The Beginner’s Guide to Insurance: What You Need to Know About Insurance

 In 2022, Articles, Business Succession Planning

Most of the people we know avoid insurance for various reasons. The topic feels overwhelming to dwell on for some, and some may feel uncomfortable sharing their financial journey. And sometimes, people avoid that topic due to a certain social stigma surrounding it.

Of course, these are all valid. It’s okay to feel scared about things we are not familiar with. However, if you are already working, and don’t know what purpose you want to put in your money, then maybe it is time to consider venturing into the world of insurance.

Knowing and learning about insurance is not an easy task. As we have said, it can be a daunting task, especially if it is your first time considering getting one. Trust us, we’ve all been there, and you are not alone. That is why we are here to guide you about insurance.

You may have many questions about insurance, so we are here to tackle the basics of insurance. What is insurance, and what kind of insurance will you need? Grab your pen and notepads ready as we list down the essential things you need to know about insurance in Singapore.

What is Insurance?

In its simplest form, insurance is financial protection that you can give yourself.  We all know the cost of living can be high, and if you lose your income-earning ability, there can be a significant impact on your finances. That is why insurance can provide pay outs during unforeseen events to help you solve some of your financial problems.”

Part of a comprehensive plan should also include a consideration of your insurance needs and requirements.  As there are many different types of insurance, and there is no one-size-fits-all solution, and hence it is important to consider your own needs and budget to ensure you get the most suitable coverage.

So, what are the types of insurances that you can get?

Different Types of Insurance

In knowing the different types of insurance, you first need to think about every possible thing that can happen to you. Death, disease, disaster, bankruptcy, and more can lead to a never-ending financial problem. There are different insurances that can mitigate the effects of those risks to you.

You might think, will that make you an overthinker? The answer is yes, but at least you are prepared for it when it happens. If you want to be ready even more, here are the different types of insurance that you can get according to your needs and budget.

Life Insurance

Security for your life until your death is what life insurance offers. When you get Life Insurance, you are guaranteed to receive a sum of money when something grave happens to you. This can be an accident that leads to disability or even your death. In the event of death, your family members or relatives (or depending on who you choose as your beneficiary) will receive the payout.

The payout may financially take care of your surviving family members and relatives when getting life insurance. However, it may not be sufficient to cover unpaid medical bills. There is another type of insurance for that, and we will get into that later.

In Life Insurance, you will come across the “whole life insurance” or “term insurance”. Don’t be fazed because these are just the different types of Life Insurance.

Term Life Insurance: Term Life Insurance is the cheaper alternative you can get. But since it’s cheaper, it only covers you for a fixed period and does not have cash value accumulation.

 That means if nothing happens to you and you live beyond the agreed insurance policy, you will not receive anything from your insurance.

Whole Life Insurance: Whole Life insurance is the expensive counterpart of Term Life Insurance. And as the name suggests, it covers your entire life.

However, the premium may be worth it because you can receive a payout from the cash accumulation feature of the plan eventually if nothing grave happens to you.

Investment Linked Policies: There are also Investment-Linked Policies (ILP) which has both a life insurance and an investment component. However, the returns on these instruments can be volatile and not guaranteed as they fluctuate according to market conditions.

It is best to speak to an advisor to consider which type of insurance is best for your needs.

Health Insurance

We mentioned earlier that there is separate insurance that will cover your healthcare needs, and that is the Health Insurance. Health Insurance gives you the capability to cover most of the medical costs in the event if you suddenly need to be admitted to a hospital.  This way, you will save yourself from the financial impact of expensive hospital bills.

For Singaporeans and PR, once you start working, you are automatically guaranteed to have MediShield Life. This is the most basic Health Insurance that you can get, and you can pay the premiums for it through your CPF MediSave account. However, realistically, the payout from MediShield Life may not be sufficient. That is why supplemental health insurance is still needed if you want extra coverage.

If you are thinking about the best time to get Health Insurance, the answer is now. Health insurance is essential to acquire, especially now that the world faces a health crisis. If you want to live your life without worries, it is time to start planning for your health insurance.

General Insurance

General Insurance comprises of various insurances that you can get for your assets or yourself. It can be car insurance, travel insurance, property insurance, and work injury compensation insurance.

