Common mistakes people make when buying insurance

Don’t make the same insurance mistakes

Insurance is a big part of financial planning. Since Singapore is not a welfare state, many of us understand that the responsibility of paying for our medical bills lies squarely on our shoulders. While the government helps with subsidised care, as well as allowing us to use part of our Medishield to pay for our healthcare expenses, most of us also understand that we need to take up external insurance to ensure we get enough insurance coverage.

Insurance can be a pretty complex subject to comprehend- jargon, thick policies and confusing long sentences all make choosing a suitable policy a headache. This is why it is important to get a trusted financial advisor to truly understand your individual needs and priorities. Yet, there is a direct conflict of interest, since most of these advisors also take a cut out of the premiums you are paying. So what’s the best you can do? That’s to get educated. Here are some top mistakes people make when taking up an insurance policy; so read on to find out how you can avoid them lest you waste your money on insurance that does not suit your needs.

Not Understanding What They Are Buying

There are many types of insurance that cover many aspects of our lives, these include health, life, travel, maternity, accident, disability and hospital income insurance. Within each type of insurance, different insurers provide slightly different coverage as well. As such, there is a high chance that you take on a number of policies that offer overlapping coverage, or you may end up with a number of policies but still lacking in covering a certain area. Educate yourself on the different type of insurance available and insist that your advisor understands your priorities before making recommendations. Remember to ask for a second or even third opinion if you have doubts about the recommendations

Buying Insurance Online

In April 2015, the Life insurance Association Singapore(LIA), Monetary Authority of Singapore (MAS), Consumers Association of Singapore (CASE) and MoneySENSE collaborated to launch CompareFirst, an online platform that allows consumers to find information on life insurance products that are offered by all life insurers in the Singapore retail market. Given that Singaporeans are a savvy bunch of shoppers and increasingly taking their purchases online, this sounded like a good initiative. However, buying such complex financial products online may also lead to misunderstanding policies and purchasing products that are unsuitable for the individual. If you’re unsure about the life insurance you are buying, then go the traditional route and talk to an advisor.

Buying What Their Friends/Family Bought

We all trust recommendations by friends and family more than online reviews, right? Following this logic, some people may feel that taking up the same policy as their friends or family is a good idea. The problem with this mentality is that insurance is very personal to your lifestyle, income and priorities in life. What works for someone else may absolutely not be suitable for you.

Rely On Company’s Group Insurance

Some companies in Singapore provide corporate health insurance to their employees. Depending on the company, this can be hospitalisation insurance, personal accident insurance or Group Term Life Insurance. While this may be a great benefit for those who are fresh graduates, building up their savings and paying off their study loan, it can be a problem in the long term. This is because most of group insurance policies are not convertible after you leave the company, so you’d have to take up your own insurance at a later age, which could also mean paying more premiums. Most group insurance is also not comprehensive enough, covering you for only a certain aspect, so you should look to take up some extra coverage on your own.

Flexible Car Insurance

A lot of people don’t realise there are many different types of car insurance available in Singapore with FlexiMileage, DriveMaster and Drivo just to name a few. These different types of car insurance offered by NTUC car insurance provide real discounts and savings when research correctly (saving of up to 69%). So look around the next time you need car insurance and don’t be fooled into thinking your current package is the right package.