Types of Insurance You Need At Different Life Stages

Are you unsure about who to trust for insurance advice? Confused about the type of insurance that you need and when you need them? Well, you’re not alone.

The result of too many unethical agents and too little trustworthy sources to rely on has caused so much misinformation out there. Thus, I've written this article to clarify your doubts. 

Before we go on, let’s first understand the purpose and the importance of insurance.

Purpose of Insurance

The purpose of insurance is to manage your risk and protect yourself from financial loss.

Let me give you an analogy.

Insurance is like your Computer’s Anti-Virus Software. Insurance protects you and your loved ones from financial loss during unfortunate events like how Anti-Virus protects your computer from virus attacks. 

Alright, so we have understood the purpose of insurance, but what type of insurance do you need at the different stages of life? 

The graph below gives you an illustration of your insurance needs as you age.

Single (Age 20-30)

When you are single and have nobody depending on your income, you honestly do not need any life insurance other than these 2 types.

First is the Hospitalization coverage.

The Singapore Government has opted all Singaporeans and Permanent Residents into this national health insurance scheme called MediShield Life which provides lifelong protection against large hospital bills.

Although a great initiative by the government, MediShield Life has claim limits.

Thus, it is always advisable to get yourself fully covered by upgrading your MediShield Life to an Integrated Shield Plan, preferably one that covers your private hospital bills. Pairing your Integrated Shield Plan with a rider that covers your co-insurance and deductibles would be ideal too.  

The 2nd type of coverage you need is Accidental coverage.

Your Personal Accident Plan should at least cover Accident Medical Reimbursement and Broken Bones Benefit.

These are the 2 policies that you should keep throughout your lifetime.

Plans to have:

• Integrated Shield Plan
• Personal Accident Plan

Married (30-35)

When you are married, your spouse is now dependent on your income and your responsibilities and liabilities would have started to increase once you have gotten your first home and a car.

Besides Hospitalization and Accident coverage, you should have coverage for:

• Death
• Terminal Illness
• Critical Illness
• Total Permanent Disability

The reason why you need these extra coverage is because you and your spouse would have additional liabilities and expenses to pay, such as your housing loan, utility bills and car ownership costs.

In the unfortunate event of your death, your spouse would receive a lump sum of money to pay off those necessary expenses.

If you contract a critical illness or become permanently disabled, at least you will receive a lump sum of money to replace your income.

Death, Terminal Illness, Critical Illness and Total Permanent Disability can be covered with a Whole Life or a Term Life Insurance Plan. If you are tight on a budget, a Critical Illness Term Plan would be a more affordable choice.

Plans to have:

• Integrated Shield Plan
• Personal Accident Plan
• Whole Life Plan/Term Life Plan/Pure Critical Illness Term Plan

Married with Young Children (Age 35-50)

At this point in time, your liabilities, responsibilities and insurance needs will be at its peak.

This is when you have housing loans, car loans, aging parents and children to feed.

You should have all the plans mentioned above and increase your coverage to about 10 times your Annual Income.

For example, if you earn $4,000 per month, that’s $48,000 a year.

You should have a coverage of $480,000 (10 x $48000).

This means that if you pass away, contract critical illness or become permanently disabled, you and your family will have 10 years to live off that lump sum of money and adjust their lifestyle from the loss of your income.

Plans to have:

• Integrated Shield Plan
• Personal Accident Plan
• Whole Life Plan/Term Life Plan/Pure Critical Illness Term Plan

Married with Grown Children (Age 50-60)

When you reach this stage in your life, your children would be starting to or have already become financially independent. Your need for insurance will gradually decreases.

However, you will still need a certain level of coverage as you wouldn’t want your spouse’s retirement funds to be used pay off any expenses if anything untoward happens to you.

Additionally, your aging parents may still be alive and likely to have health conditions. If they did not get themselves covered, you may want to get some coverage for them such as Long-Term Care Insurance and an Integrated Shield Plan.

Plans to have:

• Integrated Shield Plan
• Personal Accident Plan
• Whole Life Plan/Term Life Plan/Pure Critical Illness Term Plan

Retiree (Age 60+)

From this period onwards, you are now living off your hard-earned savings from your CPF and cash.

Hopefully you have generated enough passive income by then to not be too dependent on your nest egg.

Besides your Integrated Shield Plan and Personal Accident plan, the main coverage you’ll need is Long-Term Care Insurance.

The Singapore Government offered Singaporeans and Permanent Residents a national disability insurance scheme called ElderShield. It provides monthly cash payments of $400 for 72 months for severely disabled elderly who are unable to perform 3 of the 6 activities of daily living.

The 6 activities are:

• Washing
• Dressing
• Feeding
• Toileting
• Mobility; and
• Transfering

If you want higher coverage, you can choose to upgrade your ElderShield with ElderShield Supplements.

If you have gotten your accident plan when you are young, the premiums will still be very affordable. However, your Integrated Shield Plan and it’s rider increases with age and it’ll start becoming really costly. This is when most people choose to terminate or downgrade their plan.

This is highly unadvisable, as this is the period where you are most likely to get hospitalized. You wouldn’t want to be leave your retirement funds exposed when you need insurance the most.

It is always wiser to pay $2000-$4000 in yearly premiums than hundreds of thousands in medical bills.  

If you do not wish to deplete your retirement funds on insurance, the only way is to build and increase your passive income to fund those premiums. I’ve written an article on the 10 best passive income ideas here.

Plans to have:

• Integrated Shield Plan
• Personal Accident Plan
• Long Term Care Insurance Plan

In Summary

Although I’ve segmented the different types of coverage and plans you need at different stages of life, it is still advisable to get as much coverage as soon as possible because unforeseen events can happen in life.

For example, if you are in your 20s and you are planning to buy a whole life insurance only when you have children, your application may be rejected if you have any pre-existing health conditions on the day you decide to insure yourself!

Furthermore, insurance only gets more expensive when you grow older!

Remember this, for life insurance, it's cheaper to buy 10 years too early than 1 minute too late.

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