“What are the key insurance policies that I really need?”

Why Do We Need Insurance?

• You pass away prematurely and your dependents (e.g family, kids) inherit your debts and loans while losing a source of income
• You come down with a terminal illness eg. cancer (most common) and get hospitalised often while having to foot the bill for expensive treatment sessions
• You get into an accident and survive but face expensive hospital bills and follow up treatment

Is Insurance Really That Complicated?

No Longer “Ownself Check Ownself”

A Simple Checklist For Getting Your Insurance (30 Mins Exercise)

How Do You Use The Checklist?

• Look at what kind of insurance you need or already have based on the checklist
• Review your insurance policies either by calling up your agent for a review or researching on Google first
• Look for these 2 key essential types of policies:
  • a Health Policy (hospitalisation & surgical, private hospital cover), and
  • a Life Policy (is it term or life?)
• Everything else is a bonus to have based on your respective situation or circumstance (the policy names may be fancy but the type of policy is usually the same)

Which Are The Most Important Types Of Insurance To Get?

Further Insurance Related Questions Asked By Most Singaporeans

1. What are the differences between each insurance type?
2. Should I mix investment and insurance?
3. I bought an ILP from an agent, should I surrender it?
4. Should I get an agent or Do-It-Yourself (DIY)?
5. How do I choose a good financial planning agent?
6. Should I buy all from one agency or pick and choose from various?
7. Is my CPF insurance coverage already enough?

Still Feeling Confused?

1) Differences Between The Various Types Of Insurance

Rank 1: Health insurance (ESSENTIAL)

• What: This covers the really expensive Hospital and surgical bills and outpatient care, usually this is an enhancement to Medishield Life, which is a government basic health plan which is for public hospitals up to B2 ward/service. 
• Recommended Benchmark: Private Hospital (or at least public A). Reason because I have personally seen the differences in treatment from both private vs public hospitals and it’s quite a world of difference.
• Why it’s important: MOST IMPORTANT. This is the one that usually causes the most damage financially. Because you are neither dead nor 100% healthy. It can be very painful to survive using your own cash or have less than the best care for you. One cancer chemotherapy session can be $5-6k and surgery can be anywhere between 15k to 40k for a private quality standard. If you need more on this you can read my personal story here.

Rank 2: Life insurance (ESSENTIAL)

• Term Life: This is a purely coverage focused product, where all your monthly/yearly premiums go into coverage, so at the end of 65 years old, you are no longer covered and there is no cash component to this. This is what most savvy people recommend because they know how to use the excess cash saved to invest for better returns
• Whole Life: This is a mix of coverage product and savings component tied to it, where there is a cash value associated with your policy
• Investment-Linked Product (ILP): This is a variant of the life policy where they mix in the investment component into coverage. Often with a long lock in period before seeing returns
• What: In case of death, your family gets paid the total sum assured
• Recommended Benchmark: 5 x your yearly income OR your existing liabilities (this is one of many benchmarks available to the public) 
• Why it’s important: Should increase when you have dependents or more liabilities (e.g loan, kids)

Rank 3: Critical Illness (RIDER)

• What: Usually designed as a rider (a fancy word for top-up on your life policy) You get paid out a sum assured for a list of 37 critical illnesses when discovered by doctors
• Recommended Benchmark: Varies from policies and the payout is tied to life insurance
• Why it’s important: Good to have because the likelihood of cancer is 1 in 3 people. You can opt for also the early critical illness where you get paid out for earlier discovery to seek treatment (e.g stage 1 & 2)

Rank 4: Disability (RIDER)

• What: A monthly payout for income loss if unable to work
• Recommended Benchmark: >$3000/month payout to match your salary
• Why it’s important: Crucial if you are the sole breadwinner or entrepreneur and when you go down, at least there is a constant stream of income coming in for day-to-day expenses

Rank 5: Personal accident (GOOD ADD ON)

• What: Cover outpatient accidental medical expenses
• Recommended Benchmark: Payout based on accident expenses (e.g MRI, CT scan where you are not serious enough to get warded)
• Why it’s important: Generally, at quite an affordable price, you feel assured that if you sprain your leg or break an arm playing sports or activities you can claim for the expenses (Also, food poisoning, insect bites etc.) Also, check with your company, if you are in an MNC or SME they should usually have a group cover plan for such personal accident insurance.

