How to Protect Your Family Financially on a Limited Income

Most of us probably can understand the need to set up financial protection for our families, and are eager to provide that safety net. However, you may not be at the peak of your earning capacity yet. Perhaps you’re still at the early stages of your career, or you’re self-employed and your business is still getting started.

There are many ways to approach and implement financial protection for your loved ones, including for children and your elderly parents. Here’s how to do it when the budget is tight:

1. Take full advantage of your employer’s group insurance to complement your own insurance needs

Many employers in Singapore provide group insurance coverage for their employees – these policies are provided as part of your employee benefits package. The good news is, these policies may include health and hospitalisation insurance that you might not be able to get for yourself. For instance, your employee insurance may cover you for normal GP visits, specialist consultations, or dental expenses, so you don’t have to purchase medical insurance while you’re employed at your company.

Hospitalisation insurance is another common form of coverage for employees in Singapore – these allow you to make claims from your company insurance in the event of hospitalisation, so that you do not have to claim from your personal Integrated Shield plan, or Medishield. This is important to manage your Integrated Shield plan premiums in the long-run.

Be sure to consult the relevant person in your company (it’s usually someone in Human Resources), to find out the full range of coverage you can take advantage of. Get the information to your Financial Consultant, who can then plan a policy based on what your group insurance doesn’t cover.

This being said, do be careful not to be too dependent on your group insurance. Your employer can change the policy at any time; and you only have it for so long as you’re an employee.

2. Focus on policies that give you the best coverage for the premiums paid

While growing your wealth, planning for retirement, etc. is something you should start working on as early as possible, you should focus on protection first. For now, do take the time to compare between policies, to get the most protection for the premiums you pay.

For example, endowment policies tend to be focused more on wealth accumulation than protection – it may be more cost effective to pick a good life insurance policy first. Likewise, note that some Investment Linked Policies (ILPs) are geared toward earning higher returns, rather than providing the highest level of coverage.

Even when it comes to life insurance, bear in mind that two or more policies can provide the same coverage, but at different premiums. There may be no advantage to having the more expensive policy. As there can be hundreds of options available at any one time, a qualified Financial Consultant can help you narrow down the list to the best options.

3. Consider plans that give discounts for family-wide protection

Some insurance plans also give discounts for including other family members. For example, AXA SmartPA Protect+ is a personal accident plan, that also provides discounts when you and your spouse are under the same policy. Your children will also get 20 per cent cover of one parent, for free.

Besides looking for family-wide plans, consider insuring your children when they’re younger. The younger your children are when they’re insured, the lower the premiums will be. Also, if you wait, they may subsequently develop chronic conditions that aren’t covered (e.g. asthma). As such, it’s best to “lock in” a good rate for their life and health insurance while they’re young. As with your elderly parents, focus on their needs rather than future wants or aspirations for now (that means the endowment plans for your children can come later, when you can afford to invest more).

4. It doesn’t matter how little it is, set aside what you can each month

Don’t be under the impression that just setting aside $50, or even $20 or $10 a month, “makes no difference”. When the budget is tight, it’s important to save up as much as you possible can.

For example, hospitalisation insurance (even with riders) may require you to co-pay at least five per cent of the cost. You must cover this before your insurance covers the rest. Every little bit helps.

There are insurance options for Singaporeans at every income level

That’s one of the benefits of living in a financial hub like Singapore. There are so many available options, that there’s a viable policy for almost everybody. Speak to a qualified financial consultant for help in sifting through the options, and finding the right policy for you.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.