We mentioned in our story 10 Things Insurance Companies Do Not Tell You that insurers are billion dollar companies, and that is not just because it is a necessity, it is also because of they’ve managed to create and reinvent policies to suit differing needs and demands. Insurance today is no longer just about providing protection against untoward disasters, like that papercut that put you under great distress and rendered you ineffectual in your deskbound job. It has since become a versatile financial tool that is so much more than that. We take a look at the top five reasons why you should get you and your family insured, pronto.
Defray Hospitalisation Costs
Since November last year, we might all be covered under the Medishield Life umbrella. But are the extended benefits enough? Compared to the old Medishield, it can now relieve some of the costs if you choose to stay in Class A/B1 wards at private hospitals, and inpatient treatment claims have also been pumped up to S$700/day under normal wards. If you have an integrated shield plan with a private insurer in place, you can break free of those constraints and make claims on your hospital bills ‘As Charged’. That means, excluding the deductibles and co-insurance, everything would have already been taken care of by the insurer, subject to a claim limit. If you have a hospitalisation rider or sufficient funds in Medisave, you don’t even need to pay for the deductible and co-insurance.
In other words, no more penny pinching. Feel free to upgrade to a private ward and recuperate like a king!
Some of the insurers also offer additional benefits such as overseas hospitalisation coverage and adjustments to cope with inflation in medical bills.
Calling all high earners out there: if you’ve just started a new family and your spouse is slowly moving into a full time stay-at-home caretaker role, it’s time to review your existing coverage and consider your new priorities.
There is a higher number of dependents counting on you to bring home the bacon now. However, what if tragedy strikes one day like how it did to navy amputee Jason Chee? While he may have powered through his unfortunate disability to represent Singapore at the Paralympics, serious mishaps can cause you to lose your ability to perform at your day job and subsequently, your role as breadwinner.
You could qualify for a disability lump sum payout under your term or whole life policy, but how long can it last for your family? For a more sustainable option, look to disability riders; they provide you with regular income replacements up to a certain percentage of your last drawn salary and depending on the insurer, you can continue to receive partial payouts in the event you manage to return to work.
Your Children’s Education
The late Whitney Houston famously sang, “Children are our future”. One of the best things you can do for your children’s future is to ensure they get to enjoy their university life without worrying about paying back student loans and the interests that comes with it. If unforeseen circumstances make it impossible for you to provide for their education any longer, payouts from your term and life policies can be set aside for that purpose. But of course, ideally, you would want to be alive and see them through it. How should you do it? Turn to CPF Education Scheme? That could put a damper on your retirement needs. Surely there is a better way.
And that better way is to start an endowment plan for your children once they are born. Endowment policies work like fixed deposit savings, except it consists of both guaranteed and non-guaranteed portions. It also comes with death and disability benefits; although they are measly compared to term and life products, they provide some measure of protection for your child.
A 20-year endowment term of S$1,200 premium per annum, assuming a modest annual interest returns of 3.25%, can net you about S$45,500 by the time your child is ready to start his tertiary education. Also assuming that the plan is to enroll at a local university, that is more than enough to finance a business degree at National University of Singapore, which costs S$28,350 today. Or, after factoring in an annual tuition hike of 1.5%, it would cost about S$38,183 in 20 years’ time.
Insurance As An investment
Prudent experts advocate exchange-traded funds (ETF). The Singapore government has released the much-raved-about Singapore Savings Bonds. The wolves of Wall Street shove hedge funds down your throats. There is a dizzying array of investment schemes out there on the market, but did you once stop to think that insurance qualifies as well?
Of course, we would be referring to Investment Linked Policies (ILP) here. If you feel that owning a term policy is like throwing money down the drain and traditional whole life has little flexibility in terms of wealth accumulation, ILPs might be your cup of tea. It usually comes attached with death and permanent disability benefits and you are at liberty to switch funds in your portfolio according to your risk appetite. Unlike term and whole life plans, though, there are no guaranteed payouts: bearish performance on the funds’ part means your little nest egg goes down along with it. Then again, with high risk comes high rewards too, right?
Dealing With Critical Illnesses
Sometimes, life throws you a really bad lemon when you least expect it. Just ask cancer patients. Or that guy who became Singapore’s first Zika patient after returning from São Paulo. Treatments such as chemotherapy and radiation therapy can be recurrent affairs that cost an arm and leg, but those are only financial costs. These groups of patients aren’t spared from emotional and psychological costs.
Whether you opt for a standalone or a rider attached to your life policy, paying a minimal monthly premium for critical illness insurance can at least ease some of the tremendous burden when things take for a critical turn. Let’s not forget on top of the treatments, there are diagnosis tests, income losses and rehabs involved; the policy payouts can provide a shield against these extra costs.
It doesn’t hurt to shop around for one to bolster your portfolio; the medical definitions for each of the qualifying illnesses may be fixed throughout all insurers, but their benefits and sum assured aren’t.
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