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Written by Dave Tung | 27 May 2019 |
Most Singaporeans have at least heard of life insurance… and have experience on how best to avoid insurance advisers at roadshows.
Insurance (and insurance advisers) often unfairly get a bad reputation, due to one or two bad personal experiences or anecdotal stories.
Here, we debunk seven common myths Singaporeans have about life insurance and reveal how life insurance can be an important element of your financial life.
Many Singaporeans have great faith that the government is there to care for our basic needs. In past years, the Singapore government has instituted many schemes committed to the welfare of its citizens, including a few insurance schemes as such the CPF Dependents’ Protection Scheme and MediShield Life.
While MediShield Life does indeed provide you with a basic level of coverage for in-patient treatment, hospital stays, and a range of out-patient care, life insurance plays a completely different role.
Life insurance aims to provide your beneficiaries with a lump sum payout in the event of your death or total permanent disability. In this way, your loved ones will not have to worry about their finances if you, a breadwinner for the family, is unable to provide any financial contribution to the family.
Whether it’s your spouse, children or ageing parents, you can provide them with financial security should you suffer from an untimely death.
Life insurance addresses a different type of financial gap and should be part of your insurance portfolio along with health insurance.
Young, single, and free — and not in need of life insurance, right? That’s not true.
While life insurance certainly plays a vital role for individuals with dependents to care for, a person without dependents can also get great benefits from being insured.
Have you ever considered who would take care of funeral expenses or any of your outstanding personal debts after your death? The death benefit from a life insurance plan can go towards such expenses. You could also designate a portion of the death benefit as part of your estate to be distributed to your named beneficiaries or to charitable organisations.
And while most young people may think of children when the word “dependent” comes into mind, it actually refers to any person who is financially dependent on you.
So, if you’re supporting your ageing parents during their golden years, then they are technically your dependents. As such, any financial planning you do should take into account their future financial needs in case you’re unable or not around to take care of them.
If you’re keen on getting a financial head start as you move through life, getting insured is one of the smart financial moves you should make in your 20s.
In your youth, the idea of ill health, disability or death seems improbable or a possibility far off into the future. But life is unpredictable, and you never know what could happen — which is why life insurance is important.
One common grouse with life insurance is that when the time comes that you need it, it’s often too late. Eliminate this regret by getting covered while you’re still young and healthy.
Young people can benefit from buying life insurance early in life. Buying a life insurance policy while you are young can ensure that you enjoy full coverage for your lifetime, even if you develop health conditions later on in life.
In general, life insurance premiums for the young tend to be cheaper than those who are older. And if you purchase a whole life plan, you get more years of coverage and your policy has a longer time frame to accumulate higher cash value.
Another common misconception is that it costs too much to be insured. This myth comes about due to two possible reasons: people don’t actually know how much it costs to have life insurance and they’re not convinced of the value of being insured.
Interestingly, it’s those who think they can’t afford life insurance that really do need it the most. After all, if you are unable to allocate at least 10% of your monthly income to life insurance, imagine how financially devastating it could be on you and your family if you were to unexpectedly die or become permanently incapacitated?
In terms of actual costs of premiums, not all life insurance is expensive. Term life, as a pure protection-focused product, is able to provide you with high cover for death and total permanent disability at an affordable premium.
As an example, a healthy 30 year-old non-smoking male can purchase a 5-year Direct Purchase Insurance (DPI) Term plan with a S$200,000 sum assured for under S$10 per month.
Before dismissing life insurance as a high and unnecessary cost, you should learn about how it can enhance your financial security and find out exactly how much it would cost for you to get sufficient coverage.
You can use online tools such as quote generators to estimate premium costs, or you could speak to a financial adviser for guidance.
Some of us know that life insurance is important, but the idea of trying to figure it all out is too challenging, and so we put it off. Don’t let the fear of the unknown stop you from protecting your family’s financial future.
You may want to seek professional advice from a financial adviser who can take you through the basics of insurance, the different types of plans available, and how they work. A financial adviser can assess your financial situation and recommend how much life insurance you should have.
But even without the guidance of a financial adviser, here’s a simple way to calculate your life insurance needs. Calculate all your assets, tally up your liabilities, and the gap is what your life insurance should cover. To learn more, check out this guide.
It’s great that you’re already insured! But when was the last time you reviewed your policies?
If you’re someone who bought life insurance and then proceeded to just put aside the policy documents in a safe place, it’s time to dust them off. While it is best to do a financial review every quarter, you should at least reassess your insurance coverage on a yearly basis.
Why? The ideal amount of life insurance coverage for you is not a static amount. As time passes, our life circumstances, responsibilities, and priorities change which necessitates a review of our financial standing.
For example, if you had purchased life insurance when you entered the workforce, the amount and type of coverage you have may not be enough now that you’re in your 30s and have more financial obligations and loved ones depending on your income.
It’s also important to review policies you’ve bought in the past to assess the type of coverage they offer. As the insurance market becomes more sophisticated and innovative, new products enter the market — and sometimes, they offer better coverage than older plans.
A regular review will enable you to see how well your life insurance policies are serving your needs, and if any new financial gaps have risen since you purchased your policy or if there are new products that better fit your protection priorities.
How do you do a personal finance review? We’ve got you covered in our guide on how to do a quarterly financial review .
While advice from an insurance adviser is recommended for certain types of life insurance, there are some types of policies that you can purchase on a Do-It-Yourself basis.
For instance, a term life policy may be bought by oneself online, without the need for any financial advice. This is ideal for individuals who already know what type of coverage they need and the sum assured. An example of such a policy is a Direct Purchase Insurance (DPI) plan that allows you to purchase without financial advice, directly from the insurer.
In most cases, you can simply get an online quote by filling in your personal details and a preference of your coverage amount and policy duration. Once you’ve received the quote, you can make a payment online right away , and within minutes you’re insured.
Here at SingLife, we offer this service for our term life as well as our endowment policies.
Are you considering buying your first life insurance policy?
Check out our tips for first-time life insurance buyers.