can cover their finances for day-to-day living, take care of any of your outstanding financial obligations, and ensure that they are not in dire financial straits after you’re gone. Even if you’re without dependents, the proceeds from a life insurance policy can be used to pay off your final expenses and debts, or leave a legacy for other individuals or organizations named in your will.
On top of offering insurance protection, whole life insurance also has a savings element which means that your policy will build up a cash value over time. This means that the death benefit associated with your policy could be higher than the sum assured, leaving even more behind for your loved ones after your death. As such, having life insurance coverage is crucial if you have children who depend on you, a non-working spouse, or if you’re caring for your ageing parents.
There are also some whole life plans that offer a limited premium term. This means that you could be paying premiums for say ten or fifteen years but enjoy the insurance coverage for your lifetime. This could be ideal if you wish to take advantage of your income years and “front load” your insurance premiums during this time.
Term life insurance also provides protection against the financial loss if you pass on or you are diagnosed with a terminal illness. Sometimes, it also covers total and permanent disability. Unlike whole life insurance, term life insurance does not have a savings component and does not build up cash value. It provides pure protection. Your premiums go directly towards paying for protection coverage. As such, the premiums for term life insurance are usually more affordable.
Term life insurance protects you over a fixed period of time. You are given the flexibility to decide how long you wish to be covered. Some term life plans offer guaranteed renewability upon the end of the term, so you may not need to worry about your insurability even as you age.
If you only need protection coverage and are looking for a higher sum assured at a wallet-friendly price, then you may consider term life insurance.
Singlife’s term life insurance provides coverage for up to S$2,000,000 and up to age 99 – it gives you the flexibility to customise your plan to your needs. For example, you can customise your plan’s policy term and to be covered until your child completes university or is financially self-reliant. Furthermore, you can also increase your protection on some special life stage events without further underwriting.
Not sure how much coverage you need? Use the Insurance Estimator to calculate the amount of the life coverage you would need.
If you or a loved one had been ill and needed to be hospitalised, you might already know that hospitalisation and medical costs can pile up very quickly.
Hospitalisation insurance is one of the most common solutions – it covers the costs of in-patient medical care, hospital stays, and selected out-patient care on a reimbursement basis.
Thanks to MediShield Life, all Singaporeans are covered under this compulsory government health insurance scheme that pays for basic public hospital treatments.
If you want a better type ward or private hospital, you may want to consider an Integrated Shield Plan from a private insurer. This ensures that some extra costs will be covered by your insurance, and you have the flexibility of choosing from more hospital or ward types.
How does it work? An Integrated Shield Plan will act like an add-on to your MediShield Life plan. It will give you higher coverage limits and open access to treatment from a broader range of doctors and hospitals. Because it integrates with MediShield Life, you do not get duplicate coverage, and you are not paying double premiums.
MediShield Life premiums are fully payable by Medisave. Similarly, the premiums for an Integrated Shield Plan can also be deducted from your MediSave, up to a certain limit depending on your age. Any costs over the withdrawal limit will need to be paid for in cash.
Being critically ill can be debilitating, not just physically but financially as well. While hospitalisation insurance can cover some of the costs associated with medical treatment and hospitalisation due to a critical illness, it may not be enough. And that’s where the need for critical illness insurance comes in.
With a critical illness plan, you receive a lump sum payout if you are diagnosed with a critical illness covered by the policy, such as cancer, heart attack, kidney failure and stroke. The payout can cover any financial gaps related to your treatment and other non-medical costs. It can also be used to make up for any loss of income during your recovery period and provide you with the finances needed for daily living while you recuperate.
The Life Insurance Association Singapore (LIA) has standard definitions for 37 severe-stage critical Illnesses. However, critical illness plans offered by the various insurers may vary in the number and type of critical illnesses covered.
Many life insurance plans offer critical illness coverage as an optional rider. The rider enhances the base plan coverage on death benefit to include critical illness as well. Once you claim on critical illness, your base plan may be terminated. For this reason, it may be cheaper than a standalone critical illness plan.
For a standalone critical illness plan, there are several types on the market and the basic type usually provides coverage for late-stage critical illnesses. Other variations on the market include coverage for early and/or intermediate stages of critical illnesses (ideal for situations when you detect the illness early) or multiple claim options wherein your policy remains in force even after you’ve made a claim on it (it covers you again).
Singlife’s critical illness insurance provides coverage for late-stage critical illnesses. There are two base plans for different needs, and each plan can be further enhanced with a rider for early and intermediate stages critical illnesses protection.
Singlife’s Critical Illness Plan provides standard coverage. Upon a diagnosis of a covered critical illness, the sum assured will be paid out and the policy will cease thereafter.
Singlife’s Multi-claim Critical Illness Plan provides enhanced coverage and allows for multiple claims up to a total of 300% of the sum assured. For each claim, the sum assured will be paid out and reduced to zero. After the “reset period” (consecutive 12 claim-free months) from the diagnosis date of the previous claim, the sum assured will revert to 100% of the original amount and claims can be made again.
While the above types of insurance plans are important for working adults, there is no one correct formula for what insurance you should have.
The type and amount of coverage you need will be different from person to person. Before you commit to any insurance plan, do your research, seek professional help and assess if the plan you’re considering will add to your financial security in the long run.
The information is meant for your general knowledge and does not regard any specific investment objectives, financial situations or particular needs any person might have and should not be relied upon as the provision of financial advice.
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Information is correct as 14 June 2020.