Boring But Important: What Insurance Policies Should You Get?

Insurance may not be the most exciting topic, but it just might save you from huge financial trouble one day. Here are the insurance policies you should consider getting based on your salary.

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Insurance may not be the most exciting topic, but it just might save you from huge financial trouble one day. Here are the insurance policies you should consider getting based on your salary.

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Adulting comes with a few must-dos: hold down a full-time job, pay your own bills and separate the whites from the colours when doing the laundry. Then there’s getting insurance coverage – which you know can be a lifesaver (literally) but still haven’t gotten around to signing up for because, well, you’re young and healthy. But just because you don’t need it now doesn’t mean you shouldn’t be investing in it, stat.

“The younger you are, the cheaper the premiums will be. If you’re in your 20s, you’ll probably be able to afford full coverage as compared to someone older and with preexisting health conditions,” says Vivianna Low, NTUC Income’s Head of Retail Financial Services. “If you’re young and healthy, you should take advantage of the lower premiums and coverage without exclusions,” she adds.

Why it’s important

While you may be perfectly healthy today, you don’t know what could happen tomorrow.

“Insurance protects a person from unforeseen circumstances,” says Vivianna. “For example, if a health issue crops up, it’ll allow you to go for treatment without having to worry about finances.”

Besides, us millennials seem to worry about money a lot. According to a recent survey by NTUC Income and Singapore Press Holdings, 65 percent of those between the ages of 25 and 34 are worried about not having enough funds for an emergency.

Not being able to afford, say, surgery you absolutely need can be devastating. And since insurance helps to cushion the financial blow of unexpected occurrences, buying a plan or two is probably a small price to pay for peace of mind.

How much to spend

But just how much should you spend on insurance?

“I would recommend that a person spends around 10 percent of their annual income on insurance,” says Vivianna.

For example, if you’re earning $2,000 a month, your annual income is $26,000 (this includes the 13th month bonus). As such, you should spend about $2,600 a year on insurance, which amounts to $210 a month on coverage.

However, she also stresses that you should spend no more than 50 percent of your monthly surplus on insurance. So if you’re spending $210 on it every month, it should only be because you have at least $420 to spare each month. At the end of the day, it’s most important that you spend within your means.

Understand the policies

Now that you know how much you should spend on coverage, you should know what the most necessary plans are. Understandably, Vivianna recommends that you put health insurance at the top of the list. The second in line? Life insurance.

This covers your loss of income should you no longer be able to work. “Life insurance provides financial support upon death, total and permanent disability or the onset of critical illnesses,” she explains. If you’ve got a higher salary range, you should consider taking up additional plans that will help protect you against other scenarios. These include plans that cover specific women’s illnesses and those that help you save for retirement. And yes, you should be considering saving for the long-term.

“The rule for retirement planning is that it’s never too early to start,” says Vivianna. She notes that a 2016 survey conducted by Nielsen and NTUC Income found that “the main reason most people cannot retire comfortably is that they started saving too late; only around their 40s.” She also notes that the study showed a majority of Singaporeans between the ages of 25 and 35 are willing to set aside money every month for retirement but are held back by a lack of knowledge as well as other financial commitments.

Want to get insured but not sure what plans you can afford? We got Vivianna to recommend the plans to consider based on your salary range. 

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If you’re earning $2,000…
2 Medical planning Covers medical and hospitalisation costs
-Typically provides a standard room in a private hospital or private medical institution in the event of hospitalisation.
-Costs about $260 a year in cash.
2 Basic protection Covers loss of income and your dependents’ needs 
-Provides financial support when there is death, total and permanent disability or critical illnesses.
-About $150 a month in cash.
If you’re earning $4,000… (consider getting these too)
3 Basic protection for women Covers female-related illnesses
-Provides coverage for specific female illnesses and surgeries as well as post-diagnosis support and biennial health screenings.
-About $55 a month in cash.
If you’re earning $6,000… (maybe add this on as well)
4 Asset building Helps you save for the long-term
-Cash benefits are usually available each year, and a maturity benefit will be paid out at the end of the policy term.
-The payment term typically lasts 15 to 25 years. About $125 a month in cash. 
5 Asset building for retirement Helps direct you towards a comfortable retirement
-The payout period begins after the end of the accumulation period. During the payout period, you’ll be given a cash benefit every month. The payment term typically lasts about 30 years.
-About $200 a month in cash.
*Based on NTUC Income insurance plan rates. *
Images Text Adora Wong.