OK, so let's kick things off with a quick outline of my views on insurance. I think it's quite important to prioritize covering
essential insurance
needs first, ahead of saving and investing.
"Executive Summary": If you're a working adult in Singapore with a base public hospital Integrated Shield plan, disability income insurance (DII), and (only if you have dependents) term life insurance, then you've probably covered your genuine core personal insurance needs well.
Insurance is a financial tool that serves only one genuine purpose: it helps you reduce risks that you cannot reasonably handle on your own
and that would seriously impair your basic lifestyle (and/or your loved ones' lives). In other words, good insurance helps you cope with genuine calamities. Like any other financial tool (or product), value for money is important. Often insurance companies will create complex products that include a little questionable insurance with a lot of even more questionable fluff. It's almost always best to avoid such "hybrid" products.
In the Singapore context, I think there is a "Big Three" set of insurance products for most adults, and here they are:
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Medical insurance, which is supposed to pay (or at least reimburse) your biggest medical bills. Within Singapore, fortunately there's a high quality and moderately priced (especially for citizens) public medical system, and that's your strong framework for nailing down this particular insurance need. Getting care from private medical providers might be nice, but it's not essential. In the government's view, compulsory MediShield Life coverage combined with a "reasonable" or better Medisave balance are sufficient for public hospital B2 ward (or C ward) stays. I happen to disagree with the government on this point, and I think there's a reasonable argument that an "as charged" public hospital B1 ward Integrated Shield plan is an insurance necessity, for working adults anyway. Integrated Shield plan riders are not essential, although if you decide to get a rider anyway then I'd opt for a "Lite" or "Saver" rider that caps but does not eliminate your annual out-of-pocket costs for covered services. Having to pay a $2,000 medical bill (partially Medisave payable), for example, is unpleasant perhaps but ought not be calamitous.
Integrated Shield coverage is quite reasonable for acute care involving hospitalization. It's not so great for "lingering" scenarios that involve chronic care needs. DII (see below) offers some help there.
If you venture outside Singapore, especially to high medical cost and/or poorly medically served areas, then travel medical insurance with medical repatriation and medical evacuation coverage is essential. The many other possible parts of common travel insurance, such as lost luggage and accidental death coverage, are not essential.
As of this writing, I think Great Eastern's "as charged" public hospital B1 ward Integrated Shield plan is the best in its category. I also like Bupa Global's "basic" annual travel medical insurance plan, purchased online in British pounds and with a coupon code (that's easily discoverable if you search online), unless you only make one or two trips outside Singapore per year when locally sold single trip policies could be better values. You just might get sufficient travel medical insurance coverage if you charge your tickets to a particular credit card and travel only to certain places where that limited level of coverage will be adequate.
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Disability income insurance (DII), sometimes called "income protection insurance," but be careful to find the genuine stuff. DII typically provides a monthly payout of up to 75% of your pre-disability income up until your 65th birthday. There's a waiting period, also called an elimination period, between the moment you experience a claimable disability and the first payout is made. Disability is grounded in employability, and partial loss of income can be covered. I'm in broad agreement with
this article's explanation. Some fair warnings, though. First, DII is "expensive," but that's because it actually covers a lot of risk. (Keep the premium under better control by choosing the longest waiting period possible, such as 6 months. At equal premiums, a longer waiting period with a higher payout is much better than a shorter waiting period with a lower payout.) Second, you have to be earning an income from work to sign up, and that's hard to do if you're still pre-career, such as university student. (You may be able to finesse that point even with part-time work.) Third, Singapore's DII carriers might drop your coverage if you spend much time working overseas.
Aviva offers a MINDEF/SAF group disability insurance policy which might have some appeal, but it's quite a bit narrower than DII, including Aviva's own general DII coverage. As early as 2019 the government will introduce CareShield Life, a successor to ElderShield Life, which provides some disability insurance coverage from age 30. However, CareShield Life's definition of disability is dramatically narrower than DII definitions. It's better than nothing (and will be compulsory for all Singaporeans and PRs born after a certain date), but it's not adequate on its own. Life insurance nearly always provides "total and permanent disability" (TPD) coverage, but that too has a very narrow definition of disability. There are some insurance companies outside Singapore that offer internationally oriented DII policies, but extra careful investigation is merited when considering those products.
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Life insurance, just as its name suggests, pays a cash benefit to your survivor(s) when you die. So that's the first important point: if you have no dependents who would be in genuine and substantial financial distress if you were to die tomorrow, then you do not need any type of life insurance. Sadness and grief don't count for these purposes. "Dependents" means anybody you care about who is genuinely financially dependent on you and your income. It could be a spouse, partner, child, parent, a close friend, or even a pet. Simple term life insurance is usually the best value for money because it's easy to compare, it can be purchased online (for policies up to S$400,000 each; and it's generally a good idea to have more than one policy if you need more than that), and it provides coverage for the specific term -- the typical period of time when your untimely death would be financially calamitous to your loved one(s), but also the period of time when you're hopefully saving, investing, and building up wealth that will, at some point before the term ends, be more than sufficient to take care of your dependents. Also, at some point, dependents (such as your children) often grow up and no longer become financially dependent. So, for all those reasons, term life insurance is a good fit, and good fits represent better value for money than bad fits.
Life insurance salespeople will often argue that you should buy life insurance even before you have dependents, just in case you are not insurable later (due to a future medical or other condition). That's not a great argument, for a lot of reasons I've described elsewhere. It's certainly not a good argument for why paying for life insurance
now is
essential, and insurance essentials should be well covered before any and all insurance niceties or luxuries.
When considering how much term life insurance you need, tally up all your assets (including CPF savings, and net of debts), subtract some of that wealth for end of life care needs (if you "linger" and need to spend down some of those assets), and compare that remaining amount to what you think your dependents might genuinely need in the event of your untimely passing. You may get some free (or "free") life insurance from an employer, or from National Service, or with your NTUC membership, so include those opportunities in your coverage assessment.
If you cover these "Big Three" (or "Big Two" if you have no dependents) essential insurance needs, then you're doing rather well in terms of insurance. Once you've nailed down these insurance necessities then you can take a look at whether you ought to consider other insurance products. Remember, though, that insurance can only ever pay money, and unfortunately money alone cannot reduce or eliminate all of life's risks.
