In our previous article "Average Singaporeans Need $1 Million Coverage, Have You Had Yours?", we have shown quite clearly that a $1 million insurance coverage is necessary due to rising costs. Furthermore, we reiterated that the cost of a $1 million term plan is affordable. A 30 year old male will need to pay only $90 a month to get himself covered for the next 35 years. Thus, when he is 65 years old, the term insurance coverage will terminate, as his objective of having protection will diminish in importance (while his goals of having sufficient retirement income and healthcare coverage will grow in importance).
(See "You Might be in Massive Trouble, Without These 3 Insurance Policies")
So if our expenditure is expected to increase due to household living expenses and child's future education needs, what about our income levels? Is our income increasing and what kind of increment are we looking at? The rationale for asking this is: if your expenses and income levels are increasing, it is logical to review your existing insurance coverage to ensure that you are not under-insured. The most recent household survey statistics provided by SingStat show that the median monthly household income from work has increased 20.4% or 3.8% p.a. in real terms from 2010 to 2015. Furthermore, the median monthly household income from work per household member has also increased 19.2% or 3.6% p.a. in real terms over the same period1. There is a rule of thumb to say that you will need 10% of your income to cover at least 10 times of your annual income. However, this is strictly a reference point because there are numerous factors which will influence your decision. These factors could include the following:
1. How much are my fixed expenses now?
2. Do I need to set aside a sum of money for my child's (or children's) education?
3. What is the number of years of support that my dependents will need?
Of course, there will be other factors depending on the situation as well.
What we are trying to do here is to emphasize the need to review our insurance coverage based on both expenses and our rising income. In a recent Prudential survey2, 7 in 10 have not increased their basic life cover in the last five years to match their rising income levels. This is a worrying stat because consumers have gone about increasing their expenses but without reviewing their insurance coverage to ensure that adequate cover is needed. This big amount of $1 million insurance coverage may have put off consumers because of affordability and possibly whether do we really need such a big amount of cover?
(See "Worried About Critical Illness? Here's 3 Plans You Should Know")
We have provided statistics in a few articles to illustrate our point that this $1 million cover is necessary to provide adequate coverage for our dependents if anything unfortunate were to happen to us. We have also presented the different term insurance plans and how affordable it is without having to worry about whether we have the means to continue servicing the plan.
Lastly, this article itself is an example that as income level increases, there is a need to do a financial health check-up so as not to pass on any financial and mental burdens to our dependents once we have moved on.
Here at FSMOne, we believe that consumers should know the hard truths so that they are not taken aback when it comes to planning for life events that are close to our hearts.
(See "4 Exciting Ways Insurance at FSMOne Makes Your Life Better")
Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
Come talk to us and arrange an appointment with our friendly Investment Advisers to assist you in reviewing your existing expenditure and insurance plans that you may have. Contact them at advisory@fundsupermart.comfor a discussion.
Interested to learn more? Check out these articles:
To Your Insurance Agent, You Are Just a $4,000 Cash Cow!
Worried About Critical Illness? Here's 3 Plans You Should Know
5 Awesome Facts You Didn't Know About Medisave & Shield Plans!