Insurance has become way too complicated. Insurers know there is a demand for safety, and try to cover everything in more and more comprehensive and complex plans.
But oftentimes, trying to be comprehensive leaves you with less real protection.
I wanted to be very clear on what is essential and what it actually costs, so people can buy what they really need.
This is first-hand experience, because I have been through stage 3 cancer and claimed all the policies myself. I have filed in every single claim form, argued with insurance companies, and cashed in the cheques. I know what insurance agents won’t tell you.
There are only 2 essential insurance plans you need to have in Singapore. The rest are mostly good-to-have, and which I will cover in a Part 2.
What: Otherwise known as Integrated Shield Plans (IPs), these cover your health treatment costs. Whatever treatment or surgery that you do in an approved hospital, should be covered.
Why: This protects you from large medical bills. Treatment for cancer can cost hundreds of thousands of dollars. Same for major surgeries like heart operations. If you don’t have this, you are basically screwed if you get anything serious.
Tips: I would heavily recommend that people pay more and get private hospital insurance. This greatly expands your treatment speed and options, as well as the quality of your surroundings. It does make a big difference.
I understand if private hospital insurance is out of reach of some people. So just get the best IP you can afford, any plan is better than no plan.
Please also get the riders which cover a greater share of the co-pays and provide daily cash benefits. They are relatively affordable and easily pay for themselves.
Typical cost: $310 (MediSave) + $375 (cash) = $685 for the NTUC preferred plan, age 30-35.
2. Critical Illness
What: This pays out a fixed sum if you are diagnosed with any of 37 critical illnesses (CI). Death and Total Permanent Disability is often part of such plans.
Why: This is to give you a fixed sum to tide you over while you are getting treatment and recovery. IPs just pays for the treatment. You can’t work while being hospitalised. You and your family will still need food and a roof over your head.
Tips: The general advice out there is to buy at least 5-10 times your annual income. I will go further to say that buy enough so you don’t need to work ever again if you get a critical illness. You just don’t know how bad it will be and how young you will be.
Typical cost: NTUC and Mindef have the most cost-efficient term insurance plans. They are group plans, which means you must be a member to be able to buy their plans. As they have a limit on their sum insured, you may need to shop around for more than 1 plan.
NTUC Luv plan: $480 for $200,000 coverage for 19-45 years old.
Mindef Group Term Insurance: $148 + Living Care Rider ($216) = $364 for $300,000 coverage, for 31-35 years old.
Total for $500,000 CI and death coverage = $844 per year.
$1,500 is all you need
So that’s it! The total cost to you for all the essential protection is about $1,500 per year or $125 per month.
THAT IS ALL YOU REALLY NEED.
It costs 2.78% of a Singaporean’s median monthly salary of $4,500.
It is in fact an overestimate. It’s not a must to get a private hospital plan, and $310 can be paid through MediSave.
You don’t need whole life, you don’t need endowments, you don’t need early CI and multi-pay. You definitely don’t need investment -linked policies.
If you have the money, sure why not. I have bought endowments and whole life policies for my kid. We also have personal accident, disability income, and early CI policies.
But you must take care of the 2 essential plans first. Buying the wrong plans for your life stage can heavily reduce your protection! Because they cost so much, people can’t afford to buy real protection. A typical whole life CI plan for $250,000 coverage is around $4,000 a year. That is 4 times the cost for half the protection, as compared to term plans.
That’s it. All the insurance you really need. Don’t be fooled if people push other plans ahead of these.
What are you waiting for?