Insured - Are you fully covered?

1:13:00 PM

So we've entered new stages in our lives and as we start to prepare for a home together, build a family together, and spend the rest of our lives together, we also need to start thinking of how we can better plan for our future needs together. We are really fortunate that Mel's Dad has been a financial planner for the past 10+ years so if we ever need any advice on what we need to get insured and covered for, he has the answers for us. Furthermore, with Dad being well versed with all the different companies' products, we are safe from being "cheated" for paying for something which we do not need, or in worse case scenarios, something that will give us negative returns.

We've talked about how we save money as a couple and how we are readying ourselves for marriage life in MelBenGets so far. But we see a need to also enlighten our friends and readers on the importance of getting ourselves insured in every stage of our lives. When we were younger or were still schooling, some of us would have had the privilege of having our parents settle this for us. Now that we are older and independent, this task readily becomes our responsibility.

One of Mel's lecturers, single and aged late 30s, ever shared in school before (it was quite a random topic that he touched on in class) that he never wanted to buy any insurance for himself because he felt,

"Why should I buy and hope that an accident would happen to me before I can claim money?" and "When I die then got money to take?!"

That is quite a selfish remark for anyone to make, unless he or she is rich enough and has plenty of savings. The question that we want to ask, more importantly, is,

"Do you have a Family you need to look after if you're gone?
Parents? Wife? Children?",

because the people you leave behind might be the ones who are depending on your income all these while, and if you do not have enough monetary savings to tide them over the rest of their lives, they are pretty much left to fend for themselves.

So getting insured doesn't just mean "Hey, I'm getting this policy to protect myself!". It also means that you are protecting your family and the ones that matter most to you if anything should happen to you one day.  

Many people think that "oh I've been exercising a lot lately and watching my diet. I don't need insurance, nothing will happen to me. I'm healthy and fit, this is a waste of money", so they brush it off hoping that nothing will occur to them. But life is unpredictable. We cannot foresee at which age our health will start to deteriorate, or when a certain part of our body will give way. Most of the time (or maybe even all the time), companies will not insure you right after you had gone through a surgery or after they've found out that you just got treated for a certain illness at a clinic or hospital. 

You may be able to avoid getting an illness or falling sick, but we cannot avoid getting into accidents.

The younger you get covered, the lower the cost of the premium.

Also, if you're thinking to only get covered when you're older and have started to get weaker, even if companies are agreeable to get you insured, you might have to bear the costs of a higher yearly premium. Logically because, when we're in our 50 - 60s, we are in the age of being more susceptible to having health complications, a weaker frame and the chance of having to seek medical treatment is much higher.

But there are so many products offered in the market these days. How do we know what is suitable for us and how do we know what WE NEED so that we can stay away from falling into the trap of buying something that companies wanted us to get, clearly so that they personally could get higher returns from the sale? Find out by choosing the category you belong to below:

#1: NS Boy
I'm serving my National Service and am receiving a monthly wage of $500 (what is the lowest pay for army?). What do I need?
The best to go for would probably be the Aviva SAF Group Term Life plan. In dad's words, no other company would offer such an ideal and affordable plan for NS men who are serving their time in the army. This plan is just a temporary measure and something that your parents can fall back on should anything happen to you, be it an accident or death during this period. Particularly for more high risk vocations such as divers, commandos and pilot trainees, this plan would be the best for them as it is one of the few insurance plans that covers such vocations.

Ben was from the diving unit when he was in the NS and before he enlisted, he was constantly being told by friends and family that it was one of the toughest unit and it would be dangerous. The Aviva team came to give a talk in his camp and as he studied more on diving related illnesses and accidents, he felt that he would definitely sign up for the insurance plan so that he feels assured that if something were to happen to him, some compensation would go to his family.

Disclaimer from Ben: After 2 years in NDU, I can vouch that NDU has done sufficient safety precautions to ensure that no man will fall. Oh, but yes, it is extremely tough. 

Approx. monthly cost required =
$12.80 a month for a sum assured of $100,000 or
$64 a month for a sum assured of $500,000

#2: University Student
I'm studying in University and have 4 years to go till I graduate. I am receiving monthly allowance of $200 a month from my parents and I am teaching tuition part time on weekends, earning about $500 a month. I am taking a bank loan for my studies and will need to pay it back after I graduate. I have a girlfriend/boyfriend now and as much as I can, I would like to bring her/him out on dates every now and then. I hope I can still afford to get covered in some way?
The most basic plan that anyone should get would be a Hospital Plan. We never know when we would need to get warded or treated so it really comes in handy when you are planning to get a check-up, in case it leads to a surgery or hospital stay, which can all be claimed for.

2 years back, Mel was having very bad gastritis and decided to have it checked at the hospital. The symptoms required an Endoscopy as well as some strong medication after, because they had discovered bacteria in her gastric. Thank goodness she had bought hospital insurance so her bill was fully covered, a total of about $4,000 - 5,000.

Approx. monthly cost required = $20 a month for the most basic plan

Next, you might want to think of how much you want or need to provide for your parents. If they are still earning a decent salary and have sufficient savings, you may not need a huge sum assured. However, if they are not well to do and depend much on your earnings as well, you might need to include them in your calculations.

