The most popular insurance in Singapore

With a plethora of insurance products that are available in Singapore, some curious minds could be wondering what is the most popular insurance plan in Singapore and why do people buy them? Some may guess that since there are so many car owners in Singapore, perhaps motor insurance is quite popular? Or as Singapore is fast-ageing population, life insurance or health insurance such as the Integrated Shield Plans that covers hospitalisation and surgery costs should be the popular one. If your guess is the latter, then you are right.

According to the Life Insurance Association of Singapore (LIA), the life insurance industry posted good sales in the first half of 2017. This is due to strong sales of investment-linked plans and a positive attitude towards protection and retirement needs among people here. According to LIA president, Patrick Teow, there was a steady take-up of products designed to provide regular payouts from retirement age which shows that people are appreciating the importance of preparing ahead for their future years. This could mean that Singaporeans are more interested to take up insurance that would protect their savings and give them some payouts in their retirement.

The Straits Times also reported that out of the S$154 million health insurance premiums that were paid in the first half of 2017, Integrated Shield Plans (IP) premiums and IP riders accounted for 90 per cent while the remaining 10 per cent came from other medical plans and riders. Retirement planning seems to be an ongoing concern for both pre-retirees and their children because by 2030, there will only be two working adults supporting one retiree, compared with about five working adults per retiree in 2016. Seems like the younger generation are the ones going to shoulder a greater financial burden to support the ageing population. They also have to ensure that they have enough for milestones such as marriage and setting up their own families.

And from the reports, names such as retirement planning, life insurance, health insurance and Integrated Shield Plans (IP) keep popping up. Let’s take a quick look at what these items mean.

Retirement planning

What is retirement planning and what does it entail? Retirement planning is the process of determining retirement income goals, and the actions and decisions necessary to achieve those goals. It includes identifying sources of income, estimating expenses, implementing a savings program and managing assets. Future cash flows are also estimated to determine if the retirement income goal will be achieved.

While there is never a “good” time to start planning for retirement, there are advantages to starting early. If you start early, you will have a longer time horizon and that means more time to grow your savings. If you have made investments, a long term horizon will also help you to ride out short-term price fluctuations on your investments. If you start late, you may have to work harder at growing your retirement savings. How should one start saving for retirement? First, define your retirement goals, then assess your current situation and get started on your retirement savings plan.

Most times, retirement planning will involve looking at life insurance, health insurance and IP.

What is Life Insurance?

Life insurance is a protection against financial losses that would result from the premature death of the insured. A life insurance policy pays out an agreed amount known as the sum assured under certain circumstances e.g. when the insured pass on. This money is intended to help the insured meet his/her financial needs and/or those of the dependants. Depending on the terms of the policy, the sum assured is also paid to the insured should he or she becomes totally or permanently disabled. There are four basic types of life insurance products:

• Term Insurance
• Whole Life Insurance
• Universal Life Insurance
• Variable Life Insurance

However, most times we look at two more common categories of life insurance – term insurance and whole life insurance or permanent life insurance.

Term insurance

Term insurance provides coverage for a certain period of time. It is specifically designed to secure your family needs in case of death or uncertainty and provides specific amount of coverage for specific period of time. While it provides protection against death, terminal illness and permanent disability, there are no savings or investment features in term insurance. This means that once the policy expired, the premiums spent are gone and no portion of the premiums will be returned to the insured, that is, there is no cash value if the policy ends or is terminated prematurely.

Whole life insurance/Permanent life insurance

Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Beneficiaries will receive the death benefit (or sum insured) as long as the policy is in force when the insured pass away. Such a policy also has a cash value that functions as a savings component. Because of this, it usually has higher premiums than term life insurance.  The amount of premium paid throughout the policy may be constant or subject to change depending on the terms.

What is Health Insurance?

A health insurance policy helps you and your family cope with expenses in situations where you might face financial losses due to an accident, illness or disability. Besides incurring medical and/or hospitalisation costs, these situations may result in the inability to work, whether partially or fully, during your recovery.

Below are some common health insurance policies to consider:

^{Source: MoneySense.gov.sg}

Medical Expense Insurance

Another much-discussed scheme is the Integrated Shield Plan which was mentioned in the Straits Times article above. It is a type of medical expense insurance that falls under the category of Health Insurance. Medical expense insurance pays for certain medical expenses incurred due to an accident or illness. Medical expenses can arise from any of the following medical treatments or procedures:

• in-patient medical treatment or surgery,
• day surgery,
• consultations with specialists before, during and after the hospital stay,
• X-rays and laboratory tests.

‘Major’ medical expense insurance will pay expenses for longer hospital stays due to a major illness like cancer or for major surgery such as heart bypass surgery or organ transplant. Another example of medical expense insurance is the MediShield Life scheme which is a basic health insurance plan administered by the Central Provident Fund (CPF) Board. It helps to pay for large hospital bills and selected costly outpatient treatments, such as dialysis and chemotherapy for cancer. However, MediShield Life payouts are pegged at Class B2/C wards. If you plan to use Class A/B1 wards in the public hospital or go to a private hospital, you may wish to consider purchasing Medisave-approved private Integrated Shield Plans.

Integrated Shield Plans (IP) could be considered if you plan to use Class B1 or Class A wards in the public hospitals or go to private hospitals; or you expect to receive lower subsidies due to means-testing, and can afford higher premiums in the long run. All IP holders already have MediShield Life. IP is made up of two components:

1. MediShield Life, run by CPF Board, and
2. Additional private insurance coverage, run by private insurers, to cover Class A/B1 wards in public hospitals or private hospitals.

It is always advisable to approach a financial adviser to find out more about insurance products that you plan to buy. It also good to understand what are your financial needs and goals, and the budget that you can set aside before committing to any plans.

^Sources:

^{The Straits Times}

^{Investopedia.com}

^{Moneysense.gov.sg}

^{Dollarsandsense.sg}

^{Central Provident Fund Board}

^{1 Source: http://www.straitstimes.com/business/life-insurance-sales-hit-17b-in-first-half}

^{2 Source: http://www.straitstimes.com/business/life-insurance-business-grew-10-in-first-half}