The Working Adult Starter Pack: Insurance

It’s a longstanding trope by now – friend hasn’t contacted you in a while, and suddenly asks you for coffee. We know how this goes, and these days trying to sell you insurance might be the least nefarious of reasons why they have a sudden urge to have a beverage together. Nevertheless, it’s important to know how to guard yourself against such drinks, which can be expensive even if they pay for it.

This is one part of the Working Adult Starter Park! See other parts:

First, it’s best to narrow the types of agent you work with to those with a lot fewer clashes of interest.

Next, identify areas of coverage that almost every working adult require, in order of priority:

1. Hospitalisation coverage

Purpose: payment of hospital bills

While Medishield Life is compulsory for every Singapore citizen and permanent resident, it is necessarily a basic form of coverage to keep premiums relatively low. This means that the coverage is pegged to B2/C wards and there are various sublimits, which is why an integrated Shield plan is recommended to provide a more comprehensive coverage.

I was always very against 100% coverage, and the regulators have since disallowed such riders, so most providers should now provide fairly sensible coverage vs premium ratios.

This is your first priority of coverage to get before moving on to the others.

2. Disability income insurance

Purpose: replacement of income while medically unfit to work

I have written about disability income insurance before, and it remains an important part of one’s insurance coverage, and second only to hospitalisation coverage. Unless you have streams of passive income from rent, business, or a fairy godmother that will continue providing cashflow when you’re sick, it is essential to replace your income during your financially productive years.

Most Singaporeans are underinsured in this regard, and the fact that only three providers have such coverage exacerbates this problem.

3. Critical illness and death coverage

Purpose for critical illness: provide a sum to cope with higher cost of living due to impariment
Purpose for death: provide a sum to dependents for income replacement

The last in priority is what gets sold most often, unfortunately, due to the many, many variations it can be packaged in. There are ILPs, whole life plans, multiple payouts and more types than there are new iPhones this year.

Take my advice, stay clear from ILPs, avoid whole life policies and pick term. It’s the only way you can get high amount of coverage with an affordable premium, and too often people try to get less whole life coverage to fit their budget and end up being underinsured.


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Good to haves

Accident plan
I think this is okay to get, and given its low cost (couple of hundred per year), it doesn’t break the bank and provides a payout in the event a person does get into an accident.

Hospital bills are taken care of by one’s Shield plan, and if one can’t work, disability income would do the trick, so an accident plan isn’t really needed. Still, having a consolation prize in form of an accident plan payout is great… as great as losing body parts from a car crash can be.

CareShield supplement
This is quite no-brainer to get, if you are 30 and up, at least for up to $600 of premium because that can be paid for using your Medisave and does not require cash. Using your Medisave to protect any potential impact to your cash reserves is a prudent thing to do.

Subscribe to my Telegram channel for a (long overdue) comparison across all three providers, and articles on how it interacts with disability income insurance.

Do you really need these?

Multiple pay, early critical illness, what have you
As profit-seeking entities, insurers are businesses and businesses need to be creative for profit. And creative they can get. Over the years, all kinds of multiple payout and/or early payout plans have popped up, and while I intend to address these in separate articles, the summarised version is that you are paying for such coverage, and such money is better spent on the big three that I have listed above.

When your necessary forms of coverage are settled, you might want to look at such plans for greater peace of mind, or channel those funds towards retirement instead.

Need advice?

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2 thoughts on “The Working Adult Starter Pack: Insurance

    1. Agents tend to say things like 10-20% just to get you to pay more premiums

      My advice would be to spend as little as possible but get as much coverage as you can. This would mean you have to look for cost-efficient policies that agents tend not to recommend, and means having to do some comparisons across different providers/products. If you go for the necessary coverage that I’ve mentioned above, I think my ballpark estimates (for someone in their 20-30s) would be maybe $2,000 to $3,000 a year for medical, term, and disability income insurance. Possibly 2-5% of your income depending on how much you earn.

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