Buying insurance is a responsibility



Growing up, I never had any insurance plans. My mom defended that my dad never had enough money, so how in the world would they have money to pay for our insurances? You may judge me, but I felt that was an irresponsible thing to do. Thank god we never had to be admitted to the hospitals, but what if something happens?

I was really emotional about our lack of insurance plans. I felt that they didn't care. The only thing they bought was an endowment plan that matured when I turned 21, I believed. The last I knew, this plan didn't even give profits. I was angry, but my anger subsided after I reflected on this - my parents are not well-educated. They didn't even have their own hospitalisation plans, and my dad even thought that he could rely on his company's hospitalisation subsidies should anything go wrong. I chided him for thinking this way. He's in his 60s already. If his employment ends with his company, who is going to insure him? Who is going to pay for his medical bills? He can't claim from his HR or Finance anymore.

Insuring my parents 

And so, early this year, we purchased a hospitalisation plan from NTUC Income for my mum. We were lucky that she has never been admitted to the hospitals before, which made purchasing the plan at her age (50s) smooth. My dad wasn't so lucky. Other than having been admitted for a minor operation, he had high blood pressure, which meant that quite a number of coverage (say, potential claims from heart attack) would not be applicable to him. We didn't proceed with the purchase of the hospitalisation plan for him in the end, as the exclusions were plenty. We're just hoping the Medishield Life would be enough. My dad was pretty firm that his Medisave would be enough, which he kept repeating that he has maxed out his Medisave. Fine.

Ever since I started working, I knew I had to get minimally a hospitalisation plan for my parents. Should anything happens, I'll be the one forking the bills since I've now earned more than them combined. I'm also the eldest and the one who has a substantial savings since working 4 years ago. Nobody wants to exhaust their savings which in my case, I've been saving since 7, for a sudden hospitalisation bill! We all know the common phrase in Singapore i.e can die, but cannot be sick. Hospital bills are insane. Granted that we received heavy subsidies from the government, but what if we are admitted for a long period? These are things that scares me. I'm glad my brother and I took our steps to insure them, albeit only 3 years after I started work.

Insuring myself

When I started working, I purchased a hospitalisation plan. That was ticking off the most basic yet crucial item off my list.

4 years down the road, I've been contemplating on insuring myself with a critical illness plan. We all know that cancer is one of the most common diseases. What's worst is there are at least 100 types of cancer. Everyone would have heard or known people who passed away from this. I've my grandma and aunt who passed away from this killer. I've known of friends whose mothers passed away from cancer when they were young. I even had a primary school friend who passed away from leukaemia when I was in secondary school.

Death is a scary thing. But what's more scary is the cost that comes along with it, if your death is slow and painful. I would never want to burden my family with such bills, should I (choy!) be ill.

Term or Whole Life?

I decided on a term plan for a few reasons. One, it is much more expensive to get a Whole Life plan - I was quoted a $2000-$5000 yearly premium for NTUC's Vivocare.  Two, Vivocare was too complicated for me. I dislike the agent's reminder about how Vivocare gives me money back from the plan. I didn't mind paying a low premium for protection, just like a hospitalisation plan. Third, so what if I could get my money back? There are catches to this. I wasn't sure if I could commit to this expensive premium. What if I take a break from work to care for my kids? What if money is tight and I've to terminate the plan? Termination would likely mean getting back a lower amount than I've paid. Fourth, seriously, I could invest the money by myself, TYVM. 

However, the term plan is not without its cons. The premiums are reviewed from time to time and I'd pay higher premiums as I move across age bands. Also, it doesn't cover me till 99 years old. The maximum coverage is till 70. 

How much coverage should I get?

Still, after doing my calculations, it is more affordable to purchase the term plan. In the end, I applied for a term plan with death coverage at $200k, an early critical illness plan at $100k coverage and a critical illness plan at $100k coverage. My initial plan was to get a higher coverage for early CI and CI than death. However, the plan indicates that early CI and CI coverage must not exceed death coverage. My reason for this thought was that I needed more money during illnesses to pay for bills and to subsist myself in the event I can't work. I honestly don't need that much money after I die as I do not have any kids yet. My family would survive as I'm technically not the breadwinner. 

