Insurance Planning in 15 minutes

Some time back, I mentioned that I would be reviewing my insurance needs. Since then, I 've sent out several emails to various insurance companies to request for a quotation.

After doing a review, here are a few of the plans which I think is essential. In the order of importance (in my personal capacity as a normal man on the street):

1. Medical Insurance (Must have)
2. Insurance cover for Death and Total Permanent Disability (Must have)
3. Disability Income Insurance (Must have)
4. Insurance cover for Critical Illnesses (Nice to have)

Medical Insurance
Premiums for Medical Insurance can be paid using your CPF (up to $800 per person). It basically covers for any big bad events which requires you to be hospitalised. I've did a simple comparison on the benefits versus cost for different insurers but have been told that the premiums will be increased soon, probably in July. so I will not include the comparison here.

As you may have felt the effects of inflation on your daily life, do take note of this component too when you choose your plan. It's best to get one which reimburses you on a "As Charged" basis to cover yourself against medical cost inflation. If you need an idea of how much medical operations costs in Sunny Singapore, you can check it out here.

You can get this policy anytime you want. But do take note that if you do switch between insurers, make sure you do not have any pre-existing conditions.


Insurance cover for Death and Total Permanent Disability (TPD)
Most people would have known this by now. As such, my point of discussion will be on whether you should get a Term or Whole Life Policy.

Friends of mine will know that I'm a proponent of Buying Term and Investing the Difference/ Rest. My reasons are:

• The insurance should be for protection purposes, not for investment.
• The purpose of insurance is to protect yourself and your family should you be gone and unable contribute to the household.
• No intention to leave a large legacy for my dependents, except to cover for their daily needs when they are still financially incapable.
  

But one caveat about this method - You need to be fairly disciplined to invest the rest. I think this is not such a big problem if you set up a regular savings plan with Fundsupermart or DollarDex. I'll talk about that the next time.

You have to understand that as you're paying less every month in insurance, you should go along the path of becoming your own insurer after you pass the age of 65 or 70, when insurers will only take you in if you pay up a large sum of premiums. Hence, the remaining invested will be a cover for your own death and TPD after those ages.


Disability Income Insurance
There is a very real need to protect ourselves against risk of being totally or partially disabled. If the bad were to happen, the effective income generation due to the loss of working capability will be zero (unless you have other streams of income coming in, but that's a different issue). Hence, you need a policy which pays you should you lose the ability to work. For this, you can approach either Great Eastern or Aviva. To my limited knowledge, these are the only 2 insurers providing such policies.


Cover for Critical Illnesses
They are nice to have. The cost of hospitalisation and surgery should have been covered by your medical insurance. However, it might be necessary for you to have an additional sum of money to tide over the period where you are unable to work after your surgery (assuming of course you can be saved).


There you go. Insurance planning in 15 mins! I'm going to kick start my plans this weekend.