By now you probably have a much better idea of how important insurance is. In the event of an unforeseen accident or emergency, having insurance can often mean the difference between maintaining your financial freedom and having an empty bank account (or worse, an empty nest egg).
Insurance is a serious matter that often requires the assistance of a good financial planner who can help you plan a budget that includes having a set amount each month for your various insurance policies.
How Much Insurance Coverage Do You Have Now?
Don’t know the answer? Well, that’s a bad sign. Listen, this is an important question that any good financial advisor will ask you. But if you have little or no insurance protection other than what the government (MediShiled Life) or your employer provides, it’s never too early to fix that.
However, one HUGE problem many Singaporeans face when it comes to insurance deal with this simple question – is it better to just put more money into savings instead of insurance?
Unfortunately, many Singaporeans are under the assumption that savings is more important – and that’s a huge mistake!
Let’s say that you’re a 25-year old making $3,000 a month.
After you’ve paid off all of your monthly bills and expenses you’re left with about $500 to use any way you see fit.
You choose to put all of that $500 into a savings account that earns a tiny amount of interest because you don’t believe in “wasting” money on insurance.
Two years go by and by that time you’ve already built up $12,000+ in savings. But one day on your way to work you got struck by a vehicle while crossing the road – leaving you paralysed from the waist down. Because you didn’t have insurance, that $12,000+ had to be paid out of pocket for your medical bills.
Not only that – because of your accident, you’re no longer able to continue work at your previous employer and your work options are now severely limited.
But if you had paid just $40 a month for a simple term-life insurance policy with permanent disability coverage of $200,000, you could have not only covered your medical expenses, but you’d have ample funds left over to support your needs well into the future.
While that amount of coverage isn’t fantastic – it illustrates perfectly why even having “some” insurance coverage is far better than having none.
What is the Minimum Amount of Coverage You Need Now?
As the example above illustrates, buying insurance isn’t just about protecting your health or making sure your dependents have the financial support to sustain their way of life – it’s about protecting your wealth too!
Ideally, you’ll want to start purchasing insurance while you’re still in your 20s. That’s because the earlier you purchase some of your policies (especially life and health insurance), the cheaper your premiums will be.
Here’s a broad overview of what insurance coverage (minimum) is needed throughout your various life stages:
|Age||Monthly Income||Life Insurance (Death Coverage)||Health Insurance (Enhanced MediShield)||Total Permanent Disability||Personal Accident||Critical Illness|
When you meet with a financial advisor, he/she will evaluate your expenses, liabilities and your existing insurance policy information.
Even if you’re uninsured for some types on insurance, it’s still possible to purchase insurance policies that provide at least some financial protection in the event of an unexpected accident.
Even if you absolutely cannot afford to include the best insurance coverage in your monthly budget – having some measure of coverage for life’s unexpected emergencies is certainly better than no coverage!