Ultimate guide to insurance in Singapore [Checklist]

What Is Insurance?

Insurance is a SAFETY NET! it is your last line of defence against unexpected financial woes.

In proper terms, insurance is the transferring of risk from one party to another. It protects your wealth and properties against unexpected scenarios.

For example, if you fall sick, insurance pays, if you get into a car accident, insurance pays.

While there are many misconceptions about insurance, in this ultimate guide, we will simplify insurance into a 5-step checklist and answer some common questions you might have!

4 Reasons Why is insurance important?

Basically, insurance is important because it pays your bills in 4 major scenarios:

• You come down with an illness, e.g. Allergic Reactions, Cancer, Diabetes, etc… and get hospitalised with an expensive bill of over a few thousand dollars.
• You survive an accident but you’re left disabled and an expensive bill, long term care.
• You may die prematurely, and your family inherits your liabilities (loans, debt, housing, bills)
• You retire or lose your job, and require an alternative source of income.

In all those scenarios, your insurance policy will pay out give you the much needed financial aid

So, what insurance do I need in Singapore? 

Generally, insurance is complicated, there are many products out there and each of them serves a different purpose and need.

You might have chanced across some agents who oversell/ missell unnecessary products, making insurance seem like a pain in the ass.

However, there is certain insurance that genuinely will help you out. In this article, we will go deeper into the 3 things you need to know before purchasing insurance:

1. Does the plan solve a need? (Refer to our 5-item checklist)
2. How much coverage do you need?
3. Reasonable cost/ premium.

The 6-item insurance checklist to solve 4 different needs.

There are mainly 6 types of products when it comes to personal insurance, and each of them serves a different purpose.

The 6 main types of personal insurance are (In order of importance):

1. Health Insurance
2. Term/Whole Life insurance
3. Critical Illness Insurance
4. Accident Insurance
5. Disability income/long-term care insurance
6. BONUS: Wealth Accumulation (Investment, savings, endowment)

If you are on a tight budget, we recommend you settle at least your Health Insurance, Life insurance, and Critical Illness Insurance. This ensures that in the event of any major illness or accident, you are well covered.

If you have a little more money to spare, you should get started on wealth accumulation as well! Wealth accumulation plans could help you tide through retrenchment or job loss.

What are the 5 different types of insurance all about?

Health Insurance

In Singapore, Health insurance is also known as an integrated shield plan, it is the most important Insurance that everyone must have. It covers major healthcare expenses in Singapore, including your MRI scans, CT scans, and all hospitalisation bills, including cancer, stem cell and gene therapy.

Your hospitalisation plan consists of 2 portions.

1.      Medishield life Government Plan (It is a basic plan that has low coverage)

2.      Additional private insurance coverage – Additional private hospital coverage covers up to 95% of all hospital bills in private & government hospitals.

One important thing to note is that the shield plan can almost be fully paid for by Medisave, hence you do not need to pay a single cent.

Click here for our in-depth comparison of which shield plan is best and the value for money!

Term life insurance / Whole Life Insurance

Whole Life insurance is a form of income protection for your family to replace a loss of your income when faced with circumstances such as Death, Total Permanent Disability.

In the event of Death or TPD, the insurer will pay your family an agreed-upon sum in cash to your family’s bank account.

There are generally 3 types of Life insurance:

1. Whole life plans – you pay for 20 years and get covered for the whole of life (Most Expensive)
2. Term Insurance – you pay yearly for the years you want coverage (Cheapest)
3. ILP – investment-linked policy (Invest some of the money and use the investment returns to pay for insurance)

Generally, you should get a mixture of whole life and term insurance. Life insurance should generally cover at least 10x of your income. In the event of death or TPD, the 10x income payout can at least support you and your family for the next 10 years of your life.

Critical Illness Insurance

Similar to Life insurance, critical illness insurance is also a form of income protection. However, it is meant to provide for your income loss while you receive treatment in the event of critical illness.

According to the MOH, the top Critical illness in Singapore includes:

1. Cancer
2. Heart attack
3. Muscular degeneration

Very often, while you receive treatment for these conditions, you’d take some time off work to focus on recovery. Critical illness insurance will payout money to supplement the loss of income while you take time off work.

Generally, we recommend that you get covered for at least 5x your income. This number is pegged to the 5-year cancer survival milestone as cancer is the most common critical illness in Singapore.

The cancer survival milestone is a milestone where within 5 years, one will know if he or she is a survivor or has passed on due to cancer.

Personal Accident Insurance

Accident insurance generally covers your day-to-day activities. They payout a reimbursement for medical treatment due to accidents and injury, as well as for death or disability through accident. Accident insurance is usually cheap, with a premium of less than $400 a year.

There are mainly three broad areas of focus on accident plans

1.      Accidental death

2.      Accidental dismemberment

3.      Medical reimbursement to pay for the treatment due to accidents and sickness

Disability/ Longterm care Insurance

Disability income & long-term care insurance are policies that payout a monthly cash benefit in case of disability.

Upon reaching 30 yrs old, all Singaporeans will be enrolled on Government CareShield Life. For severe disability, the inability to perform 3 of the 6 activities of daily living, there will be a payout of $600/month for life.

However, $600/ month is quite little considering that someone is disabled and unable to work. As such, many Singaporeans will opt to upgrade to Careshield enhanced through their Medisave. This way, they can get up to $2100/month without paying a single cent out of their pocket. Upgrading also makes it easier to make claims.

Learn more about the comparison of the cheapest Careshield enhancement here!

Wealth Accumulation

Wealth Accumulation is about investing your money to create other forms of passive income as you grow older.

There generally are a few types of wealth accumulation plans:

1. Pure investment plans – where you invest and lock up for 10 years, expecting your money to 2x or 3x after 10-15 years.
2. Savings plans – where you save regularly for 20 years, and take your money out at the end of 20 years.

Previously investments sold by financial advisors are known as ILP. and ILPs had a bad rep due to certain companies which set extremely high fees (Pruden….Coughs Coughs). The industry has since evolved and now pure investment plans generally have acceptable fees and are often run by large fund managers such as Blackrock, Schroders, JP Morgan etc…

When considering a pure investment plan, you might want to consider the investment strategy, investment duration and risks involved. Learn more about investments here!

You could also sign up for our exclusive investment service here! In the past 10 years, our investments have consistently beat the S&P500.

General Insurance

Apart from personal insurance, there is also other insurance such as travel insurance, car insurance, maid insurance etc, However, we will not go into detail.

Summing things up – FREE Book, FREE Consultation

By now, you’d understand the general types of insurance that you need. Generally, insurance is important but probably due to misselling and overselling, the industry has a bad reputation.

If you’d like to learn more about how to get the best insurance for yourself, do check out our free personal finance book.

We also have partnered with a few selected advisors should you need a look at your insurance and investment portfolio.

Common Insurance Questions Asked By Most Singaporeans