One of the most common asked questions by fresh graduates and young working adults would be “What type of insurance do I need in Singapore?” and “How much coverage would I require?”
2018 was the year when I finally managed to get my own insurance portfolio in order and would be sharing my personal journey and what I’ve learnt in a blog post.
Before writing this post, I sourced for some opinions from my peers via my Instagram Stories. This would ensure that I can address the commonly asked questions by young adults when considering which insurance plan to get and how much to spend.
Thank you very much to all of those who have responded to me and who have helped made this article as comprehensive as possible. This post would not have been possible without the helpful response of many of my peers.
Please note that the opinions in this article are my own – a fellow youth who has spent quite a bit of time researching about this topic.
I would highly recommend that you do not make any decisions about insurance solely based on what I write and also seek the advice of a qualified financial advisor.
Ultimately, all of us have different life circumstances and it is more important to decide what you really need and buy the type of insurance that fits your own situation.
Having established this, I would now go to share what types of insurance I feel would be useful for young adults in Singapore.
If you’re looking to buy insurance this year, I hope that the information shared would be helpful to you in deciding what type of insurance to buy and would save you lots of time during the research process.
1. Life Insurance: To cover death, terminal illness and total permanent disability
What is the objective of life insurance?
A life insurance is basically financial product that provides a payout should you experience serious illness, permanent disability, or death.
The purpose of this money is to help you meet the financial needs of your aging parents or spouse; pay off liabilities such as mortgage or to fund children’s tertiary education.
I highly recommend that you get this while you’re young. Delaying your life insurance will only result in higher premiums in the future and the probability of becoming not insurable increases as age goes by.
Reality Check: Buying Life Insurance Young Saves Money
What type of life insurance are there?
There are two main types of life insurance.
Whole life insurance provides life-long protection.
Term insurance provides you with insurance protection for only a fixed period of time. This makes sense if you plan to provide for your dependants for a limited time. For example, only until your youngest child completes university or is financially self-reliant.
So, which would be a better option – Whole life or term insurance?
Well, I guess you need to ask yourself – Do you need to provide for your dependents for the rest of your life? Or only till they are financially self-reliant? The answer to this question would help you determine if life or term insurance would be better for you.
From my observations, most financial savvy people again never buy a whole life insurance but rather just term life insurance. You can read up more about the strategy that many have opted for, which is to “buy term invest the rest” here.
Furthermore, I feel that when one is in their 60s, life insurance should no longer be needed because your financial commitments should be at a minimum. This means no debt, no dependants and no major financial expenditures.
How much coverage do you need?
To calculate how much coverage you may need, you may wish to check out the Life Insurance Calculator. This was designed to provide an estimation of how much insurance coverage one will need to provide for in the event of Death. The calculator takes into consideration 4 key areas:
- Dependants’s living expenses
- Child’s tertiary education (if any)
- Pay off any outstanding loans
- Gifting to beneficiaries
What did I get for myself?
I opted for term insurance and am only covering myself till 65 years old:
- Death Benefit: 1 million
- Terminal illness benefit: 1 million
- Total and Permanent Disability: 1 million
- $598.50 per annum [Female, 26, non-smoker]
You can compare the various types of life insurance available at DIY Insurance. This is a life insurance comparison portal that allows you to get the best plans for your needs through unbiased comparisons. Access their comparisons here.
2) Hospitalization & Surgical insurance
What is the objective of H&S?
The purpose of this insurance is to cover the really expensive Hospital and surgical bills and outpatient care.
I personally feel that Hospitalization and Surgical insurance is a top priority.
It is usually this medical costs which can really causes the most damage financially. It can be very painful to survive using your own cash or have less than the best care for you. In fact, there’s a saying that “one can die but cannot fall sick” in Singapore because of the high hospitalization costs.
Why do you need this when you have Medishield Life?
As Singaporeans and PRs, we are automatically covered under MediShield Life from 1 November 2015, even for your pre-existing conditions. MediShield Life is a basic healthcare insurance designed to pay for hospitalisation in Class B2/C wards in public hospitals.
You may choose to add on an Integrated Shield Plan.
This is like an add-on to your MediShield Life coverage for hospitalisation expenses.
The additional private insurance coverage on top of MediShield Life provides higher coverage for hospital stays in A, B1 Class wards in public hospitals and private hospitals.
To decide whether you would like to take up an integrated shield plan depends on two factors
- Do you wish to stay in private wards and do you wish to choose your own doctor?
MediShield Life will provide sufficient coverage for your large hospital bills in B2 or C Class wards in public hospitals. Integrated Shield Plans provide additional coverage if you prefer to stay in A or B1 Class wards or in private hospitals.
- Can you afford your Integrated Shield Plan premiums in the long term?
As an integrated Shield Plan provides additional private insurance coverage, premiums will be higher than MediShield Life. Premiums will also increase as you get older.
One commonly asked question is “Why do I need this when I am already covered by my employer?”. The reasons are as follow:
- When an employee leaves, the company will usually cancel the individual’s policies – after all, there’s no point in wasting money paying for someone who is no longer a part of the team, right?
- If you developed any new illnesses during the period at your old job, these would usually be excluded from your new policies when you switch companies.
- Your company health insurance may not be as comprehensive. There are many employers who tend to accept certain limitations to the policy terms and conditions including sub-limits, deductibles and co-insurance
What did I get for myself?
I personally opted to get an integrated shield plan with assist rider. My premium amount this year is $372.34. Please note that it changes annually.
3. Critical Illness
Why do I need critical illness when I already have hospitalization and surgical insurance?
