Entering adulthood can be scary and exciting at the same time. You will be making some of the best and worst decisions of your life when you are young! These are the sort of decisions that will have a great impact on your future. Hence, it is important to make wise decisions at this age. Purchasing insurance is one of them. If you are wondering why would you need insurance at this age, allow us to explain.
When you first start working, it’s likely that your salary is around S$3,000 to S$4,000 a month (more or less). With this, you need to pay bills, buy things for yourself, have a good time when you go out with friends, and probably also give some money back to your parents. Honestly, there’s not much to go around.
Insurance is not cheap, and many of us have the tendency to put it off until much later. We’re here to say that you shouldn’t wait too long to get it.
7 reasons why we shouldn’t wait too long before getting insurance for ourselves
1. It provides a plan B
The main thing about insurance is that if the worst should happen, you are covered financially. Imagine, god forbid, you are diagnosed with a critical illness or have met with an accident that has left you disabled. There is no way you can go back to the old job and get a source of income going again. What are you going to do for money?
If you have an appropriate insurance policy in place, then such eventualities can be taken care of by the policy. It will ensure that you are not left penniless without a source of income.
2. The younger you are the cheaper it is
One look at the insurance market will show you that the older you get, the costlier premiums become. The main reason for this is that the younger you are, the lower the risk of you falling ill.
If you go for it at an early age, you get to start building your protection net. Furthermore, if your health deteriorates or if you get injured before you get a policy, that condition will likely be excluded from the policy’s coverage.
3. Your debt doesn’t become a burden
Imagine losing your source of income due to unfortunate circumstances. What happens when the monthly payment for your education loan or that HDB loan that you took is due? If you’re unable to service the loan anymore, the entire burden will have to fall on your family to deal with the debt. But if you received a pay-out from your insurance, that would help alleviate the stress a difficult financial situation.
4. There is no dearth of choice
Between the various insurance companies operating in Singapore, you have ample choice when it comes to insurance plans. Do your own research and don’t be swayed by insurance agents who might be out to sell you policies you don’t need. Ask them lots of questions, and don’t buy just because you like the agent. Remember, agents change jobs as well.
You don’t have to get all your insurance at once either. Start with your basic health insurance such as accident insurance and integrated shield plans. Next, look at critical illness policies and life insurance. These have terms plans or whole life policies. In general, term plans are significantly more affordable and are great for providing a high coverage.
5. Insurance or investment first?
The way we see it, insurance protects your money, and investment grows it. We think that you should always aim to protect your wealth first before you try and grow it. The simple reason is that it’s so much harder to make money back after you’ve lost it. As soon as you can afford it, get yourself covered by insurance and start building your emergency fund. Once you have your emergency fund, it’s time to start investing.
6. It provides for the future
Most savings or endowment plans come with an investment horizon of 5, 10 or more years. You’re made to commit to the plan so that the money gets to compound over time. Ideally, the sum would mature into an amount that is perfect for your next house or for your child to use for university education. Even if it can’t pay for all of it, it might be enough to pay for a part of the expense.
That said, be careful about mixing insurance with investments, particularly in the form of investment-linked plans. Many Singaporeans have reported that after many years of paying the premiums for the policies, the returns were dismal. It could be wiser to make your own investments separately.
7. CPF and Medisave is not enough
You may say that you are making regular contributions to your CPF accounts and earning an interest but the fact is that when it comes to savings and retirement or unforeseen circumstances, CPF won’t suffice. You will need to have another source to invest and grow your money, or at least protect you financially.
This can be done if you get an insurance policy. As we said earlier, not only do you have ample choices in this regard, you also get a choice in the type of plan you are comfortable with.
This article was written by BankBazaar.sg.
BankBazaar.sg is a leading online marketplace in Singapore that helps consumers compare and apply for financial products such as credit cards and personal loans.