Here's some of my older posts on insurance
Insurance - Types of Insurance
Hospitalization plan and Eldershield
Why do you buy insurance - what people don't think about.
Why I think an endowment plan is a good product
Is healthcare cost too expensive in Singapore?
There are so many types of insurance, but actually, insurance is pretty simple.
All insurance are actually term policies, then they package it into something complicated.
Medical and healthcare insurance in Singapore is very simple.
Medishield life. This takes care of a lot of our healthcare needs and people can go to government hospitals.
If you want to upgrade, then you can buy from a private insurer then you can go and consult at a private hospital. This IS very expensive especially in the later years of life. I may consider dropping it when I get older.
Some people want to get a rider to cover the deductible. This is a personal choice. Personally, I don't have it, cos the rider is very expensive and I don't think I'll visit hospital much.
Overall, there's little to think about.
Everyone already has Medishield Life, the decision is whether to upgrade or not. And whether to buy the rider or not.
This is a term insurance, no money will be returned after the period ends, and will be adjusted every year to take into account rising healthcare costs. Some insurers are more expensive than others.
Who should get this insurance? Everyone needs this insurance. At least Medishield Life, which is automatic anyway. Upgrade or not, up to you.
Accident Insurance
Many people have this type of insurance. It's cheap. Just a few dollars per month.
This covers the insured if the person meets with an accident, loses a part of a finger, loses a leg, DUE TO AN ACCIDENT. If the person dies from an accident, the payout will be greater.
If the person dies from a critical illness, there is no payout.
Personally, I don't have this insurance.
Personally, I feel that many people don't really need this insurance, depending on the job we do.
Many of us won't be affected much if we lose a finger. Yes it would be nice to receive some money from it, but it really won't change our lives. Furthermore, most of us aren't in jobs that will cause us to lose a finger. And IF we did lose a finger, if we work in office jobs, we'll still be able to work as per normal.
It does get more troublesome if someone loses an arm or a leg, some jobs will still be able to employ such a person so, it may not may not impact the person much from a employment point of view.
Don't forget, this is only due to accidents.
Death benefit is greater, but also must be from an accident.
Personally, I feel this isn't useful for me. Since I already have my life insurance to cover me if I die.
HOWEVER, someone who might be impacted by such accidents needs to buy such insurance.
For example a doctor... Remember what happened to Dr Strange.
So someone who needs his hands or limbs to remain employed would benefit greatly from having such forms of coverage.
This is a term policy, means no money will be returned after the period ends.
Life Insurance
Ok, ALL insurance are term policies bundled together into complex products.
Life insurance is simple. If the person insured dies, gets total permanent disability (TPD - loss of 2 eyes, hands, feet, or a mixture), or terminal illness (when the doctor says the person has 6 mths to live, not to be confused with critical illness). Most life policies will pay out in any of these 3 scenarios.
How much to insure? It really depends.
Like what I say, insurance is not like buying chicken on discount.
$50/month cover for $500k
$90/month cover for $1 million
$150/mth cover for $2 million
If you don't need the $2 million coverage, it still doesn't make sense to buy the $2 million coverage.
The question is, are you buying insurance to help your family tide over a rough period to get their lives back together again.
OR are you buying insurance to help them HUAT when you're gone?
Also, I believe life insurance should decrease over the years. As a person's networth increases when their older.
Cos remember. Insurance is to cover for a person's loss of income.
If a young person 30 year old dies, he may have low assets and his family needs some support til the family gets their lives back on track.
But someone who is 50 years old with $2 million in his bank account... does he really need much more insurance? The family already has $2 million assets to help tide over their lives until they get back on their feet. Unless their lifestyles are so enhanced that they need $10 million insurance to be able to maintain their lifestyle. Which... well... I suppose it's their choice.
But personally, I think insurance should decrease as personal networth increases. Depending on a person's lifestyle and commitments.
Whole Life Insurance is basically, term life insurance + buying Singapore Savings Bonds.
It's almost the same concept. Depending on circumstances one may have better returns than the other. But SSB can be withdrawn at anytime without loss. Whereas an insurance policy can't be withdrawn without significant losses.
All you need to do is to subscribe to SSB on a monthly basis and hold it til you grow old. When the SSB matures, you can just put them all into SSB again.