When you’re sick with flu you’d get medicine for a couple of days and all would be well. However, if you’re ever sick with late-stage cancer, it would take months and even years to recover.
What constitutes critical illness? These include common illnesses such as cancers, heart attack, stroke and kidney failure (see above). In this case, it’s unlikely that you’d be able to work. If you’re the main breadwinner in your family, this could cause many problems for your loved ones.
While H&S mainly covers hospitalization and surgery bills alone, Critical Illness insurance can compensate you for lost of income. The payout from critical illness could also be used to help you:
- Engage a helper after the treatment
- Special dietary needs.
- Long term medication.
- Inability to work while recuperation.
Cancer is actually something that is very real and close to us Singaporeans. In fact, cancer takes away 5,899 loved ones from families on a yearly basis in Singapore. For every 3 deaths, 1 is attributed to cancer, making it the top killer in Singapore.
Think about it, if you have stage 3 cancer, would you still wish to continue to work or spend time to recuperate?
Should you opt for early critical illness plans ?
The basic CI plan only provides payout when the illnesses are in the intermediate stage.
However, the early stage critical illness plan provides for payout as soon as the policyholder is diagnosed.
The ability to have access to the claim money in the early stage of a critical illness can mean more resources towards earlier medical intervention and better treatment outcomes.
However, one should note that early stage critical illness plans would have a higher premium than a normal critical illness plan.
What did I get for myself?
I personally perceive early critical illness as a good to have rather than must have. However, I also acknowledge that some may need it more than others such as the main breadwinners, those who are self-employed, those who are single.
My early critical illness insurance plan covers myself until I am 65 years old:
- Coverage: $80,000
- Premium: $676.40 per annum
Where can you find and compare the different types of CI plans?
You can compare the various types of life insurance available at DIY Insurance. This is a life insurance comparison portal that allows you to get the best plans for your needs through unbiased comparisons. You can access their comparisons here.
Further Reading: Top 5 Questions Singaporeans Have About Critical Illness Insurance
4. Travel Insurance
Millennials love to travel and most of my peers travel around 3-4 times a year. If you fall within that group which travels the most frequently, travel insurance is an absolute necessity.
There are several instances where travel insurance can come in handy such as stolen phone, medical checkup, postphoned or delayed trip or a damaged or lost baggage.
However, the two most expensive items of all that travel insurance can cover seldom cross people’s minds.
First of all, it would come in handy when you are require medical evacuation.
This is the cost to get you to the closest medical facility, from your point of injury. For example, if you break your leg while halfway up a mountain, you may need to be evacuated by air (rescue helicopter). The cost for these services are notoriously high.
This is to send you back to Singapore for treatment. If you’re in places like Europe or the United States, the cost to be treated there – without the subsidies afforded to their citizens – are prohibitively expensive. If you’re in a developing country, there may not be sufficiently advanced medical facilities to deal with your injury / illness.
Also, if you pass away while abroad, the body has to be returned home. This is far from cheap. An undertaker has to be contracted in the relevant country, and the coffin and transport arrangements made. It’s not uncommon for the cost of mortician’s services, along with the casket, to reach sums of $20,000 or more.
When do you need annual travel insurance?
A simple answer would be if the total amount of all your single trip Travel Insurance Policies surpasses the amount you need to pay for an Annual Travel Plan assuming coverage is equal.
If you travel frequently for work around 5 times a year, you could check with your company if they have any annual travel insurance plans that would cover you.
What did I get for myself?
For this year, I have opted for an annual travel insurance and the premium is around $309. I do not forsee myself traveling much next year and would likely not take up an annual travel insurance.
5. For Home Owners: Home Insurance
You might have vaguely remembered having signed up for fire insurance when you purchased your HDB.
This is different from Home Insurance.
Fire insurance offers a payout in the event that your home is structurally damaged, whether by fire or some other disasters on the list. Structural damage refers to damage to things like walls, floors and pipes—basically, the building itself as well as the original fixtures and fittings that were there when you purchased the property.
On the other hand, home insurance deals with offers a payout for contents of the home that are not part of the structure itself, or that you added to the home after you purchased it. This include home renovations you made after purchasing your home fall under this category, as well as furniture, appliances and even personal items.
Having fire Insurance only, means that you’re only covered for damage to the physical structure of the flat and cannot recover any costs attributed to your renovations and/or home furnishings.
Given that Singaporeans spend an average of $70,000 on furnishing plus renovating their new home, I feel that home content insurance is a necessity.
What did I get for myself?
Based on the recommendations by ValuePenguin’s Best Home Insurance 2018, I personally chose NTUC Income’s Enhanced Home Insurance. This is one of the cheapest products in the market that only costs S$51.36 per year for a 4-room HDB flat.
I acknowledge that there are several different kinds of products out there in the market and I didn’t cover all of them in this post.
However, the purpose of this article about what type of insurance is really to highlight the basic kind of insurance that a young adult can consider.
To me, insurance is quite important and I feel it is one of the first things a young working adult should sort out before graduation.
I personally agree with Bank Bazaar’s perspective that you should always aim to protect your wealth first before you try and grow 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.
So, how much should you be spending on insurance in proportion to your income? Dollars & Sense generally recommends spending no more than 3% of your annual income on insurance protection. You may exceed or fall under this by a little depending on your financial situation.
So with that budget in mind, you need to ask yourself which type of insurance products you should be buying. And also if you can afford the premiums over the long run.
I generally agree with their perspective and try to keep my insurance spending around that limit. However, I understand that perhaps others may have a different view. There is no right answer that fits everyone and it really depends on your specific life circumstances.