Many young adults have this common assumption: insurance is only for people who are older and “of age”. They often ask why a young and healthy individual would even need to buy insurance.
It doesn’t mean that just because you are young, you won’t fall ill.
Insurance acts as a safety net when things go south. Regardless of your age, purchasing the relevant insurance policies ensures that you are protected and insured.
Why do I – young and healthy – need insurance?
Insurance cushions the financial burden for both you and your family through rough times:
- If you unexpectedly pass away, and your family who depends on you financially lose their main source of income.
- If you meet with an accident or fall seriously ill and become saddled with huge hospital and treatment bills.
Insurance, made simple
For some of us, our parents may have bought us insurance coverage since we were young – and that’s great! Having insurance coverage is a privilege that some of us have. But do you know what exactly your insurance policies cover you for? Taking ownership of your policies and understanding its coverage is fundamental for your financial planning.
Here at PolicyPal, We believe that no one is “too young” for insurance. Whether or not you currently own any insurance policy, we want to empower you with the right tools and knowledge to make informed decisions.
Before purchasing any insurance policy, ensure that you are able to afford the premiums. This is important as you will likely spend the rest of your life (or at least a long time) making monthly or yearly payments.
We have listed three key insurance products to help you in this decision-making process.
Health Insurance helps you to cover the costs of healthcare, this includes hospitalization bills, medical treatment and other expenses related to health.
All Singaporeans are covered under MediShield Life, a government scheme that helps us to cover large hospital bills and select costly outpatient treatments. MediShield Life is sized for subsidised treatment in public hospitals and pegged at B2/C-type wards. If you choose to stay in an A/B1-type ward or in a private hospital, you are still covered by MediShield Life.
However, you will find that your MediShield Life payout will cover only a small proportion of your bill. You would need to draw from MediSave and/or cash to pay the balance.
It’s like a McDonald’s McChicken – nothing wrong with it, but a McSpicy sounds better. In health insurance, the McSpicy equivalent is comparable to an Integrated Shield Plan (IP).
Many Singaporeans choose to increase their coverage by purchasing an IP; higher coverage limits and coverage for pre/post-hospitalisation treatment. In addition, if you prefer having your recovery in A/B1 ward in a public hospital, or a private hospital, you should consider purchasing an Integrated Shield Plan (IP).
Even though you would need to pay more when purchasing an IP, you can do so using your MediSave account and cash. If you would like to purchase additional coverage on top of your IP, there are additional riders you can add on as well.
For example, a common rider in health insurance covers your deductible and co-insurance. This means that when you make an insurance claim, there would still nonetheless be a portion that you would need to pay for.
All add-on riders would need to be paid out of pocket.
You should purchase your health insurance while you are still young and relatively healthy. Premiums increase as you get older and it becomes harder and costlier to take up health insurance if you develop any medical condition.
^ As a fresh graduate (between 26 to 29 years old), you can expect premiums for Integrated Shield Plans to range between S$228 to S$427 annually.
Cost of premiums is based on a Life Assured, who does not have any pre-existing conditions at the point of the proposal.
Term Life Insurance
A Term Life policy provides a payout in the event of your death. Some insurers include coverage for total and permanent disability and terminal illness as part of their Term Life plans. Insurance coverage can start from as little as S$50,000 sum assured and for as short as 5 years.
You can use Term Life insurance to financially provide for your loved ones after you’re gone. As taking up a Term life policy can also be a long-term commitment, you should not rush into this but assess your finances and how much coverage you need before making a decision. The last thing you want to happen is for your Term Life policy to terminate because you were unable to continue to pay the premiums.
As a fresh graduate just entering the workforce, taking up a Term Life insurance plan may make more sense than a whole life plan. This is because Term Life plans are cheaper compared to whole life plans for the same insurance coverage. However, Term Life plans do not offer any cash value upon the termination of the policy, unlike whole life plans that may offer some after a period of time.
How much coverage do I need?
As a common rule of thumb, a good estimate for the amount of coverage (sum assured) needed is approximately ten times of your annual income.
However, this approach is a simple and straightforward way to estimate the coverage needed, with the idealistic assumption that it is one-size-fits-all. It does not take into account any of your unique circumstances and future obligations.
^ As a fresh graduate (between 25 to 29 years old), you can expect premiums for a term life insurance plan, to cost an estimated of S$500 to S$600 annually. This sum is based on S$1 million sum assured and coverage till age 65 for females (note that premiums cost more for men).
Critical Illness Insurance
While health insurance helps to cover your hospitalisation and treatment fees, it’s intended to reimburse you for medical expenses already incurred.
However, during the period of diagnosis, treatment and recovery, you may likely be unable to work. Health insurance does not compensate you for any loss of income during this time.
This is where Critical Illness insurance may be useful. It provides you with a lump sum payout in the event that you are diagnosed with a Critical Illness. With this payout, it will allow you to cover at least part of you and your family’s expenses during the period of your treatment and recovery.
Do you need Critical Illness Insurance if you already have Health Insurance?
As a fresh graduate, purchasing both health insurance and critical illness insurance might be a stretch for your wallet in the first few years of working.
However, if you have the financial means to do so, purchasing critical illness insurance on top of your health insurance definitely provides you with additional protection.
Make an informed decision before committing
Your insurance needs changes with time and is dependent on your unique circumstances. With that in mind, PolicyPal’s Life Stage feature can help you to better understand what and how much you need at your current phase of life.
This feature allows you to determine the coverage and calculate estimated premiums that are common to your demographic.
By using your profile, we can assess your insurance needs, and help you understand what and how much you need at your current phase of life.
These personalised solutions can help you to make more informed decisions that are driven by data. This is to ensure that you’re not grossly over or underinsured and be equipped with the right knowledge to make your decisions.
Insurance is usually a long-term commitment, and it is important to balance your coverage needs with what you can afford.
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