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. Unless the consumer is absolutely knowledgeable about insurance products, it may make more sense to go the traditional route to talk to an advisor to take up an insurance policy.
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.