Are you young, single and healthy? Do you have a family? Do you have pre-existing health conditions? What are your short- and long-term life goals? These are all important questions to ask and answer when looking for suitable insurance policies and coverage for you.
You may be young and healthy and choose not to take out insurance beyond MediShield Life, the compulsory health insurance for Singaporeans that pays for basic public hospital treatments. But if you intend to purchase additional insurance in the future, but develop a condition along the way that is then classified as a pre-existing condition, insurers may exclude it from future policies, which will be problematic for your future self.
Or perhaps you’re a family with basic health insurance but want to up your coverage to include education cover and accident insurance as your family grows.
When deciding on the type of insurance suitable for you, it’s important to identify your needs — for today and tomorrow — as well as your long-term commitments. You can then map these requirements to the insurance policies that best address them. Once you have this in place, you and your family can be assured of a more secured future.
If you are the main breadwinner in your family, you might want to consider life insurance. It serves as a form of financial security for you and your dependents should there be a loss of income in the event of your death. Put yourself in your loved ones’ shoes: would they have the ability to pay rent or mortgage repayments, outstanding bills and school fees if you are not around? If the answer is no, life insurance is a must.
Also think about your retirement. It’s never too early to start planning, particularly as we know that people are living longer than ever before.
There are a variety of life insurance products to cater to different needs. Here are some major types of life insurance policies:
- Term life: this type of policy offers pure insurance coverage at the lowest premium, as it provides no cash value if you survive the term of the policy. In the unfortunate event should you die within the insured period, you will have the peace of mind that your dependents will be covered with a lump-sum payment upon your death. This is a good option to consider if you are looking only at high coverage and using other investment tools for better returns. Keep in mind, however, that a pure term life insurance policy offers coverage for a limited time frame (10, 20 or 30 years) or up to a particular age, and this may not meet your long-term needs. Say your policy ends when you’re aged 60 or 65 years, what is your plan for financial security beyond that age? Premiums may increase with age upon renewal, and you may have pre-existing conditions excluded from new policies purchased.
- Whole life: this is a good option if you want to be covered for life while reaping the benefits of building cash value. A whole life policy generally allows you to accumulate wealth over the long term while giving you the option to partially withdraw money in the form of annuity payments to meet your retirement needs. This type of policy does come with higher premiums, but it will give you peace of mind that you are performing two tasks: growing money for your future and gaining coverage for life. Additionally, premiums are typically fixed, so it helps with the financial discipline of planning and saving.
- Endowment: this option allows you to build cash value over a fixed period, with the aim of meeting a long-term goal, such as your children’s higher education. With an endowment plan, you will generally pay premiums for the first few years as specified by the policy and receive a lump sum when the policy matures. In addition to being a savings vehicle, endowment policies also offer insurance protection for the length of the policy term.
Accidents, illness and disability can lead to a significant financial outlay for medical expenses and hospitalisation costs, as well as a loss of income. Group health insurance from your employer may not offer you sufficient coverage. Also, although Singapore citizens and permanent residents enjoy MediShield Life coverage, its benefits are based on the cost of staying in B2 or C class wards in public hospitals.
If you are considering additional coverage, here are a few options:
- Medical expense insurance: this provides wider coverage for your hospital and surgical expenses in the event of an injury, illness or disability. Policies can be tailored to include or exclude inpatient and outpatient costs, chronic medical conditions and elective surgery.
- Hospital cash insurance: this offers a fixed amount of cash when you are hospitalised, to be used as you need it. The amount may be more or less than your medical expenses and may come with a waiting period before the benefit is paid.
- Critical illness insurance: this option pays out a lump sum for medical treatment and other expenses when you are diagnosed with a major illness that your policy covers, such as diabetes or cancer. Some plans may offer increased coverage for specific illnesses or demographics, should an individual want to focus on one illness — for example, cancer. Currently, the Life Insurance Association (LIA) lists 37 critical illnesses, with standardised definitions across all critical illness insurance plans; however, policies will differ from insurer to insurer.
- Disability income insurance: this option offers a monthly payout to replace your income when you are unable to work as a result of an accident or illness. It may not cover your entire income, but it will ease your financial loss. Typically, payment will stop or reduce once you can start work again. It is best to clarify how your insurer defines “disability”, as it can differ from policy to policy and insurer to insurer.
- Long-term-care insurance: this pays a monthly benefit towards expenses for long-term care if you are severely disabled or unable to take care of yourself.
- Personal accident insurance: this option offers you and your family financial support in case of death or permanent disability from an accident.
- International health insurance: this offers you and your family a flexible plan for medical coverage for different geographical areas. This is handy for those families who may need to relocate and require a portable plan to ensure no lapse in coverage.
Any number of events could derail your travel plans: delays, theft, accidents and more. Before you book your next holiday, it’s wise to take out travel insurance to provide financial protection against such events. The policy should cover the financial costs of your belongings, flights, money, personal documents and medical expenses when you’re overseas.
Do check that the policy covers all countries and regions. For example, healthcare expenses in the US can be crippling for the uninsured, so if you are planning a trip to the US, make sure it’s not excluded. Also, tailor your policy according to your activities while travelling. For example, if you’re planning activities on your holiday with a higher degree of risk, such as bungee jumping or renting a motorcycle, it’s best to choose a policy that explicitly provides coverage in such situations.
Your home is not only your sanctuary, but also a major asset and expense. It is prudent to think about different types of insurance to protect your home. For example:
- Home contents insurance: this type of policy offers protection should fire, theft or other accident damage or destroy your home and contents. You can also include personal liability coverage, which covers valuables such as jewellery or art.
- Mortgage protection insurance: this insurance provides protection for the outstanding capital of a mortgage loan in the event of you or your spouse’s death during the policy term. It may also cover disability or terminal illness and be available as a joint-life or individual policy.
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