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5 types of insurance you should get in Singapore

2023 dot 8 min read
Health Insurance Life Insurance Critical Illness Coverage Personal Accident Coverage Disability Income Coverage
Insurance is important to safeguard yourself from life's uncertainties. Not only does it provide financial security in the event of illness, disability and death, but it is also a way to accumulate wealth and build a nest egg for retirement.
 
With so many different types of insurance available on the market, you may wonder: "What insurance do I need?"  or "What insurance should I get?"
 
While the answer depends on your lifestyle and preferences, there are 5 types of insurance in Singapore that you should definitely consider.

#1 Health insurance

The first is health insurance. This covers the cost of treatment for medical conditions, such as if you are hospitalised.
 
Singaporeans and PRs receive basic health insurance in the form of MediShield Life. This protects all Singapore Citizens and Permanent Residents against large hospital bills for life, regardless of age or health condition. The payouts are pegged at B2 or C-type wards in public hospitals and will cover a certain portion of your bill.
 
But if this is the case, then why is insurance important?
 
This is because if you choose to visit a private hospital, or stay in a Class A or Class B-1 ward, your MediShield Life will only cover a small portion of the bill. You will still need to top-up the rest using your MediSave, or in cash. There are also limits to the amount you can claim. For example, you are only eligible for $1,100 per month for kidney dialysis treatment, and the total claim is limited to $150,000 per year.
 
If you'd like a more comprehensive coverage, you can enhance your MediShield Life with an integrated shield plan such as AIA HealthShield Gold Max. This will offer you additional coverage for a stay in a private hospital or in a Class B1 or Class A ward, so you can recover in a more comfortable space. Your annual claim amount also will be higher, which translates to lower out-of-pocket expenses and financial stress.
 
In addition, you can enhance your integrated shield plan with optional riders to further boost coverage based on your unique needs. A common add-on would be one that allows you to reduce the out-of-pocket expenses for your medical bills.

Keep in mind that the best time to purchase health insurance is when you are young and healthy. This is because if you develop a health condition later in life, your insurance premiums may rise, or you may not be able to cover your newly discovered medical condition.

#2 Life insurance

Common types of life insurance are term life insurance and whole life insurance. The biggest difference between these two is the length of coverage you receive. 
 
Term life insurance provides coverage for a set period of time. For example, with AIA Secure Flexi Term you can choose if you want protection for 5, 10, 20 or 30 years or up to age 65 or 75. There is also the option to cover critical illnesses through the addition of critical illness riders.
 
Whole life insurance on the other hand, covers you either until the end of your life or until you reach a ripe old age, such as when you turn 100. Premiums are typically higher than term insurance as part of the premium is used to build up cash value. Plans such as AIA Guaranteed Protect Plus (IV) can even offer a boost in coverage during your income earning years, to give higher guaranteed coverage, and have the added benefit of optional critical illness riders.
 
To answer the question "Which life insurance should I get?", consider your needs and financial capabilities. If you are a parent and want to insure yourself until your child is a certain age and no longer dependent on your income, or simply want a more affordable option, term insurance may be suitable. But if you want to accumulate wealth, you may prefer whole life insurance instead. No matter which you choose, use the Life Insurance Association (LIA) protection gap calculator to ensure that the insured amount offers your loved ones sufficient financial protection in the case of your death.

#3 Critical illness insurance

Critical illness insurance builds on health insurance and life insurance by covering specific illnesses, such as a stroke, heart attack or cancer. This is particularly important as one in four Singaporeans may be diagnosed with critical illnesses like cancer in their lifetime.
 
While health insurance can help ease the financial burden of hospitalisation bills, there are still a number of costs, such as daily living expenses if you choose to take a break from work, or of hiring a helper to support your recovery. These are not covered by health insurance, but you can offset the costs with the payout from a critical illness insurance policy.
 
To be adequately protected, the LIA recommends that your critical insurance coverage payout to be at least 3.9 times of your annual income. It is also worth looking for an option that will protect you if your illness recurs, or you contract a critical illness at an early stage. This is where plans such as the AIA Absolute Critical Cover comes in. Besides being one of the most comprehensive critical illness plans in the market, with coverage for 150 multi-stage critical illnesses, it also restores coverage amount 12 months after your last critical illness or Power Relapse Critical Illness, so you can make claims of up to 500 per cent of your coverage amount.

#4 Personal accident insurance

Personal accident insurance fills in the gaps that health and life insurance may not cover, like if you injure yourself in an accident or while playing sports. Health insurance may pay for surgery and hospitalisation, but not for the X-ray and treatment costs if you visit a physiotherapist or TCM practitioner. Personal accident insurance will. 
 
This makes it particularly useful if you lead an active lifestyle and play high-contact sports or work in a physically demanding job. But even if you do not, personal accident insurance is usually very affordable. Take for example AIA Solitaire PA (II), which costs $0.61 per day*, and covers a range of accidental injuries from road accidents, falls or sprains, to dengue fever, TCM treatment and food poisoning.

#5 Disability income insurance

The types of insurance in Singapore we have discussed so far all allow for claims, or pay out a lump sum in times of crisis, which you can use to offset the cost of recovery. But what if your illness or injury prevents you from working for an extended period of time? That's where disability income insurance comes in.
 
Disability income insurance provides monthly payouts if you are unable to work due to illnesses or injuries and is particularly helpful for those in physical professions, such as fitness instructors. One example of this is CareShield Life, an initiative that automatically covers all Singaporeans born in 1980 or later. Those born before 1980 may also check to see if they are covered or eligible to apply for it.
 
However, you only qualify for CareShield Life payouts if you are unable to perform three out of six Activities of Daily Living (ADLs). In addition, monthly payouts start at $600, which may not be sufficient to cover your daily expenses.
 
In contrast, plans like AIA Pay Protector safeguards your income from injuries and illnesses including mental illness until age 65 years old by giving you fixed monthly payouts for up to five years, so you have enough time to recover or reskill for a new occupation. You can select from a variety of plans to meet your needs, although it is advisable you choose one that will be able to replace around 70 to 75 per cent of your income.
 
At the end of the day, insurance is invaluable in protecting you and your loved ones, improving your financial stability and enjoying peace of mind. There are many types of insurance in Singapore, and it is important to balance protection with your budget. Reach out to an AIA Consultant to discuss your insurance needs and learn about the plans that are best suited for you.
 
*The premium of $0.61 per day was calculated by taking the annual premium for Plan 1 (Basic Benefits), for those ages 16 to 65 last birthday and within occupational classes 1 and 2, and dividing it by 365 days.
References
 
1. MediShield Life Benefits – Ministry of Health
2. Tips on insurance products – Life Insurance Association Singapore
4. Common Types of Cancer – Singapore Cancer Society
6.CareShield Life Claims – CareShield Life
7. CareShield Benefits – CareShield Life

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