The Roles of Insurance in your Journey to Financial Freedom

Louis Koay
Louis Koay

Most people want to retire freely.

Me included.

We want to achieve financial freedom so that we do not have to worry about money.

We are all working hard in our own ways – some choose to be an employee, others start their own business and yet others invest so as to make their money work harder and arrive at financial freedom earlier.

1 financial freedom

However, as we know, life is uncertain. The road to financial freedom is not a straight line.

There will be ups and downs in life. We may get promoted, and we may secure new contracts for our businesses.

There will be down times as well, we may fall ill, meet with an accident among others.

This is the time where we need to incur a large sum of money to pay for hospitalisation cost.

2 cost

Moreover, most of the time we do not live alone. We all have loved ones we want to take care and protect.

And, we will have assets, property, cash, investment. We will also have liabilities, mortgages and loans to repay.

Some of us have dependents. Our children and parents are depending on us for their living expenses.

If an unfortunate event occur such that we pass on prematurely, who will be the ones taking care of our dependents? In the worst case, if we are unable to service our liabilities, we might even lose our hard earned assets.

3 liabilities

Some of us may think that we have siblings who can take care of our dependents.

“They can take over my assets and liabilities in the event of premature death.”

But think carefully, your siblings also have their own dependents or liabilities to take care of.

We should be responsible of our own dependents and liabilities. A responsible person would not want to burden others.

4 person

And in the event that we manage to recovered from our illness or accident. We may be disabled or work with limited ability. We will need a sum of money to take care of our own living expenses.



Even if we are able to achieve financial freedom without any incidence, as life expectancy becomes longer, up to a certain age in our life that we might need someone to take care of us as we may not be able to perform daily activities.

There will be another cost of long term care.

5 care

So in our path to financial freedom, insurance plays a part. The role of insurance is to protect ourselves and our family in the event of these unforeseen circumstances. I will examine how government policies and private insurance can protect and provide for our:

  1. Hospitalisation expenses
  2. Death, critical illness and total permanent disability
  3. Long term care and finally how
  4. Insurance can help us achieve our retirement and financial goals.

Hospitalisation Expenses

Government Policies

In Singapore, we are quite fortunate that Singapore government has come out with few policies to take care of these costs.

For protection of hospitalisation expenses, CPF board has introduced Medishield Life. However, Medishield Life do not cover all hospitalisation expenses. Deductibles and co-insurance is not covered and there is a claim limit for hospitalisation expenses.

Private Insurance

To make sure ourselves are fully covered for hospitalisation expenses, we need to get private integrated shield plan from private insurer. Read about Medishield Life and private integrated shield Plan

6 here

Death, Critical Illness and Total Permanent Disability

Government Policies

For all of us who are contributing to CPF, CPF has given an option for us to take up Dependent Protection Scheme (DPS). DPS is an insurance that cover death or permanently incapacitated either physically or mentally up to $46,000 until age 60. Do ask ourselves, is $46,000 enough to cover our liabilities and take care our dependents? Certainly not.

Private Insurance

To add up protection value, we need to get term or life insurance to cover death, critical illness and total permanent disability. Depending on the individual, some may be better off with life insurance while for many others, term insurance is sufficient. Do read my post comparing both term and life insurance.

7 insurance here

Long Term Care

Government Policies

For those who are above age 40, we will be automatically covered under Eldershield. Eldershield is a long term care insurance by CPF board. Eldershield pays out $400 per month in the event that the life insured is unable to perform 3 of the 6 activities of daily living. The 6 activities of daily living consist of washing, dressing, feeding, toileting, transferring and mobility.

Eldershield will pay out $400 per month for a maximum period of 72 months. Question is, is $400 per month enough for long term care cost? If we need to hire a maid or buy equipment to assist our daily activities, $400 per month is certainly not enough. Just the cost of hiring a maid in Singapore will easily be double of that.

Private Insurance

For long term care private insurance, we are able to “upgrade” our eldershield to eldershield enhancement. We can potentially get up to $1000 per month or more in the event that we are unable to perform 3 ADLs. The good news is, eldershield supplement can be purchased by using our medisave. This mean that the majority cost of eldershield supplement is taken care by our medisave monies. Depending on your entry age and monthly payout benefit, some of us don’t even need to fork out any cash to purchase eldershield supplement!

8 supplement

Retirement/ Financial Freedom

Government Policies

Last but not least, we want to retire freely. The first thing that come into our mind when we retire is CPF. Yes, most of us will have CPF savings that is supposed to be used to fund our retirement. However, most of us are using CPF to buy property. CPF members need to keep aside minimum sum of $161,000 in the retirement account before he or she can draw the money from CPF at age 55. If a person participates in CPF LIFE, he or she will be able to draw out about $1200 per month from age 65 onwards.

I think we all will agree that this will not be sufficient for our retirement living expenses. Moreover, the median sum of CPF retirement account is actually less than $161,000. Which mean at least 50% of CPF members cannot draw out $1200 per month from CPF LIFE!

Private Insurance

To achieve retirement or financial freedom, we need to learn how to grow our money. Of course we can get an annuity plan or savings plan from private insurer to increase our monthly pay out when we retired.

More importantly, we need to know how to invest our money. The objective of Bigfatpurse is to share our financial journey with everyone in the hope that to ensure that everyone is adequately insured and at the same time, able to grow our money to achieve financial freedom.

For more questions about insurance, do contact me at or leave your comments below.

image: world business finance news

Louis Koay
Louis Koay
Louis Koay is a dual-licensed representative at a top financial firm. He graduated from the National University of Singapore with First Class Honours and he is a CFA charterholder as well as a Certified Financial Planner. He is currently managing a team of 6 advisors and servicing more than 1,000 clients with asset under advisory of more than $20 million. As a trainer at Dr Wealth, Louis developed the Personal Finance Mastery Course and he is a key trainer in the Intelligent Investors Immersive Program. He has trained more than 10,000 retail investors in analysing stocks and on personal financial planning.
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