Tips On Finding The Right Insurance

When we talk about matters of life and death, somehow the word “insurance” will come to mind. Or at least, that was what Prisca Ang, a business correspondent of the Sunday Times, mentioned in her written article published in yesterday’s Sunday Times Invest section, “What to do when insurance shopping seems daunting”.

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She thinks about life matters more as she is turning 30 soon, and at the same time, also thinks about death matters because she had attended quite a few funerals last year.

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It hit her that she would have to pay higher premiums as she gets older, and attending the funerals also made her think about the huge emotional toll on those who are left behind, wondering whether a larger insurance payout would at least lighten any financial worries.

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However, she had a hard time shopping for the right insurance due to some health issues. Even her friends didn’t know where to start, are worried about costs, or are put off by the same hassle of getting medical reports and check-ups to lift exclusions for health conditions.

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Therefore, if you have just started insurance shopping and are feeling a little lost. You can benefit from today’s 208th week of our #SundayTimesRecap learning series, where I summarise some of the tips to help you along:

1. When to buy? Prisca bought an insurance policy on her own for the first time when she started work, even though she was not earning much and thought it may not be necessary as she felt immortal, like most young people. It turned out to be one of her better decisions, as the critical illness policy was almost instantly approved without any exclusions.

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Starting early often means you are likely to be healthier, which results in lower premiums due to few to no pre-existing medical conditions.

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As your earning power increases, do consider increasing your coverage accordingly. In addition, young adults can also consider adding protection coverage as riders to existing plans, which is typically more cost-effective than buying standalone plans.

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There is a chance that young working adults’ insurance coverage may no longer align with their current needs if their policies were purchased by their parents years ago. These individuals may find themselves underinsured or overpaying for coverage they no longer require.

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It is therefore a good idea to review your insurance coverage with a financial adviser annually or at least once every few years, and during significant life events such as marriage or the birth of a child.

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2. What policies to consider? Young adults can prioritise those that offer immediate benefits during their lifetime. For instance, buying coverage that provides ‘living’ benefits, such as critical illness plans, ensures that they receive financial protection and assistance when they are diagnosed with a critical illness so they can concentrate on their recovery. These plans typically provide a lump sum benefit or reimburse necessary expenses incurred during illness or injury.

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You can also opt for plans that serve dual purposes, such as endowment plans and investment-linked policies (ILPs), which offer protection and also help to accumulate funds for future needs. Endowment plans offer both insurance coverage and savings benefits, while ILPs combine insurance and investments and tend to carry higher risks.

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3. How much insurance is enough? Ideally, individuals should obtain protection of 9x their annual income for death and total permanent disability. The coverage should be 4x their annual income for critical illness, according to a Basic Financial Planning Guide launched in 2023 by the Monetary Authority of Singapore and the financial industry.

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Another rule of thumb is to spend at most 15% of the take-home pay on insurance protection. Fresh entrants to the workforce, or those aged 19 to 29, are also advised to familiarise themselves with the national scheme MediShield Life that covers large healthcare bills, among other steps.

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Ultimately, insurance coverage is highly dependent on an individual’s financial needs and their current stage in life. For example, someone who has dependants and debt obligations may need more coverage, while gig workers may require a more nuanced calculation that considers income fluctuations and potential gaps in coverage during periods of lower earnings.

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Therefore, do assess your financial coverage based on your assets and liabilities. Assets include savings, property and investments, while liabilities encompass existing debts, dependants’ needs and when these dependants will become financially independent. The excess amount of liabilities over assets will provide a rough gauge of the required financial coverage.

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Consider using online calculators to consolidate your financial information and estimate how much coverage you need, and to discuss possible gaps with a financial adviser. Prisca also used SGFinDex to get a consolidated view of her existing policies from various insurers. The digital infrastructure enables users to retrieve their financial data from government agencies and private sector organisations, and view them in their bank or insurer’s app, for example.

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4. Navigating exclusions and finding the right adviser. While insurers strive to provide comprehensive coverage for everyone, exclusions play a vital role in keeping insurance premiums manageable and also ensure the individual gets some form of coverage. It is important to be transparent about past health conditions when applying for insurance. Otherwise, you run the risk of having certain claims rejected, or the policy voided.

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As underwriting guidelines may differ between insurers, you may also wish to explore submitting applications to other insurers if the first application results in exclusions or premium loadings due to health conditions.

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You may also appeal against exclusions in your policies if your health recovers or improves. It is essential to ensure that your medical records are comprehensive and up to date, as this helps underwriters understand your current health status.

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Financial consultants play an important role in explaining the impact of exclusions on coverage needs and negotiating with underwriters to reconsider certain exclusions by making a strong case.

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Read the fine print. It is important for you to read and review the terms and conditions, as well as the exclusions, within your policy documents. Doing so ensures that you understand exactly what is and is not covered by your plan.

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The good news is that for large hospital bills and certain costly outpatient treatments, Singapore citizens and permanent residents are covered under MediShield Life even if they have pre-existing medical conditions. You may also choose to get an Integrated Shield Plan, which adds private insurance coverage to MediShield Life.

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It also helps to consult the right doctors and research recovery programmes that may help your health to improve.

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A factor to consider when choosing a financial adviser is the industry recognition they have received. It’s an indicator that maybe, many people believe in the agent, which also goes in line with whether your trust is being placed in the right person.

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Individual preferences are also important – some clients like an adviser who gives it to them straight, while others need more “tender loving care”. It is about whether you can trust what the person is saying and whether you’re comfortable sharing your life goals with them. There is no right agent or wrong agent, unless they are mis-selling you a product.

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By having the right insurance in place, you can then focus with a peace of mind to grow your savings for your future, knowing that the short-term risks are taken care of.

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My teammates and I will be conducting our next webinar, “The Lifetime Income Streams”, on Tuesday 30th July 2024 at 8pm, where we will share simple investing tips to help you create monthly income that can one day replace your working salary, and lasts you for the rest of your life. You will feel more confident in managing your money matters as most of our attendees can testify.

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