Only good for $200k though.
As your money grows, depending on when you reach the $200k SSB limit, you can take out the money and buy into a bond ETF, which should potentially give a low volatility 2-3% return.
Endowment plan is also the same. Just buy a term life insurance + SSB.
It's just a shorter term whole life insurance product.
(The maths of endowment is... the insurer is calculating the probability of the person insured to 100% die at an earlier date, which is the date the endowment matures. Whereas the whole life policy, the maths is the insurer is calculating the probability of the person insured to die at around 88 years old or something like that.)
Similar product as whole life, just a shorter time frame. If you have the discipline to regularly buy SSB on a monthly basis.
Investment linked policies are basically, term life insurance + buy a fund, or a few funds.
So you can just open a brokerage account or even a regular savings plan with DBS, UOB, OCBC, they allow for small amounts of investments in some funds or stocks on a regular basis, although the brokerage is higher. But... well, still cheaper than paying for an insurance product.
There are simple ETFs available on SGX. STI ETF, there are also REIT ETFs, so... in the long term, I reckon these will do better than many of the other products offered by insurance companies which incur more management fees.
I believe almost everyone should have a life insurance policy. It's not always about death, cos there's always the chance of total permanent disability and having some compensation when being disabled is useful for life's challenges.
How much to insure is pretty much up to the individual.
For me, I don't insure a lot. It's not in the millions. Cos as I said, I'm not buying discounted chicken. I just want some coverage so that my family gets a bit of money to get their act together again. It's not for them to HUAT and enjoy their lives. Furthermore, as my assets have been increasing throughout the years, we need less insurance to keep our standard of living.
Critical Illness / Early Critical Illness
This is also always term insurance. Often, it's sold as a rider. But it's still term insurance. If it's a rider, it's just packaged together with something else.
Many people get heart attack, stroke or cancer these days. Some folks have said the probability is one third. I'm sure many of us know people who have had heart attack, stroke or cancer, so I reckon some form of critical illness coverage is useful.
Basically, this is to cover recovery costs of the illness.
Hospitalization should already be covered by the healthcare insurance.
So this additional coverage is pretty much to cover long term leave for recovery, or maybe additional medical bills which are out of the hospitalization which might not be covered under the hospitalization plan.
Critical illness is a bit tough to claim, cos the definitions are really strict and the illness needs to progress to a late stage before it's claimable.
Early Critical covers are more expensive but the policy is able to pay out when the person insured has early stage illnesses.
So it's a choice. For me, I have a bit of both. Cos, it's useful to have some money at each stage of the medical condition, after taking into account the cost of the insurance.
Of course buying ONLY early crisis cover is better, but it's more expensive.
So for me, I decided half half is more affordable.
How much to cover? It's pretty much up to individual choice.
For me critical illness is critical illness.
It's to help me with finances when I'm still alive but have a critical illness.
If I die from critical illness, then my life insurance will payout.
So I'm clear not to mix the two of them.
Who should buy it? I personally think everyone should have some coverage for this as well. Cos considering the probability of critical illness these days, my view is that some coverage will help if the situation arises.
And that's it... Insurance is pretty much so simple.
Most of the time insurance agents sell a story. Tell you a story about how your life should be and at what age you need what. How much you need to save for your kids, their college fund, your retirement, etc...
This is so they can sell more products and in multiple tranches.
IF... IF you have the discipline to save and invest, you can actually keep insurance costs very very low. Just buy some term insurance and invest the rest.
There's so many other products like retirement plans where they return the money to you in bits over 10 years, or unemployment benefits, etc... but in reality... most of us won't use this. OR with your own knowledge and discipline, you could just do it yourself for cheaper.
These products are useful. Different people different requirements of course.
But personally, I think many of these products are just there to confuse the customer and make them think of things that are highly unlikely.
For example, unemployment insurance. Yes it's potentially possible. But... I think even if someone has been retrenched, he can still find employment again, even if it's not within the same industry. So there's really no need to purchase an insurance product just for that.
*Note, please consult a trust worthy financial adviser for customized financial advice for yourself.
This post is a general post of my own views, which may or may not be suitable for your own personal circumstances.
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