5 Key Insurance Policies You Should Get in Singapore

When you go on a beach holiday, snorkelling is one of the activities you may do to experience the underwater life. Typically, you would be encouraged to put on a life jacket even if you are a good swimmer. The life jacket may sometimes get in your way of enjoying the best experience and you may be tempted to take it off.

However, you will only realise the true value of a life jacket when you actually need to use it.

Similarly, the true value of your insurance coverage will only be apparent when you or your family need to make a claim on it.

What insurance to get?

For those new to insurance, it can become overwhelming with various types of policies in the market. Instead of avoiding the topic, you should pay even closer attention to it, as the right insurance plans can be the difference between being able to steer through unforeseen scenarios and having your savings wiped out or worse, getting into debt.

In Singapore, you may wish to consider these 5 types of insurance plans for holistic coverage to protect yourself and safeguard your family’s future. These plans are some of the basic and essential plans that we recommend every person to start with. Once you have the basics covered, you can go on to explore other insurance policies for wealth accumulation and growth.

1. Hospitalisation insurance

MediShield Life, Singapore’s basic universal health insurance plan, provides lifelong coverage for every Singaporean and Permanent Resident (PR) against large hospital bills and costly outpatient treatments.

One thing you need to note is that coverage on MediShield Life is pegged at B2/C-Class wards. This means if you choose to receive treatments in A/B1-Class wards or in a private hospital, you will still be covered, but only up to the B2/C-Class wards limit for your treatments. This is why the first recommended insurance plan for many Singaporeans is hospitalisation insurance.

For more comprehensive protection, in A/B1-Class wards or private hospitals, you can choose to get an Integrated Shield Plan (IP) to cover a larger proportion of your medical bills. You can also choose to purchase additional riders providing even more extensive coverage, up to 95% of your hospital bills.

Do note that IPs can be costly, and you need to strike a balance between purchasing a plan that suits your needs and affordability. For more information on IPs, you can read about AXA Shield, our Integrated Shield Plan providing pre- and post-hospitalisation coverage,  as well as value-added services such as discounted consultation fees when you seek treatment with our extensive Panel of GP and Specialist clinics.

2. Critical illness insurance

While the cost of your hospitalisation and costly outpatient treatments, such as chemotherapy, radiotherapy, kidney dialysis and several others, may be covered by your MediShield Life and IP, critical illness plans provide a lump sum payout in the event you are diagnosed with an illness covered under the plan.

This lump sum is meant to insulate you and your family from the possibility of losing your income and help you to focus on recovery. It also shields you from having to dip into your savings and investments to pay for costly treatments, alternative treatments, medication and additional help required at home.

As a rule of thumb, the Life Insurance Association of Singapore (LIA) assumes a 5-year recovery period for critical illnesses, which takes into consideration the timeframe when a person will either be able to beat the critical illness and return to employment or lose their battle and rely on their life insurance to provide a payout for their loved ones.

To be prudent, you can opt to purchase a critical illness sum assured that is approximately 3.9 times your annual income, according to the LIA.

With medical advancements allowing for better treatments and early detection, survival rates of critical illnesses are increasing. AXA CritiCare for Him/Her has specific critical illness plans for men and women, offering multiple claims of up to 3.5x the sum assured, and a reset feature for male and female illnesses respectively. The plans also encourage you to go for regular preventive health screening once every two years. AXA SuperCritiCare is a plan that provides multiple payouts up to 600% Sum Assured for Early, Intermediate and Advanced Stage Critical Illness. For cancer survivors, AXA Cancer ReCover provides coverage for recurrent or new primary cancers, with an Early, Intermediate and Advanced Stage Cancer Benefit as well.

3. Disability insurance

In Singapore, CareShield Life, administered by the Singapore government, provides severe disability coverage, protecting Singaporeans and PRs against the risk of long-term care costs with lifetime cash payouts.

From mid-2020, CareShield Life will replace the existing ElderShield scheme, providing coverage for all Singaporeans and PRs born in 1980 or later when they turn 30. For those born in 1979 or earlier, you can choose to join CareShield Life from mid-2021.

However, as CareShield Life is targeted to protect those with severe disabilities, those with mild or moderate disability who require long-term care or are unable to work may not be covered. This is why you might consider supplementing your coverage with a private disability insurance plan.

4. Life insurance

While health insurance plans support you in your healthcare or recovery, a life insurance plan is meant to provide everyday peace of mind and financial security for your loved ones if you are no longer around to provide for them.

There are two main types of life insurance plans you can choose to purchase – Whole Life Plans or Term Plans.

In general, whole life insurance provides coverage for your entire life, while term insurance provides coverage for a specified number of years or up to a certain age, such as 50, 65 or up to 99. Whole life insurance also accumulates a cash component while term insurance does not. Due to these reasons, whole life insurance also tends to be more costly compared to term insurance.

As a rule of thumb, MoneySense recommends asking yourself the following questions to assess how much you need to insure yourself for:

• How many dependants do you have? (including your children or elderly parents, and whether you need to provide for your spouse to leave work)
• How many years before your youngest child becomes financially self-reliant
• What other debt and financial obligations will you leave your dependants?
• How much will your children need for their education?
• Do you have savings they can rely on?

When you purchase a plan, you also need to consider its suitability and long-term affordability. More coverage isn’t always better. What’s equally important is being able to afford the premiums because if you are unable to keep up with the premiums, your policy may lapse or be terminated.

5. Home insurance

With 91% of Singaporeans and PRs owning the homes they live in, Singapore has one of the highest homeownership rates in the world. This is also why home insurance is important.

If you currently have a HDB loan on your HDB flat, you will already be required to buy Fire Insurance. Typically, this insurance only covers the cost of reinstating damaged internal structures, fixtures and areas built and provided by HDB back to its original condition. It does not cover your home contents, such as furniture, renovations or personal belongings.

If you are living in a private property or want to get more comprehensive coverage if you are living in an HDB, you need a home contents insurance policy. This will provide coverage for renovations, including your flooring, built-in furniture and air-conditioners, as well as other furniture, household appliances, electronics, jewellery and valuables. Your home contents insurance will also often provide coverage for personal legal liabilities for expenses or property damage you may be liable for.

AXA SmartHome covers your internal building structures and standard fixtures and fittings, and a “new for old” coverage for home improvement works and additional fixtures or fittings without deductions for wear and tear or replacements, as well as reimbursement for temporary accommodations or loss of rent.

Unlike Fire Insurance for owners with HDB loans on their flats, home content insurance is not mandatory. Nevertheless, it forms an important security in the event of a mishap in your home.

Buy what you can afford

Insurance is very important to implementing a prudent financial plan to protect us and our loved ones against unforeseen scenarios in life. However, it can be expensive, and we need to ensure we can afford the plans we purchase.

This will ensure we have sufficient financial resources for other important things, such as paying for our daily expenses, spending on some luxury to treat yourself and your loved ones, and to build a nest egg for your retirement.

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.