A Term Plan covering 30 illnesses would be good and if you want to keep it short-term to cover the years that you are still studying, you can take up shorter plans like those that are 5 - 6 years. It is cheaper for now, and less of a commitment if you are worried of committing for the next 20 - 30 years. However, with every renewal for a short term plan, you might have to risk paying a higher premium each time due to your age increment and health condition. The chances of people renewing shorter plans are also lower as they may brush it off or forget to get it renewed.

Approx. monthly cost required =
$30 a month for a sum assured of $500,000 (5 years term plan) or
$100 a month for a sum assured of approx. $720,000  (30 years term plan)

#3: Postgraduate and entering the workforce
I have just graduated from Poly / University and started working. My monthly salary is $2000 and after CPF deduction, my take-home pay is $1,600. On top of paying for my phone bills and giving my parents some money monthly, I am repaying my study loan of $____ a month. Is there anything else that I can start buying?
The Hospital Plan and Term Plan are still the basic needs first and foremost. Some companies would offer insurance to employees but if you are working for a smaller firm or start-up, you are on your own. Companies usually pay for you to get treated at a government hospital. However, if you intend to go to a private hospital for treatment, you will need to rely on your personal hospital insurance coverage.

This is also a good time to start on a Savings Plan because as people start to enter the workforce, they also start to get a bit more spend thrift. Locking up money in insurance savings plans are more useful if you do not intend to withdraw any of the money till many years later, as compared to saving up this pool of money in bank accounts. The interest rate might also be higher, and most times incorporated with some form of insurance protection should anything happen to you as well.

However, a word of advice would be to not take any savings plan that is coupled with "investment". This can be a tricky move. It is usually difficult to see significant returns from these policies.

Approx. monthly cost required = depending on how much you'd like to save monthly.

Mel prefers a bit of flexibility on savings and getting the Revosave Plan was a good move that was introduced by her Dad before she started her full-time job. She is able to earn up to 3.5% of interest per annum and able to withdraw a sum of it after the 2nd year if she ever needs to. As of now, she has no plans of doing so because she would rather save this sum for a rainy day.

#4: Engaged and Planning for Marriage
I just got engaged and plan to get married within the next 1 - 2 years. I estimate that I need about $50k for my wedding and not forgetting for my house which will be ready within the next 2 - 3 years time. Money is quite tight for now, but I would still like to get some basic insurance. 
So now another person comes into your life and as you start to save up for big ticket items like the wedding, house and renovations, it is also good to consider your partner within your insurance plans. You will need to think about how much you are contributing to the income monthly and should anything happen to you, how much do you need to provide for the rest of your family. 

The Hospital Plan and Term Plan are still the basic needs first and foremost. If your income has gone to a more stable level and you are able to afford a little more on your Hospital Plan, you can choose to get a higher plan, which will allow you to get treated in a better ward in the hospital. The difference in price as compared to a basic cheaper ward hospital plan would be about a $40 difference per month. 

We can't stress how important it is to get hospital insurance. Another example would be how Mel's mum has hurt her back recently and will need to go for a Keyhole surgery later this month. The total operation costs, treatment and medicine will easily amount to $45,000 thereabout. With the insurance company paying for the entire surgery, she can now put her mind to ease and concentrate on the recovery process, without having to worry about footing the bill at the same time. 

And if you had purchased a Term Plan before, you may want to consider getting an additional term plan so that you will have more coverage since your earnings might have increased by now and your needs are also different from before. 

Additionally, you can consider a Whole Life Plan, which will also come in handy for retirement in future.

Approx. monthly cost required = $250 a month

When the house comes into place, you may also want to get a Mortgage Protection Plan so that if either party has passed on, the house will be paid for.

#5: Married and Planning for Children
I just got married and we are planning to start a family. Is there anything I can get before my child is born?
After getting covered with a Hospital Plan and Whole Life Plan, getting a Savings Plan for the purpose to provide for the child's tertiary plan, would be a good idea as you should be able to get a good cash value in 20 years time. This is ideal to start early before the child is born because most people will start to push the thought aside once diapers and milk foundation becomes a "higher priority". If in the end you do not have children, this amount can be used for retirement.

As mentioned above, do not take up savings policies that are coupled with "investment". We've seen how friends were made to purchase such plans and saw little returns. An alternative can be to buy an investment plan with minimal insurance included. 

Mel's Dad had bought 2 Growth plans for Mel using most of her Ang Bao (red packet) money collected from her first few birthdays. Over these 2 decades, the money in the policy has grown quite substantially. Now that we are preparing to build our own family, we feel that what Mel's dad had done was financially very wise. Because quite a number of parents would either spend the money collected for toys or put it in a savings account in the bank which usually yields paltry returns.

Here are the plans that Mel and Ben currently have:

Revosave (Savings Plan) 
Whole life Plan 
Hospital Plan 
Early, intermediate and advanced stage critical illness Plan 
Accident Plan 
Growth Plans x 2

Hospital plan 
Whole life plan 
Accident plan 

In conclusion, we feel that regardless of which insurance company you choose, it is not that important. The most important thing is for you to buy the necessary coverage for yourself and for your family. 

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