
How much do you really need to self-insure? While some may believe that they are "saving money" by not purchasing insurance, this is in fact a misconception. By choosing not to purchase insurance, you would then have to shoulder the risk and pay out of their own pockets should a misfortune befall. However, while you may be able to afford the astronomical costs of self-insuring, would this really be feasible? In this article, we highlight the costs involved and factors to consider about self-insurance.
(See "Can You Really Afford To Not Have Critical Illness Coverage?")
How much do you need to self-insure?
One of the most common worries that many have is to leave their family in the lurch if they were to meet with a mishap. The purchase of life insurance thus resolves this by offering a peace of mind. Providing a lump sum payment in the event of a death or total permanent disability (TPD), life insurance provides financial security for our dependents. Therefore, if you are considering self-insuring against a death or Total Permanent Disability (TPD), a general rule of thumb is to have 9 times of your annual income in savings.1
Additionally, it is also important to account for any outstanding debts that you may have. With a growing household debt-to-income ratio in Singapore, you may find yourself requiring a larger amount should you wish to self-insure.2
(See "Term or Whole Life - Which Should You Choose?")
Discover Your Protection Needs
An illustration
Case study: Mr Tan, age 40, a non-smoker
A father of 2, Mr Tan together with his wife and parents currently live together in a 5-room HDB flat. As a dual income household, Mr Tan and his wife are able to afford their current lifestyle.
To calculate the amount Mr Tan would need to self-insure against an unforeseen event, he would need to consider 3 factors: tertiary education for his 2 children, his family’s immediate daily expenses and any outstanding debts and/or loans.

Averaging at $10,1613 a year for tertiary education in Singapore, Mr Tan should expect to pay $81,288 to send both of his children to university. Additionally, he also has to factor in the expenses needed to sustain his family's lifestyle in the immediate months following the incident. With the monthly expenses for a 5-Room HDB flat estimated at $7,519,4 Mr Tan would therefore need $90,228 in order to provide his family with at least a year's worth of expenses.
Lastly, Mr Tan also has to factor in his outstanding loans such as mortgage, car or credit card debts. With an average household debt of $54,285 per capita5, this would further increase the amount that Mr Tan would need to self-insure for.
(See "How To Get Coverage With High Blood Pressure")
How life insurance can help
However, if Mr Tan had purchased a life insurance policy, he could enjoy the same coverage at a much lower price. Additionally, he would also be able to enjoy a peace of mind knowing that his family would receive a fixed sum of money.

*Calculations done are based on an age 40, non-smoker male with coverage given up to the age of 65. Information is correct as of 4 October 2018.
Moreover, it is important to note that even if Mr Tan had left behind assets for his family, it would often take some time for these assets to be distributed according to the will. In the event that a will has not been drafted, the time taken could be even longer.
(See "Be Your Own Advisor with FSMOne's Insurance Discovery and Review Tool")
The case study as shown above only reflects the scenario when a death/TPD occurs. In the event of a critical illness or disablement, a different solution would be necessary. To find out more on how much coverage is necessary, click on the "Get Started" button below.
Find Out If You Have Sufficient Coverage
Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Etiqa Insurance, Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
1Source: http://www.lia.org.sg/system/files/news/2018/04/2017_Protection_Gap_Report_v20180426.pdf
2Source: http://www.mas.gov.sg/~/media/resource/publications/fsr/microsite/FSR_2017_Housing_Risks.pdf
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