2) Should I Mix Investment And Insurance?

• You are in control of your own finances (knowing what is happening etc.)
• You pay way less fees to more middlemen transacting the deals (management fees and costs)
• You have more flexibility to withdraw, or reallocate the funds with way less fees (low or no lock-in)

3) I Bought An ILP From An Agent, Should I Surrender It? 

• What was your intention when getting the policy? Is the policy still on its way to helping you meet that objective?
• Can you invest at a lower cost?
• Are you able to invest on your own and fetch a higher return?
• Are you well-covered or have plans to get insurance coverage after cancelling your ILP?
• Does it make sense to carry on with the ILP in terms of cost and its functionality?

• Very often ILPs incur not only costs, but it becomes rather tricky at a later stage in life. You can head over to this post here in our Community where some users discussed the realities of the rising cost of insurance in the ILP eating up the investment value at a later stage.
• Also, you can refer to this user’s blog where he/she labelled it NEVER EVER BUY AN ILP. In summary, he/she only had a return of 0.35% which is way below inflation at 2%. 
• One of our community contributor, Alan, discussed the interesting trend of underinsuring. This is because they mix insurance with investment (aka whole life), endowments and ILPs. These investment products give mediocre insurance coverage.
• Hence, some agents may jump on this on this to sell policies which may be without sufficient coverage.

4) Should I Get An Agent Or Do-It-Yourself (DIY)?

• Pharmacy: If you already know what you want (e.g buying Panadol, flu medicine), you don’t pay consultation fees
• Doctor Clinic: If you have some complicated existing plans or complications, go to the doctor and pay consultation fees on top of the medicine cost

5) How Do I Choose A Good Financial Planning Agent? 

• Clarence Chua
• Elijah Lee
• Hariz Arthur Maloy
• Loh Tat Tian (Ex FA)
• Luke Ho
• Vincent Tan Wei Bin

6) Should I Buy All From One Agency Or Pick And Choose From Various?

• However, if you get the ESSENTIAL (eg. a whole life or term life with Agency X), your RIDER (eg. Critical Illness or Health) may be cheaper as a top-up, versus individually purchasing the different plans from different agencies. 
• Lastly, there is a big plus if you stick to one agency – Your Agent (point of contact). That being said, personally, my family seen a ton of agents leave the industry just after 5-10 years (innately these people are very driven to succeed, so by being an agent it may not be a long term career path).
• What happens next, is that you get assigned another agent who may not do follow up meeting and reviews as you have fallen off the ‘sales funnel’ in some sense.

7) Is My CPF Insurance Coverage Already Enough?

• Dependant Protection Scheme: The Dependants’ Protection Scheme (DPS) is term insurance that provides insured members and their families with some money to get through the first few years should the insured members pass away, suffer from Terminal Illness or Total Permanent Disability.​ It covers only $46,000 sum assured but for a very low premium amount yearly, between $36 to $260.
• MediShield Life: It is a basic health insurance plan, administered by the Central Provident Fund (CPF) Board, which helps to pay for large hospital bills and selected costly outpatient treatments, such as dialysis and chemotherapy for cancer. It is structured so that patients pay less MediSave/cash for large hospital bills.
• ElderShield: ​ElderShield is a severe disability insurance scheme that provides basic financial protection to those who are not able to do simple daily activities and need long-term care, especially in their old age.​ (you must be not able to do some of the basic routines, eg walking, bathing, eating etc)

• MediSave: It is a national medical savings scheme which helps CPF members put aside part of their income into their MediSave Accounts to meet their future personal or approved dependant’s hospitalisation, day surgery and certain outpatient expenses. 
• This is a sum of money (which you are forced to save every month) which you can use when you are warded in public or private hospitals

• Health: Upgraded to Private Hospital level (NTUC INCOME, bought at a young age) with as-charged rider
• Term + Whole Life: Coverage up to $500,000 presently (AVIVA MINDEF Scheme) with a whole life (bought at a young age)
• Critical Illness and Early CI: Riders on top of the AVIVA MINDEF Scheme
• Personal Accident: Currently with my company policy

Concluding Thoughts