Insurance aims to protect you, your family and your assets from unexpected circumstances. You never know — an accident or death of a loved one might suddenly change your life. In those moments, you would likely wish you’d prepared for the financial impact. Some types of insurance are compulsory, such as car insurance, whereas others are for peace of mind, knowing that you are financially covered for specific events. There is a wide variety of insurance policies available, each tailed to individuals in specific occupations, income brackets and life stages.
There are four main types of insurance that we consider: health, life, critical insurance and general.
Health insurance works to protect you and your family against the medical costs of serious illnesses or accidents. Such expenses include hospitalisation costs, medical bills or doctor consultation fees.
Photo by Diana Polekhina on Unsplash
Health insurance is so important that the government imposed compulsory insurance schemes for citizens and permanent residents. The MediShield Life policy is universal, life-long coverage for all Singaporeans and PRs. It’s designed to help pay for some hospital and medical bills. Premiums are paid straight from the MediSave account, which is part of the CPF accounts.
Purchasing an Integrated Shield Plan (IP) is suitable for those wanting to upgrade on the MediShield Life policy’s coverage limitations. IPs contain both MediShield Life and supplementary private insurance coverage, which makes the premiums more expensive.
Another compulsory scheme is the CareShieldLife scheme, which protects Singaporeans and PRs against severe disabilities. You will automatically join this scheme once you hit the age of 30 and monthly payouts are given if you suffer from a severe disability thereafter. The monthly payouts are to increase annually until you are 67 or successfully make another claim.
Other health insurance types include:
Life insurance aims to protect your loved ones, who may be reliant on your income, with financial support in the event of your death or permanent disability. In summary, there are two types of life insurance – term and whole life.
The main differences between the two types are:
1) How long your policy will cover you.
2) The compensation you receive if you do not make a claim by the end of the policy life.
3) Premium payment term. Term is always pay-as-you-go, whereas Whole Life has the option for a limited payment term, meaning that coverage may last for a period much longer than you were paying premiums for.
Term life insurance is the most straightforward and affordable life insurance product. It’s generally more affordable than whole life insurance since you’re only insured for a fixed period. The younger and healthier you are at the point of purchase, the lower your premium should be. Note that if you haven’t made a claim at the end of the term, you won’t receive any of the money you paid in premiums back. Note that if you develop any medical conditions during the policy term, they will either be taken as pre-existing conditions when re-applying for new term insurance, or you may be deemed uninsurable by underwriters.
Whole life insurance is a life-long protection scheme, as long as the premiums are paid. It's usually more expensive than term insurance. The primary advantage of whole life insurance is that termination or surrender of your policy may still entitle you to compensation. This is because whole life policies include a cash-value component. The primary objective of whole life insurance is to provide an insurance plus investment policy.
There are also different types of insurance plus investment policies, such as investment-linked policies and endowment plans. Note that much of your decision should depend on what best fits the stage of life you’re in, not just how much the premiums are. For example, term life insurance is likely more suitable if you’re younger, as lower premiums make budgeting easier. Term life insurance grants more freedom over how you invest the rest instead of locking it in an investment-linked policy.
On the other hand, the enhanced freedom of choosing how you invest comes with the responsibility to actually do it. Just putting the money saved from the lower premium into a savings account, or worse, not using it wisely at all, is not the idea!
The majority of conversations about insurance coverage revolve around health insurance (i.e. hospital plans) as well as traditional life insurance (payouts in the event of death). However, many people do not often stop to consider what cover they have in place if they contract a major life-threatening illness, should it not take their life, after they have left the hospital.
Critical illness (CI) coverage is a form of insurance that pays out upon diagnosis of a preset list of major illnesses, such as stroke, kidney failure, cancer etc. It is often divided into “early CI” and “late CI” coverage, which payout in the event of early-stage & late-stage diagnoses respectively.
Due to its importance and necessity, it is most commonly sold as a “rider” - which is a supplementary attachment - to a basic life insurance policy.
General insurance is to protect yourself and the assets you own. Your insurer will pay you in the form of an assured sum or agreed amount to cover the loss under certain circumstances. Examples include car insurance (compulsory insurance for damages to as well as caused by your vehicle), travel insurance (cost of inconveniences outside the resident country), pet insurance and property insurance (reimbursement for a variety of damages, i.e. theft).
To sell general insurance products, such individuals/companies must register with the Agents Registration Board (ARB), which falls under the General Insurance Association (GIA) of Singapore. You should always check with the ARB as to whether an insurance agent is licenced to sell insurance.
Photo by Nirzar Pangarkar on Unsplash
THE FOUR MAIN TYPES OF INSURANCE. COMPLETED. ✅
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