Since the early CI and CI coverage must not exceed death coverage, I decided on a $100k coverage for each. Agents told me that I need to consider a coverage at 5 times my annual income. This is to prepare myself in the event that I could not work for 5 years. On a side note, the higher amount I cover, the higher my premiums and the more commission they'd get la. I didn't subscribe to what they preached as I thought that I should cater my coverage based on my expenses instead. Also, having emergency funds is very important. I'm glad I've $100k disposable cash for now which means that my coverage for life insurance need not be as high. My own savings can tight me through a good 1 year if I spend frugally, and hospitalisation bills can be covered under my hospitalisation insurance plan. I've also quite a decent Medisave chest considering that I've worked for 4 years. 

There's no hard and fast rule on how much coverage you need. Determine it yourself as you know best how much money you need for yourself and family should you fall ill. 

I'll definitely review my plan when I have my own family, but for now, $100k coverage for early CI and CI is good enough.

Be responsible

To me, buying insurance is a responsibility. It is my responsibility to insure my family against huge medical bills. It is my responsibility to ensure that I do not pass any medical bills for them to pay should I be ill. 

I strongly recommend young working adults to have a chat with their family on this, and start insuring your family if they haven't done so. This is especially important for the single young working adults as we do not have much financial burdens to face. Do what you can to protect your family now. You'll have a better peace of mind knowing they're insured should you branch out from the family to care for your kiddos :)

Comments

  1. Do you still need to cover your human asset till 99? Still working to generate cash flow from human asset at 99?

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  2. My parents bought no insurance plans for me. I don't blame them because putting food on the table was already an isuue. There was just no more money for others

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  3. Can u share which term plans u had considered and why u had chosen this particular term plan? Thanks

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  4. I really think that you are a very responsible and sensible daughter to care so much for your parents.
    I don't think your parents are being irresponsible as I can understand that they might think buying any type of insurance with no return is just money down the drain. At least they bought an endowment plan and I think that show that they does care for you in their 'responsible' way.

    Just think of my own parents, up to till now in their eighties till got no whole life plan, hospitalization plans as they strong against such plans. So just learn to take it easy and buy whatever plan that make sense in term of money that you can afford and everything will work out well in the end. Cheer!

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  5. Apart from H&S plan and (maybe) long-term disability plan, you don't really need life insurance when you no longer need to provide for dependents or cover large debts like mortgages. I.E. not necessary to cover till 100 or lifetime. Death is a certainty so a long-term life insurance will be priced accordingly. Consumers may think "bao chia" sure can win when claim, but insurance companies are 100,000X smarter than us and already factored in death claims into your premiums.

    As for CI, it is mainly good to have but not critical especially if there is no history among your family members/relatives. More important to have a suitable H&S plan. If you're concerned with possibility of CI affecting your ability to work, then a disability income term plan will be more useful.

    You can get a term till 65 & fixed the premium throughout. More expensive initially but cheaper overall. Otherwise if you go for renewable term, then every 5 or 10 yrs (depending on length of term), they'll increase the premiums for the next 5 / 10 yrs.

    For HDB mortgage, get CPF's Home Protection Scheme, cheapest mortgage insurance. Otherwise get a mortgage reducing term --- cheaper than normal level term insurance.

    For guys who do NS, please please take up the SAF / MHA Group Term plans. Most freaking hands-down the cheapest goddamned insurance in Singapore. They have for life, CI, disability income, personal accident. Cheaper than even NTUC Income group plans for civil servants.

    The only limitation for SAF/MHA Group Term is pro-ration factor for war / terrorism incidents. Which is freaking ironic. Other than that, it's good to go --- even if say airplane crash or ocean liner sinking not due to war or terrorism, you'll get your specified coverage without pro-ration.

    For KS fellers, just add on with your favourite usual term insurance.

    ReplyDelete
  6. Hi SBSL,

    Your relationship with parents might go from admiration to anger to acceptance to understanding. That's a lot to blame them when I was much younger too, but after becoming a parent myself, I realised that a lot of things your parents are also muddling through. There's no adults in the world, all are trying to be one. Be understanding.

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  7. My sense is that the Term Insurance should only be to cover your dependents should you die prematurely. So I'm doubtful you really need term insurance to such an old age. Consider: Who is the money for should you die at that age, and what would they need it for?

    For that matter, if you are investing to generate a portfolio, it would start to trade off the extent of coverage needed from term - i.e. decreasing need as your investment portfolio grows to counterbalance.

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  8. I doubt there was any affordable insurance one generation ago. Term insurance is a recent concept.

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