Insurance needs for different life stages

Insurance needs for different life stages

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below.

  • Insurance is not one-size-fits-all.
  • Almost everyone can benefit from a basic health insurance plan
  • If you have dependents, you should consider getting an insurance that helps alleviate their financial burden when you are no longer around

One can never guess when a debilitating illness strikes or when a loved one passes on. Other than dealing with the emotional ordeal, the least you would want during this sensitive period is to have to deal with the financial trauma of high medical bills or the loss of income. Therefore, insurance is a key component of financial planning – to shore up your defences.

The tricky thing about insurance is that it is never one-size-fits-all. Each individual has his or her unique needs and circumstances. If you are not sure about what type of insurance to purchase, it might be helpful to look at it from a life-stage perspective.

Here, we highlight the key insurance-related factors at different life stages, as well as the steps you can take to protect your finances:

Young adults entering work force

But getting basic health insurance during this time could be your best first step to building up your financial defences. As premiums are usually more affordable for younger people, this is a good time to pick up essential health coverage. Another consideration is a critical illness (CI) plan, if budget permits.

What you can do

Consider a private hospitalisation Integrated Shield Plan as young adults are less likely to have pre-existing medical conditions that excludes them from insurance coverage.

Insurance needs for different life stages

Married couples with young kids

At this stage of life, financial priorities may include home mortgage, family planning, as well as saving for kids’ education. With education inflation pushing up the cost of tertiary tuition fees, it would be prudent for parents to start saving for their kids’ education when they are still young.

It is also critical to plan for the financial security of the family to ensure loved ones can sustain a reasonable lifestyle if the breadwinner is unable to provide anymore.

What you can do

The cheaper way to get coverage for death/terminal illness benefits is to consider a term plan over life insurance. Term plans are cheaper, but do not build up cash value like whole life insurance. To ensure that the coverage amount is sufficient, the Life Insurance Association Singapore recommends approximately 9-10 times your annual earnings as basic life coverage.

Note that this amount varies from person to person; it is advised to have a meeting with a Wealth Planning Manager (WPM) to evaluate your protection needs.

For those who can afford, a CI plan can be a helpful add-on. A CI diagnosis can disrupt income as the insured seeks treatment, and such a plan can ensure some financial support when treatment is ongoing, and income is disrupted.

Families with single income source

It is very important for families with single income source to have well-rounded coverage to mitigate any unexpected loss of income. For sole breadwinners, the priority would be to ensure adequate protection so that his/her family can meet financial commitments for the continuity of normal life.

What you can do

The consideration here is similar to married couples with young kids – a term plan and a critical illness plan.

Since the family is solely dependent on a single source of income, the breadwinner can consider getting a disability insurance cover. Essentially, disability insurance provides a payout if you’re no longer able to earn an income (or your previous income level); or when you become unable to perform daily tasks you used to do independently, like feeding and dressing yourself. The cash payouts from disability insurance can offer you an income replacement and provide some form of financial support.

Working individuals supporting aged parents

Juggling both the responsibilities of providing for their children as well as aged parents, the sandwich generation may face tremendous financial stress. For this group, financial planning will have to take into consideration the 2 generations of loved ones if the unexpected happens. Given the rising healthcare costs, the priority here is to ensure their parents are adequately insured against unexpected medical bills and treatment costs.

What you can do

Help your parents take stock of their insurance policies. You might want to ensure that they have a term plan for coverage, a CI policy, as well as a basic health insurance coverage.

Retirees

Singaporeans have an average life expectancy of 85 years old. This means you will need an additional 20 years of retirement income to support yourself after you stop work at 65. Thus, it is never too early to start thinking about your retirement goals. As we get older, health and CI protection becomes a priority. Having the right policies when we are younger ensures insurability, affordability of premiums and helps to cushion the cost of treatment without having to dig into our retirement savings. It is also prudent to take charge of your retirement planning early to ease your children’s financial burden.

What you can do

Use a retirement calculator to find out whether you are on track to accumulate the amount you will need to maintain your desired retirement lifestyle. Mortality protection is not as relevant for retirees unless the retirees have dependents. You can, however, still consider a CI plan to mitigate the cost of medical treatments in old age.

Ready to start?

Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.

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