Of course, car insurance is for your car. And it is also there to protect you once you get into a car accident. Either the third party will be liable for the accident or you (if you are at fault for the accident). You will need this to ensure that you will protect all parties involved in a possible accident.

Travel insurance, as the name suggests, is for your travel needs. In case of an emergency, you are ensured financial support to save you from trouble while travelling.

Property insurance is for your house or any property you’ve invested in. The common use of property insurance is when a fire gets into your home or is affected by a natural disaster. Property insurance can help you save the costs of fixing your house.

And finally, work injury compensation insurance is needed when you get into an accident inside your workplace. This is important, especially for manual workers who work on the ground. In Singapore, companies are required to issue work injury compensation insurance.

There are more to General Insurance aside from what we have mentioned. To know more, speak to one of our friendly consultants.

5 Tips Before Buying Your Insurance

There are many ways to start your insurance. However, if you are not careful, you might be at risk of scams. That’s why before buying one, here are some tips that you should know. 

List Down Your Needs

If you have an unlimited budget, it might not be a problem to get every insurance you’ll need. But if you have a limited budget, it is important to get insurance based on your priorities.

Sometimes insurance premiums can be high; if not well planned, it can affect your cash flow and lead to bigger financial problems. That is why only get the insurance that you think will benefit you. Do you want to prioritise your health? Your property? Or do you want to have a good retirement plan? Those are some of the questions that you can ask yourself and limit what you want to prioritise.

Research is the Key

If an agent tries to get in touch with you and sells insurance, do not buy it instantly. After talking to an agent, do your research and always do your due diligence for every offer that you will come across.

Buying insurance is a long term commitment, and if you are not responsible enough for your insurance, you may experience buyers’ remorse. Is this right for me? Is the agent just hard selling? Is this within my budget? Does the insurance actually fit my requirements? Remember to ask yourself these questions and more to find the right kind of insurance for your needs.

Don’t Hesitate to Ask for Help

Of course, researching on your own is not the end of it. You also have to ask different people about insurance. You can start by contacting other agents from different insurance companies, and from there, you can compare their offers.

If you feel shy about asking, please don’t because the more curious you are, the more you will gain knowledge about insurance. Remember, learning starts when you ask a question.

Check Your Budget

Getting insurance means you are bound to pay different premiums every month (or depending on your insurance policy). And we all know that premiums can be expensive, and that is why before getting insurance, make sure that you will start by getting one that has an affordable premium or is at least in line with your budget.

Know Your Purpose

There are different purposes of insurance, and you can pretty much get insurance for all your assets. But there are three primary purposes for insurance: protection, investment, and savings.

Do reach out to our friendly consultants and let us know your concerns and needs. We will be happy to share solutions based on those priorities.

Your Insurance Journey Starts Now

There is no such thing as a straight road for insurance. The journey to becoming financially secure can be bumpy, and it is not easy to take on. However, if you are patient and willing to take risks for this journey, the results will be worth it.

Your journey starts here, and if you want to know more about insurance, speak to one of our friendly consultants. And to learn more about the latest news and other information about insurance, sign up on our website and check our upcoming events.

Important notes:

The views and opinions expressed in this article are solely that of the author and do not reflect the opinion of Professional Investment Advisory Services Pte Ltd. The information contained in this article is for general information only and does not constitute the provision of financial advisory services. The precise terms, conditions and exclusions of any services or products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Apex Financial Advisor Representative.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apex Private Wealth Management is an authorised group of Financial Adviser representatives from Professional Investment Advisory Services Pte Ltd

References

1DBS Bank Singapore. (2020, June 3). 7 useful tips for buying insurance | DBS Singapore. DBS Bank. Retrieved February 18, 2022, from https://www.dbs.com.sg/personal/articles/nav/protection/7-useful-tips-for-buying-insurance#

2MoneySense Singapore. (2022, January 14). ​Insurance basics. MoneySense. Retrieved February 18, 2022, from https://www.moneysense.gov.sg/articles/2018/11/insurance-basics

3MoneySmart Blog. (2020, November 25). Insurance in Singapore — 7 Things to Know Before Buying Your First Plan. MoneySmart Blog. Retrieved February 18, 2022, from https://blog.moneysmart.sg/life-insurance/insurance-singapore-beginners-guide/

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