Good financial planning does not just refer to managing your monthly expenses well and growing your wealth. It should also encompass planning for the future and this means having the foresight to ensure that you have appropriate insurance coverage in place to fall back on in times when you need it most.
When you are younger and without dependents to look after yet, you may not see the full benefits of certain insurance policies. However, this does not mean that you should kick the can down the road when you actually have dependents to care for.
Similar to how you are encouraged to start investing as early as possible, you should also aim to be sufficiently insured as soon as you can.
It provides you with coverage and protects your wealth
Getting insurance to protect your downside risk goes hand in hand with growing your wealth for a more comfortable lifestyle and retirement. As you put in the time and effort to earn money and grow your wealth, insurance acts as a safety net to protect this growing pot of money as well as your ability to continue working to grow your nest egg.
In unexpected times, for example, a trip to a hospital could easily set you back a few months’ worth of savings, having a significant impact on the funds that you were trying so hard to grow.
Receive full extent of coverage
The younger you are, the more likely you are to have a clean bill of health, without any pre-existing medical conditions. This means any insurance policy you have will provide you a comprehensive coverage.
Even if you live a healthy lifestyle, there is a higher chance you become ill, develop a chronic illness or get involved in an accident as you grow older. When this happens, you have certain exclusions inserted into your insurance policies at the point of purchase. These will usually exclude coverage on the medical conditions that you have already developed prior to purchasing the policy.
You pay lower premiums when you are young
Premiums increase with age as many chronic illnesses tend to onset only at a later age and your risk of developing a medical condition increases with time. Hence, to enjoy paying lower premiums, you should get your insurance coverage when you are young and in good health.
It is also possible that you develop health conditions by the time you decide to purchase an insurance plan. Rather than have an exclusion inserted into your policy, you could be made to pay a higher loading to represent your greater risk of developing a recurring or new health condition.
Understanding the different types of insurance available
While there are many different types of insurance plans that provide you different types of coverage, here are three basic types of insurance to consider for young working adults.
Health insurance covers aspects of healthcare costs, such as hospitalisation bills, surgeries and medical treatments. All Singaporeans are automatically covered under MediShield Life, a basic universal health insurance plan. However, MediShield Life only covers you for hospitalisation in B2/C-type wards at public hospitals.
For those that plan to use an A/B1-type ward in a public hospital or go to a private hospital for future hospitalisations, you would need to supplement your MediShield Life with a private Integrated Shield Plan (IP).
AIA HealthShield Gold Max is a Medisave-approved integrated shield medical reimbursement plan which combines a MediShield Life component with additional private insurance coverage. The additional private insurance coverage gives you more benefits and the choice to stay in private hospitals or A/B1 Class Wards in public hospitals.
As a customer of AIA, you also get to enjoy exclusive access to quality private healthcare specialists under AIA Quality Healthcare Partners (AQHP).
Before purchasing your first policy, you might like to speak to your parents or their financial planner to understand what kind of health coverage you may already have.
Critical Illness Protection
Critical illnesses include major cancers, heart attack, kidney failure and stroke. With critical illness protection, you will receive financial support so you can focus on recovery, without the added stress of having to find employment to pay for your and your family’s living expenses.
AIA’s Beyond Critical Care provides both a critical illness benefit as well as mental wellness benefit. Under the critical illness benefit, you can receive up to 200% of the coverage amount for 43 major stage critical illnesses and 5 rediagnosed or recurred critical illnesses.
It also provides first-in-market coverage for 5 prominent mental illnesses, up to age 75, for which AIA will pay an additional 20% of the coverage amount, up to $50,000 per claim.
At the end of your policy term, up to age 85 or a minimum coverage period of 30 years, you will also receive 100% of your premiums (less any claims) in one lump sum.
While most critical illness plans cease to provide coverage once a claim is made, AIA Triple Critical Cover has a 'Power Reset' feature which restores your coverage amount back to 100% once 12 months have passed following a claim.
Disability Income Protection
Disabilities can have a great impact on your family’s financial security. Not only are you likely to be unable to continue working, you could also be put in a situation where you struggle to pay for ongoing bills, supporting your dependents and mortgage payments. This is where disability income protection comes into play.
For example, with the AIA Premier Disability Cover, you receive a monthly payout of up to 75% of your existing income, right up until you make a full recovery or reach the age of 65, whichever is earlier. This ongoing income provides vital financial stability and peace of mind while you adapt to your new situation.
While you may also have severe disability coverage with ElderShield or CareShield Life from 2020, you should note that these plans typically have more stringent criteria for severe disabilities, while you might require more immediate help to tide through periods where you may be unable to work.
Growing your long-term wealth
As you plug insurance protection gaps in your life, there are also plans available to help you achieve your long-term retirement goals.
For example, AIA Smart Wealth Builder is a savings plan that aims to magnify your returns while giving you the flexibility to withdraw your savings to fund your key goals as you reach different milestones in life.
While helping you grow your savings, AIA Smart Wealth Builder also guarantees 100% of your capital. This means that regardless of how the market performs, the total premiums that you have paid will be fully secured from the end of the 15th policy year.
With this in mind, find out which insurance plan suits your current needs and be sure to get your coverage as soon as you can.