Financial Protection

Underinsurance in Singapore

Currently in Singapore death claim payouts average around $40,000.  This is significantly below the $480,000 (based on the average income in Singapore) needed to meet dependants’ needs, such as for housing, education and the means to continue a similar standard of living.

Singaporeans are underinsured by nearly 70 per cent of what is required to cover the financial needs of their dependants in the event of an untimely death.

Misperceptions: 

  • Premiums are expensive. In fact, one needs to pay an average premium of just over $5 a day to get adequate coverage for his dependants. 
  • ‘Untimely death will not happen to me’ and thus there is no urgency to get adequate coverage.
  • Dependants can look after themselves should the unexpected happen to them.   

 

The importance of protection insurance

Life insurance provides protection against life’s unforeseen events, such as physical disability, critical illness or untimely death.  When such unfortunate events occur, an insurance company will pay out benefits to the beneficiaries of your insurance policy.

The benefits are intended to cover immediate to long-term financial needs of family members – most often parents, spouse and children – who are dependent on you for these needs.

For tips to help you choose a suitable insurance plan, click here.

For an overview of life insurance protection plans available, click here.

For a list of FAQs on Financial Protection, click here

Get real with numbers

A Nanyang Technological University (NTU) study commissioned by the LIA in 2007 concluded that the average 40-year-old working adult in an average household will need $480,000 to be adequately covered in the event of the breadwinner’s untimely death or inability to work due to critical illness.

Choosing a suitable insurance plan

When it comes to life insurance, there is no blanket solution for everyone.  Each family has its particular needs and circumstance.

During the decision-making process, there are several questions you will need to ask yourself:

How much insurance coverage do I need? Determining the amount of coverage that you actually need is important and thus you should make a thorough assessment of your needs in order to fulfill the purpose of life insurance.
 
You need to take into account several factors: the number of your dependants; the lifestyle you want to provide your family with should the unfortunate happen to you; your investment and your children’s education needs.  Consider also your debts and mortgages as you do not want your family to be burdened with having to settle your debts when you pass on.
 
It is advisable to seek the help of a financial adviser as he/she will be able to take you through a needs-analysis to assess your insurance needs.
How much will I be paying for my insurance cover and will I be able to afford the premiums over the long term? The amount you pay for your insurance cover (premium) depends on the insurance coverage you need.  And yes, you need to carefully consider what you can afford when deciding on the type of insurance policy and the amount of coverage to buy.
 
Review the benefits your insurance policy provides and determine whether you should opt for a rider. Some riders allow you to stop paying the premiums in the event you are unable to work due to a disability but can still enjoy the protection benefits of life insurance.
 
If your policy does not have this benefit and you are finding it difficult to meet the premium payments, discuss with your financial advisor on the other options you could consider.

Use the Protection Gap Calculator to estimate the amount of life insurance cover you need for your dependants in the event of your untimely death, critical illness or disability.

Life Insurance Protection Plans

Term Insurance You can choose to have protection for a set period of time with term insurance.  If you were to die or become totally and permanently disabled during that period, your dependants will be paid a death benefit.
Dependant’s Protection Scheme (DPS) This is a national term insurance scheme that covers CPF members against death or permanent incapacitation.  It provides CPF members and their families with some money to tide them over the first few years should the insured member die or become permanently incapacitated.
Whole Life Insurance Whole life insurance pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death.
 
As long as you pay premiums, you are guaranteed lifelong protection, either for life or for a set period.
 
In addition, most whole life policies accumulate a cash value over time. As such, it encourages long-term savings as your insurance company can invest on your behalf. The cash value can be withdrawn as a policy loan in case of an emergency.
Universal Life Insurance If you prefer to pay premiums according to your current financial situation, you can consider a universal life insurance policy as it offers adjustable and flexible premiums.  Within certain limits, you can choose the amount, method and timing of your premium payments.
 
Universal life insurance has a death benefit feature.  In addition, it allows you to build cash values which can be borrowed or withdrawn. Although the policy cash values earn interest at a declared rate which may change over time, most universal life plans guarantee a minimum interest crediting rate.