No Nonsense Guide To Getting Insured For Millennials 2020!!
You received your first paycheck and you wonder what to spend it on? Well, let me tell you...
Getting yourself properly insured!!
WHY?
Because you will never know what might happen in the future... Better be safe than sorry!!
This guide will help you answer ALL your questions.
Why should you buy insurance when you are young?
As a young working adult, you have decades ahead to generate income. That is your greatest financial asset.
The younger you are, the more the potential you need to consider insuring.
In addition, insurance premium gets more expensive with each extra year in age. FACT!
Imagine the rare situation where you have something major medically...
Being unable to earn income is bad enough but leaving medical bills to your aging parents and still relying on them from then on is even worse.
What’s the easiest way to start?
With dozens of insurance agents out there & hundreds of plans, you are spoiled for choices.
However, there are tools available to help you better before meeting an insurance agent.
One of the tools I recommend is compareFIRST. What is it?
CompareFIRST allows consumers to compare about 200 life insurance products offered by a dozen insurance companies in Singapore. Source
It is the first such “regulated” life insurance portal offered in Singapore.
Value of an adviser to you
HOWEVER!
A professional adviser (like here at TheAstuteParent =) can still help. Why?
Engaging an adviser is NOT NECESSARILY MORE EXPENSIVE. A professional adviser knows
1) Insurers have premium discount tiers for certain plan sizes that you may not be aware of
2) Underwriting process can be smoother with an experienced adviser.
3) Independent financial advisers can help with underwriting with multiple insurers to get the best offer for you.
How much is needed to be covered?
Rule of thumb is usually
- 10X Annual Income as coverage in the event of Death
- 5-10X Annual Income as coverage in the event of Critical Illness
- Integrated Shield Plan with Rider
The 3 types of coverage you need
· Private Hospitalisation Coverage
· Death Coverage
· Critical Illness and Early Critical illness coverage
Private Hospitalisation Coverage
Hospitalisation plans is to cover your hospital and surgical expenses.
All Singaporeans have MediShield Life, a universal basic hospitalisation plan from the government, as well as the opportunity to purchase additional Integrated Shield Plans (IP) from private insurers.
Below are the limits for Medishield Life. Source
Integrated Shield Plan (IP) offered by private health insurers provides
1) more comprehensive coverage limits
2) sometimes more conditions on top of MediShield Life
3) coverage to better wards like B1, A ward or private hospital
4) Pre/Post hospitalisation limits.
If you have a newborn read:
https://www.theastuteparent.com/2019/09/best-shield-plan-for-newborn-baby/
It is important to know that if you have pre-existing conditions, there may be exclusions. So if you are perfectly healthy now, it's easy.
Premium in cash for the riders are in cash and depends on your age band. Premiums are always non guaranteed.
If you’re looking to save cost or looking for a government A ward only coverage, read this post:
https://www.theastuteparent.com/2019/01/am-i-paying-too-much-for-my-ntuc-incomeshield-enhanced/
Death Coverage
The LIA recommends 10X Annual Income as coverage and Average protection need is $626,000 per working adult! Source here from LIA
While this figure varies from person to person, how much you need at age 25 will be very different from when you are aged 50!
A more realistic measure will be to factor your current and future liabilities.
Read this is you want virtual online advisory from our Principal author Josh Tan https://www.theastuteparent.com/2020/04/online-insurance/
Critical illness Coverage
In the event of a severe medical condition or an accident, critical illness is there to compensate you. It could be for your long term loss of income.
Hence, at least 5-10years loss of income is a concern to cover.
On the other hand, the amount of early critical illness coverage can be much lesser. It is much more expensive than critical illness but it helps you get compensation again less severe conditions.
Take for example early stage cancer. I've a friend in 20s who had testicular cancer. Thankfully he has fully recovered and gone on to lead a normal life.
Extra point on disability income coverage
The disability income insurance is a standalone term insurance plan that compensates you a fixed monthly income for a period upon your inability to perform your work.
You can get covered for up to 75% of your last drawn fixed monthly income.
There are also choices on deferment period between plans.
Because of the complexity of this plan (as compared to death coverage), I feel it is better to speak to a qualified adviser first.
Read our article on Careshield Life here:
On the other hand, careshield life is coming in 2H2020 and it also covers disability.
Main difference is that careshield life is compulsory from the government once you turn age30.
It pays for the inability to perform a stipulated number of daily activities such as washing, toileting, feeding, dressing, mobility and transferability.
Covering using term insurance and wholelife insurance
Whole Life Insurance
Whole life insurance covers you till age99 or to the end of your life. In many ways, it is permanent insurance coverage.
If you do not plan to invest, the Whole life insurance plan will be a good fit for you. Why?
It has 2 components: insurance component and the participating fund (PAR FUND) component.
PAR FUND is an investment into the insurer's investment pot and it is where there are guaranteed and non guaranteed components.
Term Life Insurance
Term insurance provides you with protection only for a fixed period. You can choose any number of years quite flexibly.
Some choose to cover till aage 65. Some choose age85 which is average Singapore lifespan.
But hey, what if 20years later, the average lifespan increases to 100? Never know medical science...
But most protection needs are for a limited period. Like HDB loan of 25years or child liabilities for 21years etc… it makes sense if you plan the majority of insurance for this defined period of time.
We have an offer below for you!!
Last updated on November 17th, 2020 at 09:32 pm
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