Insurance is exactly like fat loss!

Ever tried losing fat and it just seems like no matter how you go about it, it just doesn’t go away. Have you ever considered your insurance portfolio is exactly the same? You buy and you buy but it never seems to solve your financial problems?

Much like my weight loss journey, I did not begin to lose weight until I tailored the plan to myself and my individual lifestyle. After joining the financial industry, I realised how much the two goals are alike.

Insurance is simply one of many financial tools available to us that serves a specific purpose: risk mitigation against the major disasters in our lives (such as death, disability and critical illnesses). But more often than not, people find themselves asking if they are paying too much or too little for their insurance.

Which is exactly why, a tailored solution is essential for you to solve the puzzle of financial planning.

In order for us to take a closer look at our finances and have a complete understanding, we either need to get brutally honest with ourselves or hire an external force to keep us in check. For weight loss, we will look for a dietician or a coach, while we turn to a financial advisor for our financial problems.

With an expert to help us, as well as strict adherence to the tailored plan, we can actually begin to start our journey towards financial freedom!

Health Insurance
Health Insurance (or more commonly referred to as a hospital plan) should be a cornerstone in our insurance portfolio. This is because Singapore’s medical bills are often exorbitant and cannot be completely covered by our Medisave account. Health insurance gets you increased coverage without forking out any cash. If you do choose to top up a certain amount, you can get up to 95% coverage for your medical bills.

Life Insurance
Life insurance is a policy that protects your wealth for your entire life. There has been a surge in popularity for limited pay life insurance as most do not wish to pay for their insurance for a long period of time, while maintaining a lifetime of coverage. Unlike term plans, life insurance plans often have a cash value tied to the policy. Upon surrendering of the plan, the policy owner will receive a lump sum of cash that often equals or is greater than what they initially put in.

Term Insurance
True to its namesake, term insurance simply provides coverage for a period (aka term). It is widely considered to be the most bang for your buck insurance simply because it has no cash value. It protects your wealth against:

1) Death
Death is an unfortunate event wherein a person dies (I know, crazy right?). When a person passes on, his responsibilities do not simply disappear. They are passed on to his loved ones. For instance, any debt a person carries when he is alive will be pushed onto his next-of-kin. Insurance then provides a sum to cover any existing debt as well as responsibilities. Generally, people are recommended to cover themselves for around 10 times of their annual income for death coverage.

2) Total and Permanent Disability
Total and Permanent Disability (TPD) is a condition where a person is unable to work due to injuries. This often involves not being able to use certain limbs or even loss of sight. Without the ability to work, a person will experience a loss of income. That is where the insurance pay out comes to play. It will serve to help the injured with his living expenses as well as any debt he may be servicing. Akin to death, coverage for TPD is recommended to stand at around 10 times of a person’s annual income.

3) Critical Illness
Critical Illness (CI) is any major illness such as cancer, heart attack or even stroke. In Singapore, the Life Insurance Association (LIA) has 37 clearly defined critical illnesses for which you can claim insurance for. Much like TPD insurance, CI insurance will pay out to cover any living expenses as well as debt. Unlike TPD insurance, however, there is a good chance that you will beat the critical illness and resume your working life. Therefore, you will need less CI coverage. It is recommended that you cover yourself for around 5 times your annual income for CI coverage.