In Singapore, many people take on private insurance policies because we all know that simply relying on government initiatives to fully cover our insurance needs is just not enough. So how can we optimize our insurance portfolio to have the best coverage without overpaying? Let us first explore the 4 most important coverage that you should first consider.
1. Private Hospitalization Coverage
It is a known fact that the cost of hospitalization in Singapore is not cheap, so a comprehensive healthcare protection policy is essential. Note that medishield life does not provide pre and post hospitalization treatment and there is also a limit to how much you can claim. Therefore, in order not to end up with an unexpected financial burden, private hospitalization insurance should be the first insurance policy we purchase. The upside is we can use Medisave to fund our integrated shield plan to cover majority of our hospitalization bills, and when purchased with the necessary riders (payable in cash) can cover up to 95% of hospital bills depending on the plan chosen and the type of hospital that we are treated at.
2. Death Coverage
According to Life Insurance Association Singapore, you should aim to have approximately 11 times your annual earnings for death cover. While this figure varies from person to person, an easy formula for calculating how much death coverage you need is: Resources (income and liquid assets) - Financial obligations (expenses and debt) = Recommended life insurance death benefit. You can find our more detailed write up on death coverage here.
3. Disability Coverage
Disability may affect your ability to earn an income to sustain the financial needs of your family and your own. Therefore, instead of being a financial burden to your family, disability coverage is a must. There are 2 components of the disability coverage that we need to take note of, one being a lump sum payout (Total and Permanent Disability Insurance) and another which acts as a monthly income replacement (Disability Income Insurance).
The criteria for total and permanent disability is extremely stringent, not only must you be totally disabled, the condition must last through six months in order for you to make a claim. In contrast, the disability income plan provides monthly income payout after a 2/3 months waiting period should the insured be unable to carry out specific duties within their occupation, instead of being totally unable to work in any occupation .
4. Critical Illness Coverage
A simple way to understand the difference between a critical illness insurance and a hospitalization plan is that a hospitalization plan covers your bill while a critical illness insurance provides you with a lump sum payout to seek treatment not covered by a typical integrated shield plan as well as to tide over income losses during this period while not draining all your savings as you go through the recovery process.
Many sources have shown cancer cases to have risen sharply in Singapore in the last few years, therefore the probably of activating a critical illness claim is high. That is why having critical illness and early critical illness coverage is important.
Insurance Coverage Calculator
As mentioned in the previous post, to calculate how much you need, Insuree offers you an insurance checkup tool to help you determine how much money you need to cover your financial obligations. It will automatically add up your debt and expenses, take into consideration your assets and how long you need coverage to last. With a few easy inputs, it will determine your coverage gap. Simply sign up for a free user account here.
Insuree editorial content is intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.