NOC Advises: Is Insurance Really Necessary?

Wednesday, October 17, 2018

NOC Advises: Is Insurance Really Necessary?

A week has passed since we’ve last gone through about the importance of saving. And since there is a furore going on now about NAS Daily’s sponsorship about insurance, why not take this opportunity to go through what insurance is really about. For most people, when we talk about insurance, the first image that appears in their minds are the pesky insurance agents that will ambush you the moment you exit an MRT station, or just minding your own business at a shopping mall. They are definitely annoying, but have you ever tried sitting down to listen to the message that they are trying to deliver? Because regardless of their personal motivations, it’s actually an admirable trait in someone to persevere despite facing countless rejections. So what really is so important about insurance that they are willing to do so?

 

Let’s have a look at the dictionary’s definition of “insure”, the root word of insurance.

 

insure
arrange for compensation in the event of damage to or loss of (property), or injury to or the death of (someone), in exchange for regular payments to a company or to the state.
“the table should be insured for £2,500″
2.
secure or protect someone against (a possible contingency).
“by appeasing Celia they might insure themselves against further misfortune”

 

As you can see, to insure means to secure or to protect yourself against a possible contingency/emergency. Or in simpler words, a back up in case things go wrong. There are tons of back ups we do often in our daily lives. The most common ones are to back up our data on our phone or computer regularly in case you need to do a reformat. After doing a format, you can simply restore the back up and you can still proceed on with your normal activities on the device. While backing up your data works in the event of technical emergencies such as your device is infected with a virus, or that it breaks down and you require a new one, it isn’t that simple when we are talking about our physical being. However, the closest thing to the technical backing up of data is insurance. With insurance, it is possible to actually cope in terms of emergencies.

 

For starters, let’s look at the few basic types of insurances.

  • Life Insurance
  • Health Insurance
  • General Insurance

 

First, a brief introduction to General Insurance as this article will focus more heavily on Life and Health Insurances instead. General Insurance are for incidents where you might incur losses from your belongings or assets being lost or damaged, such as car insurance, or travel insurance. These insurances are only applicable to those who owns a car or is intending to travel, as such, we will focus on the other two instead.

 

Life Insurance

Life insurance is just as its name starts, it’s an insurance on your life. In the event that you are no longer around, the insurance company will give a payout to your remaining family members so that they are able to cope without you. This is particularly important for the breadwinners of the family as if the sole breadwinner is no longer around, the income that the family is living on will stop as well.

 

Life insurance can be further divided into two types: Whole Life and Term Insurance. The main difference is the length of coverage, where Whole Life covers you for, well, your whole life or up to 99 years whereas Term Life covers you for a specific term, for example 30 years. As it is highly likely to receive a payout from a Whole Life policy, the premiums (payment) will be higher as compared to Term Life.

 

Which is better?

It depends on your situation. For example, if you are 20 years old and you plan to get married and have a family of your own, you can consider taking a Term Life for 40 years. In the event that anything happens to you within the 40 years, your family will still have the payout to rely on. And in the event that you outlive the 40 years, your children should already be self-sufficient, and as such, be able to provide for themselves and your spouse. If you are actually in a very comfortable situation financially, and you’re confident of paying off the premiums even when you’re in your old age, you can always opt to take up a Whole Life.

 

Must I get it?

Yes, especially if you have family members dependent on your income.

 

Health Insurance

Health Insurance covers a lot of aspects, such as medical, hospitalisation, critical illnesses, disability, accidents. One of the most expensive bills that you will ever see in your life will be your medical bills. A visit to a private clinic for a flu will easily set you back $40+. Now imagine how much will it cost to go through a heart surgery? The bill will easily run up to 5 or 6 digit figures if you’re not careful. If you have been conscientiously saving for many decades, you might be able to fork out that sum of money. But your decades of savings will be wiped out in a single surgery. So what you can do is to get health insurance, where you are able to claim partially, if not the full amount of your medical bills. Also, certain health insurances offer allowances in the event that you’re unable to work due to medical reasons.

 

But I already have MediShield Life and MediSave

MediSave is this account in your CPF that is set aside for medical expenses. It basically takes up about 8 to 10.5% of your monthly wages. But it is the same as savings, where once it’s depleted, you literally can’t afford to pay for another surgery anymore. As for MediShield Life, it is sized for subsidised treatments in public hospitals and pegged at B2/C-type wards. However, if you stay in A/B1-type ward or a private hospital, the payouts will only cover a small proportion of your bill. Meaning, you will still need to fork out the remaining balance in cash/MediSave.

 

Here’s the benefits chart (or the amount you can claim) under MediShield Life.

 

 

As you can see, it only pays $2,000 to cover more complex procedures, but more complex procedures are expected to cost a 5-figure digit on average. This applies to almost every category as well. As such, you will realise that MediShield Life is insufficient to totally protect you. Hence, it is important for you to get a health insurance and make sure that you are adequately insured. And yes, as of now, it is possible to have every cent of your medical bills fully paid by your insurance company. That’s how much difference it makes.

 

 

Which one is the best then?

There is no objective best insurance policy out there. The more benefits and inclusive a policy is, the more expensive you can expect it to be. So you have got to balance what you need with what you can afford. Everything needs to be catered specifically to your current needs and your future plans. And while you might now be inclined to get insurance for yourself, do not rush into a decision and end up paying money for something that doesn’t really suit your purpose. Arrange an appointment with a consultant, or in fact, consultants from different companies and be forthright in what you want. This will allow the consultant to be able to suggest policies that are suited for you in the best way possible. As much as you dread seeing insurance agents, but feel free to sit down for a talk with them if you have time to spare to plan for your future.

 

With that, hope I’ve illustrated the importance of getting yourself insured. This is merely a very rough outline of the general types of insurance and their importance to educate those who may not be aware of what is it all about. Comment below and let me know if I should go more in-depth into this in a separate article!

 

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