This article was written in collaboration with DIYInsurance. All opinions expressed in this article are the independent views of DollarsAndSense.sg
When it comes to buying insurance plans, one common question we often hear people asking is which is the cheapest policy that they can buy. Whether it’s private integrated shield plans (IPs), critical illness plans (CIs), disability income insurances or life insurances, we all want the best deal.
However, diligent consumers who compare insurance policies may not always end up getting the best deal for themselves. That’s because getting the cheapest deal is often confused with getting the best deal – this just isn’t true in most cases.
Compare Insurance Plans Like You Compare Your Overseas Holidays
To explain this, we use a simple analogy for how we usually plan for our holiday.
When planning a holiday, most of us would do some sort of comparison. For instance, we may compare accommodation prices across a few hotels or Airbnb homes before making our booking. Price is of course important, but so is cleanliness, location to nearby amenities, safety, views from our room as well as our overall experience.
Once we narrow our preferred accommodation, we go on to try finding ways to book them at the best possible price, either by searching for promo codes or using a platform that gives discounts.
This is similar to how we should be comparing our insurance plans. When buying an insurance plan, price isn’t everything. Other considerations such as scope of coverage, definition of what’s covered and even the types of riders that we can add on are important factors that we should also consider.
Comparing Two Life Insurance Plans
As an example of why price isn’t the only thing that we should be looking at, we did a comparison of two popular term life insurance policies.
The first is the MINDEF/SAF Group Term Life Insurance by Aviva. This is a policy available to all NS men in Singapore.
Here’s a look at how the premiums stack up if we require a coverage of $1 million, up till age 65.
For this, we have to pay a monthly premium of $41, or about $492 per annum.
We also used the Do It Your Way Insurance (DIYInsurance) platform to help us find a term life insurance policy. DIYInsurance is Singapore’s first life insurance comparison web portal developed by MAS-licensed financial advisory firm, Providend in June 2014.
You can read up about DIYInsurance in this article if you are interested to know more about them.
According to the platform, a 25-year male seeking $1 million life insurance coverage till age 65, the top plan is the MyProtector Term plan – which, ironically, is also an Aviva product.
The annual premium for this plan is $803, though there is currently a 5% discount, which would reduce the premium to $763. This is close to 55% more than the premium we need to pay on the MINDEF/SAF Group Term Life insurance plan.
Here’s a quick snapshot of the premiums we have to pay for each policy, for a coverage of $1 million, for a 25-year old male, till age 65.
|MINDEF/SAF Group Term Life||$492|
|MyProtector Term Plan||$763
(after 5% discount)
At first glance, it might make perfect sense for consumers to buy the MINDEF/SAF Group Term Life plan (if they are eligible for it), and rightly so. It’s a well-known fact that the MINDEF Group Term Life plan offers the cheapest term life insurance plan in the market, if a no-frill term life insurance plan is what we want. Even Aviva’s own term life insurance plan is more expensive than the one which they offer through MINDEF.
If that’s the case, why would anyone still need to consider other term life insurance plan?
Scope Of Coverage Matters
Even when looking at similar life insurance plans offered by the same insurer, scope of coverage may make all the difference.
When we look at the MINDEF/SAF Group Term insurance, we will find that there is coverage for total and permanent disability. The definition for total and permanent disability is defined as such.
When we look at the definition for the MyProtector Term Plan, we can immediately observe that the definition for total and permanent disability for this plan is much broader. Here are screenshots we took from the policy.
Source: Aviva, Screenshot by DollarsAndSense
The MyProtector Term Plan offers a much broader definition of disability. For example, if the policyholder is unable to perform three (3) of the six (6) “Activities of Daily Living”, the claim for TPD benefit is paid out.
Do note that we are not trying to say that people should skip on the MINDEF/SAF Group Term insurance. It is good (and in fact, we own it ourselves!).
What we are stressing here is that we should not base our insurance decisions solely on price. Often, insurance plans that look similar on the surface, have differences that explain disparities in its costs.
Cost Is Never Proof Of Quality
When buying insurance based on cost, we have to be extra mindful.
On one hand, as shown above, different insurance plans, even those offered by insurers, may differ in scope of coverage. Simply buying what’s cheapest may not always get us the plan that we truly need.
On the flipside, we should not immediately assume that the most expensive insurance policy will automatically give us the best coverage. Cost is never proof of quality and we should never be overpaying for an insurance plan just because we didn’t compare plans.
Rather, we should complement our cost comparisons with product information to ensure we’re getting what you need. If need be, we should not be hesitant to pay slightly more for a plan when it gives us greater protection value, especially when we really need more comprehensive coverage.
Compare Insurance Plans Before Buying Them
DIYInsurance helps consumers find the key unique features that each plan offers in a quick and easily digestible format. This helps us compare plans based on what we need and which plan is the best value, rather than simply buying what is being pushed to us or the cheapest plans.
To help their customers save money, DIYInsurance also provides its clients a 50% rebate in agent’s commissions, which is given on top of any other existing promotions.
There is a misconception that enquiring or buying insurance online means receiving no advice or any after-sales service. This is untrue.
DIYInsurance has a team of MAS-licensed advisors whose jobs are to understand the needs of their potential clients, and to ensure that clients buy suitable products. These advisors will have face-to-face meet ups with clients after their online comparisons and/or enquiries are submitted through DIYInsurance.
During these face-to-face sessions, clients can also ask any questions that they may have, be it for the plans that they have opted for, other similar plans, or any other insurance-related questions that they may have.
Also, the advisors from DIYInsurance advisors are salary-based employees who receive no commissions for selling insurance plans. Their job is to ensure that their clients buy insurance plans that they need and fully understand the coverage they will receive on such plans, as well as to provide after sales servicing, when the needs arise.