The 3 Best Policies For Every Life Stage

Work, family and retirement - these are milestones that typically signifies the start of a new life stage. With financial obligations differing at each stage, your protection needs inevitably vary as well. As such, a regular review of your insurance portfolio is necessary to ensure that your policies remain relevant to your protection needs. However, with the plethora of policies available, this may make choosing a suitable policy confusing. To better illustrate and help with your understanding, we suggest 3 policies that we believe are ideal to have at each life stage.

(See "Transfer In Your NTUC Shield Plan & Get $10,000 Personal Accident Cover")

Single Working Adult

As a single working adult with no dependents to provide for, your protection concerns are likely to be the ability to provide for yourself. As such, with protection needs focused on you, we recommend having hospitalisation, disability income and critical illness policies at this life stage.

Firstly, hospitalisation policies ensure that you receive coverage for treatment costs in the event of a mishap and are therefore an essential to have. While all Singaporeans and Permanent Residents (PR) receive basic hospitalisation coverage through MediShield, these benefits are limited to Class B2/C wards in public hospitals.¹ Hence, should you wish to receive treatment in private hospitals or Class A/B1 wards in public hospitals, an Integrated Shield Plan (IP) and/or riders offer a more comprehensive coverage.

If your concern is the ability to look after yourself, then perhaps policies that offers income protection such as a disability income or critical illness policy would be suitable. For example, disability income policies provides income protection if you are disabled and unable to work due to an accident or illness. Paying out a fixed amount every month, this policy provides income replacement of up to 80 per cent of your average monthly salary thus allowing you a peace of mind knowing that you do not have to worry about your finances should you meet with a mishap.

Alternatively, critical illness policies offers a lump sum pay-out for critical illnesses thus providing the insured with a partial income replacement. Additionally, this also helps to offset any post-treatment and long term medication costs.

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With a family

With dependents now reliant on you, your responsibilities and liabilities inevitably increases. As such, your protection needs will shift with priority now placed on your loved ones. Therefore in this life stage, we recommend term life, critical illness and hospitalisation policies with mortgage insurance also necessary for home owners.

An affordable option for life insurance, term life policies are used to cover protection gaps for a specified period of time. This provides financial stability to your loved ones while also offering you a peace of mind knowing that your family would be taken care of should you meet with a mishap. To begin, a life protection calculator can be used to estimate your expenses, shortfall and protection gap required.

Additionally, critical illness and hospitalisation policies are also necessary at this stage. As the purpose of a critical illness policy differs from a hospitalisation policy, it is important to note that they are not meant to be substitutes but rather, complementary to one another.

Lastly, home owners should also consider purchasing Mortgage Reducing Term Assurance (MRTA) for their homes. With coverage provided for the outstanding loan amount, this ensures that your dependents would not be burdened with the remaining mortgage loan should you unfortunately pass on.

(See "Your Must-Have Guide To Term Insurance")

Approaching retirement

And finally, retirement - the life stage that many have been waiting for. Spilt into two categories, retirement can be divided into pre and post retirement.

Before you retire, it is important for you to first plan for your actual retirement. This is to ensure that you have ample savings and/or income to sustain your retirement lifestyle. Other factors to consider are the lifestyle that you wish to lead and the amount you would require each month. For instance, a basic retirement lifestyle is estimated to require S$1,200 a month.² However, with the pay-outs from CPF Life only offering S$700-750 each month, a top-up would be required.³ This could then come from your savings, investments and/or annuities.

After retiring, your dependents are likely to be financially able and no longer reliant on you for your income. Hence, income protection becomes of less importance with protection needs shifting back to you. Moreover, as we age we become more susceptible to illnesses and accidents thus making medical care our priority. Hence, with hospitalisation policies providing coverage for medical treatments, procedures and hospitalisation, they are therefore ideal to have in this life stage.

Lastly, long term care insurance is also beneficial to have as this provides coverage for disability in old age. While hospitalisation policies offers coverage for medical treatments and procedures, long term care insurance helps with the cost of long term nursing treatments. An example would be Eldershield, a basic severe disability insurance scheme that all CPF members at the age of 40 are automatically enrolled into.⁴ However, it is important to note that Eldershield only pays-out upon the inability to perform at least 3 out of 6 ADLs with pay-outs capped at $400 month for a maximum of 72 months. Therefore, if more compensation or a longer duration is required, consider supplementing Eldershield with other long term care policies.

(See "Will You Be 60, Retired And Broke?")

How FSMOne can help you get on track

Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan,

Contact Our Advisors Here >

^{1Source: https://www.moh.gov.sg/content/moh_web/medishield-life/resources---faqs/faqs.html#anchorName}

^{2Source: http://www.channelnewsasia.com/news/singapore/retirement-planning-how/2640474.html}

^{3Source: https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life}

^{4Source: https://www.cpf.gov.sg/members/schemes/schemes/healthcare/eldershield}

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