They say there’s nothing certain in life except for death and taxes.
So if life is so full of uncertainty, doesn’t it make sense to manage the risks involved? Life insurance, in its various forms, was born out of the desire to manage the risk of death (especially premature death), disability and major illness (that could lead to disability or death).
The assumption behind wanting to manage this risk is that you wish to – should anything untoward and unexpected happen to you – maintain a decent standard of living for either yourself and/or your loved ones (unless you have a devil-may-care attitude towards life).
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This means you want the best-case scenario of being able to stay healthy (and alive) so as to provide for yourself and your loved ones, as well as not become a burden (for instance, disabled and dependent through accident or illness).
The truth is, one can never predict what will happen to you or your loved ones – and when. Insurance cannot cover every possibility out there, but it can go a long way towards offering some coverage for at least some eventualities.
Depending on your budget, age, health and situation, there would be a level of insurance coverage that would be deemed ‘adequate’ for that stage in your life (e.g. swinging singleton or new parents).
It is best that you seek the advice of a financial advisory professional to tailor such coverage to your needs. (Not having adequate insurance is one of the reasons behind a report that more than 50% of Singaporeans are not on track to meet their financial goals.)
In so doing, you may wish to bear in mind the bare necessities of life insurance in Singapore – in other words, you should consider such relatively affordable coverage as your insurance foundation:
1. Medical Insurance – MediShield or Integrated Shield Plans
MediShield is a national basic medical insurance scheme administered by the CPF Board. It helps pay for costs arising from hospitalisation, be it from accident, illness or other reasons, and certain outpatient treatments. You can enhance this coverage under the Private Medical Insurance scheme, whereby you combine MediShield and an enhancement plan offered by a private insurer – the result is known as an Integrated Shield Plan, which is your first, vital line of defence against potentially crippling medical bills. You may largely finance your Integrated Shield Plan with Medisave funds, though cash may be required for higher levels of coverage, and for riders.
2. General Insurance – Personal Accident
Personal accident plans do exactly what they sound like they do; they insure you against the risk of accidents that result in death, disablement or injury. As accidents can happen to anyone, such insurance is very affordable and applicable no matter what life stage you are at. Worldwide coverage is available.
3. Term Life Insurance – Dependants’ Protection Scheme (DPS)
DPS is an optional term insurance scheme that covers eligible CPF members. Those who have made their first CPF contribution, between age 21 and 60, are automatically included in the scheme. The maximum sum assured of $46,000 may seem paltry, but premiums, deducted annually from your CPF ordinary and/or special accounts, are kept low enough for this to be good value – and a good first step in life insurance.
4. Disability Insurance – ElderShield and ElderShield supplements
ElderShield is a national disability insurance scheme that covers those 40 and above. It offers a monthly cash benefit of $300 or $400 for 60 or 72 months respectively (depending on version of scheme one is covered under) to cover costs incurred in caring for the severely disabled. This insurance can be enhanced, for higher cash benefit up to lifetime coverage, through ElderShield supplementary plans offered by private insurers. You may largely finance ElderShield and its supplements through CPF if you have sufficient Medisave funds, or top up with cash for higher levels of coverage.
With your bare necessities met, additional insurance may be required depending on your needs. (Find out how Dr Wealth can help you gauge your needs and take an overview of your current policies.) Remember, always seek the advice of a financial advisory professional before you proceed.
About the Author
Yong Shu Chiang is a Contributing Editor for Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. A journalist and editorial consultant with extensive experience in print, magazine and online media over 15 years, he is also an authorised financial advisory consultant for Life Insurance and General Insurance.
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