If you’re a young working adult who is striving to establish your career, you should not neglect getting the right insurance policies to protect you against unexpected events in life.
Insurance protects you against potential personal financial disasters such as medical emergencies, the loss of income due to disability, or unforeseen accidents.
In this article, we discuss 3 types of insurance policies that all young working adults in Singapore should consider getting.
# 1 Health Insurance
As young adults, health is our greatest asset as it allows us to work and earn an income for a living. As healthcare costs continue to rise in Singapore, it will be prudent to get yourself insured with adequate health insurance coverage.
Any unexpected medical emergency will not only render you unable to work, but may also incur potential hefty hospital bills.
A common kind of health insurance in Singapore is the Integrated Shield Plan (IP) offered by private health insurers, which provides more comprehensive coverage on top of MediShield Life. It is important to know that IP plans do not cover for pre-existing conditions, unlike MediShield Life.
# 2 Life Insurance
Life insurance provides financial protection for your dependents should there be any unforeseen circumstances such as death, Total Permanent Disability (TPD) or Critical Illness (CI). The lump sum payout is intended to meet the financial needs of your dependents and allow them to sustain their day to day living. In general, there are two types of life insurance – Term Life and Whole Life.
Term Life Insurance
Term Life insurance is a pure protection policy with no cash value. It provides a fixed coverage for a certain term period, usually until the age of 65 or 70 years old. Since there is no cash value in the policy, you pay less premiums than a Whole Life policy.
One of the reasons why people buy Term Life insurance for coverage is due to the low cost, and you can always use the money you save by not buying a Whole Life policy to invest on your own. Some people also purchase Term Life policies to supplement an existing Whole Life insurance plan.
Whole Life Insurance
Unlike Term Life insurance, Whole Life insurance provides coverage for a lifetime. Given the same amount of coverage, the premiums for Whole Life insurance is more expensive compared to Term Life insurance.
There are two parts to a whole life insurance – a term component (similar to term life insurance) and a savings component. The rationale behind this is that the term component provides a fixed coverage during critical years of employment while the saving component provides coverage after the term component expires. This allows the policy to provide coverage throughout a person’s entire lifetime and leave a bequest for their surviving dependants.
# 3 Disability Income Insurance
Disability income insurance is important for young adults since it ease your financial loss from not being able to work.
It protects your income source in the event you are unable to perform your job duties due to disability. Depending on insurers, the regular stream of monthly payouts can be up to 75% of your last drawn salary until a specified age.
For example, a person earning $4,000 a month can opt to receive up to $3,000 per month in payouts in the event of disability. You can receive the payouts even if the disability is temporary, though there is usually a waiting period. Payouts will cease when the person is able to resume work.
A common misconception of disability income insurance is that it is the same as disability insurance. The latter only pays out if you can’t perform 2 or 3 out of 6 Activities of Daily Living (ADLs) while the disability income insurance is occupation-specific. For instance, a permanent loss of voice for an educator may be considered a disability since he or she can no longer speak in class but is still able to perform all the ADLs.
Disability income insurance only covers you when you are employed. If you happen to be unemployed when you become disabled, you may not qualify for any payouts.
Buy The Policies That Fit Your Needs
There is no one-size-fits-all solution when it comes getting the right insurance. It is important to only commit to insurance policies that you understand and caters to your unique situation.
For most young adults in Singapore, these insurance highlighted should be among the first types of policies that they can use to protect themselves.