Like doing an annual spring cleaning of your home, reviewing your insurance each year is recommended to ensure that your coverage and policies are up-to-date and that you have adequate protection for yourself and your family members.
While some life events will naturally trigger you to think about increasing your protection – such as if you recently bought a new home, got married or welcomed new additions to the family – there may be other less obvious changes that may warrant a review of your protection.
If you had enjoyed a pay raise this year, felt the impact of rising prices, or if your parents are looking to slow down their work or retire soon, you may need to assess if your protection is keeping up with the changes you have experienced.
A pay raise may mean that you need to increase your life cover, rising prices may mean you need to save or invest more to keep up with higher costs in your later years, and you may need to speak with your parents to check if they need any support after they stop working.
An insurance review need not be a long session with your financial adviser. Here are some quick tips on how to do your own insurance review:
Key Focus Area #1: Life Protection
If you have dependants, or liabilities or wish to leave a legacy after your passing, life insurance can help provide for this. That’s where cost-effective term plans that cover unfortunate death or total and permanent disability come in. You can consider term plans that cover you until you retire and have stopped generating income or when your financial dependents are no longer relying on you, whichever comes later.
While whole-life plans can also be used for this purpose, they are usually more expensive. This is due to the extended period of coverage and an additional savings element, which may not be the most cost-effective way to accumulate wealth.
If you have experienced an increase in your income or expenses this year, you may want to consider increasing your life cover to ensure that your loved ones continue to be taken care of. On the amount and period of cover, you can calculate the amount you need to provide for your dependants and how long you need to provide for them, including the cost of their tertiary education, and take into account any other liabilities.
For example, if your child is five years old and you estimate that you will need to provide $2,000 a month for the family for another 25 years, your child needs about $60,000 for tertiary education, and you have an outstanding home loan of $450,000. Hence, your life cover may amount to the following:
|Living Expenses: $2,000/month x 12 months x 25 years||$600,000|
|Outstanding Housing Loan||$450,000|
|Estimated Life Protection||$1,110,000|
You may reduce the protection you need accordingly if you have other sources of savings or investments which can help provide for your family. You can also reduce the amount you pay on insurance by getting term insurance. Recently, due to fierce competition between insurers, term plans have gotten cheaper.
For a limited time till 31 March 2023, enjoy a 30% perpetual discount on your term life premiums. And don’t forget to add on MoneyOwl’s 30% first-year commission rebates paid to you in cash!
Key Focus Area #2: Health Insurance
The government recently announced the 2023 CPF Basic Healthcare Sum, which is the maximum you can save in your CPF MediSave Account, to be $68,500. This will affect those of us who are 65 years old or below. The increase of about 3.8% keeps pace with the growth of MediSave usage. With medical costs expected to continue increasing over the long term, you should review your health insurance plans and whether it is sufficient for your needs.
Health insurance includes hospitalisation, critical illness, and long-term care plans.
All Singaporeans and Permanent Residents are covered by MediShield Life, a basic health insurance plan administered by CPF Board. It covers large medical bills, especially if you choose subsidised ward types. But if you prefer better class wards in public hospitals or private hospitals, or have the option to choose your doctors, you can consider getting supplementary coverage through an Integrated Shield Plan (IP).
Your MediSave savings can be used to pay for the additional private insurance component of the IP premium up to the Additional Withdrawal Limit, which ranges from $300 to $900, depending on your age. Any excess will have to be paid in cash. As such private insurance premiums rise substantially and very quickly as you get older; consider a plan that you can afford over the long term and meets your needs.
There could be certain medical expenses that cannot be claimed through conventional health insurance plans. These include alternative treatments, traditional Chinese medicine, and ancillary medical expenses. That’s where critical illness plans, which pay a lump sum benefit, come in. These can be used at your discretion.
Your long-term care needs will be covered by CareShield Life, which provides monthly payouts should you become disabled and require long-term care. Like for MediShield Life, you can consider adding supplements to CareShield Life to receive additional benefits such as higher payouts and lowered claims eligibility to start receiving payouts. You can then use the monthly payouts for medication, employing hired help, or paying for community care services.
Key Focus Area #3: Disability Income
If you are not able to work due to an accident, disability or illness, it will make a huge dent in your financial plans. Such disability insurance plans help replace your income during your recuperation period, so that you can recover with peace of mind and ensures that your financial plans are not set back due to a reduction or pause in your income.
You can consider getting occupational disability plans which pay a monthly benefit with the intent of replacing up to 75% of your income in the event you are unable to perform the duties of your current occupation.
Final Tips to Do-It-Yourself
Reviewing your insurance plans need not entail a long session with your financial adviser, whom you might feel may be more interested in making a sale to earn the commissions.
Fear not, you can now do a self-assessment through MoneyOwl’s online Comprehensive Financial Planning service to check if your finances are on track and if you have adequate coverage. One benefit of our Comprehensive Financial Planning service is that you can update your inputs whenever your life circumstances change and generate updated reports of your financial situation.
After assessing your insurance gaps, you can use MoneyOwl’s insurance platform to compare benefits and premiums to get the coverage you need at the lowest price. There are over 500,000 quotes from different insurers and different products to suit every life stage!
The increase in life expectancies has contributed to a curious trend – falling term life insurance premiums. Now is the best time to buy a term life insurance plan! Hurry, indicate your interest here now. T&Cs apply. Valid from now till 30 June 2023.
Disclaimer: The information contained herein does not have any regard to the specific investment objective(s), financial situation, or the particular needs of any person. Buying insurance is a long term commitment and should be bought according to your needs, and products’ suitability. You may wish to seek advice from our client adviser before making any financial decision.