The nation is experiencing one of the more depressing growth rates since the housing bubble fiasco eight years back. While employers are tightening purse strings (and as a result, yours too) ahead of a sluggish year, you should perhaps review your insurance coverage too instead of just comparing online grocery promotions.
Are you making the mistake of locking down more premium payments than you should? Because that couple of hundred bucks saved could go a long way. There are a gazillion other oversights people are guilty of when buying health insurance. In order to ensure you are getting bang for your buck for your policies, avoid the following mistakes to minimise your monthly expenses and optimise your coverage:
Mistake 1: Implicitly Trusting Your Insurance Agent
Trust is a double-edged sword. Your friendly neighbourhood agent camped out at MRT stations might have your best interests at heart but he could have unintentionally (or not) omitted certain terms and conditions that you did not know existed until dung hits the fan one day. Yes, there is nothing brief about the policy brief but do take some time to really sit down to ask the right questions, pore over each bulleted clause and understand the key Singapore health insurance terms.
Over the duration of your policy, changes in terms would occur too. “Customers usually don’t take the initiative to check for updates on their plans because they are too busy,” explained Ashleigh Quek, Senior Advisor at Prudential Assurance Co. “It’s as easy as setting reminders or requesting for email updates from the consultant.”
Remind yourself to also update personal particulars if you have changed mobile number or moved to a new house, because your consultant could have been mailing you new updates, reminders and birthday cards the whole time.
Mistake 2: Not Doing Due Diligence
Bear in mind the insurer your personal financial advisor represents is not the only one in town. Although it feels like homework, it is a necessary process to grasp a thorough understanding of the facts and figures, so you can select the best one that suits your needs. One good way to do this to use insurance comparison portals. You will notice subtle differences once you compare that same product across the board.
Mistake 3: Overbudgeting
And here is one common mistake mentioned from the start. Your agent has a truckload of ideas to recommend you, and in your discombobulated state, you think more is better. But the adage less is more continues to hold here; if you are looking to scrimp on every penny for rainier days, term policies are obviously the winner.
Assuming the same profile, you can be insured for S$300,000 (death and total permanent disability) for as low as S$334 per annum up to age 65. That is a mere fraction of the cost of whole life premiums.
Of course, the downside we are looking at here is that it does not cover you beyond 65 and returns are non-existent. This is not exactly good news for aspiring centenarians. But for a start, it is a prudent move with low opportunity costs. Especially so since you would want to free up cash for the downtime.
Mistake 4: Assuming Medishield Life Is Sufficient
That is probably a question you have been asking yourself ever since the legislation was formally implemented by Central Provident Fund (CPF) Board. As its name suggests, it is a compulsory opt-in that covers you for eternity and its coverage has been beefed up. In the event of an accident, Medishield Life offers higher payouts, subsidises treatments in public hospitals and even partially offsets stays in private wards. It sounds all good, but is it enough?
The answer is no. Unlike term and whole life policies, Medishield Life ONLY takes care of hospitalisation needs. It would be wise to still add on death, disability and critical illness coverage with private insurers. Moreover, they have attachable health riders for those who prefer to convalesce in luxury without worrying about hefty deductibles.
Mistake 5: Investment Linked Policies: Balancing Needs And Wants
On one hand, you need to protect yourself. On the other, you want to build your wealth. What do you do? Say hello to investment-linked policies (ILP), which would serve both purposes smashingly. However, stories of overzealous investors getting their fingers burnt by unfamiliar products are dime a dozen, and therein lies the danger of ILPs.
The mistake of overestimating personal risk profiles is real; coupled with the fact that insurance coverage is dependent on performance of the underlying funds, all your hard earned money could be wiped out overnight if they go belly up. Assuming you can’t resist the flexibility ILP offers and you have a whole tribe of dependents, always err on the side of caution and stick to the bundle on the lowest end of the risk scale.
At the end of the day, remember that your health insurance policies are not so liquid and it might be too late if you need urgent cash to tide you over these tough times. Therefore, be honest with yourself and sift out the wants from needs, before sitting down with your friendly neighbourhood agent.
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