(The contributor can be contacted at raymondwee@fapl.sg)
Contrary to popular belief in Singapore, financial planning requires more than just a single meeting with your financial adviser. Planning for your finances is a complicated matter, mainly because your income, expenses, and debt changes as life progresses. As such, financial planning requires regular reviews. Here are top 5 reasons why financial advisers keep telling you you’re under-insured:
1. Most of your policies are savings plans
Within the first 5 years of entering the workforce, you suddenly find yourself having disposable income that you previously didn’t have. This prompts you to start planning your finances and saving your money. When approached by your insurance adviser, you might have chosen the saving-type plans over the ones offering more protection. For the same premium amount, savings plans in Singapore provide better returns but offer less in terms of protection.
2. You have an Investment-Linked Plan set at a low sum assured
The bulk of your premium payments might be going into a policy that is an Investment-Linked Plan, also known as an “ILP”. ILPs work in a way that, for the amount of premium you put in, you can choose your desired sum assured from a range. For a lower sum assured, more of your premiums go to investment in unit trust funds, and vice versa. Therefore, when you applied for this policy, you might have had less financial obligations and set the sum assured at a lower range.
3. You have many small policies
You might have implemented many different policies whose aggregated sum assured seemed like a reasonable amount when you first entered the workforce. With inflation and salary increments, the total sum assured offered becomes inadequate for your lifestyle or for your family. So, even though your insurance policy count is high, your total coverage is not.
4. Your policies mostly cover non-core areas
The core areas one should be covered for are:
- Death,
- Disability,
- Critical illness, and
- Hospitalisation.
Like many other individuals in Singapore, you may have several insurance policies taken up via phone marketing by your credit card companies. These insurance policies have attractive premiums but because of the face-to- face requirement for planning for more complex insurance policies, credit card companies typically market policies that cover:
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- Travel: This only covers you if you leave Singapore
- Personal accident: This covers death and varying degrees of disability arising only from accidental causes.
- Hospital cash: This does not pay the hospital bill but gives you a small amount of cash each day if you are warded longer than a stipulated period.
5. Your coverage is lacking in one of the core areas
For example, you may have high coverage for death and disability, but may not have enough critical illness coverage. This reiterates the above, but from a different angle.
At Financial Alliance,
- We help you analyse in detail to ascertain if you are indeed under-insured or inappropriately insured;
- We advise you on how you can restructure your current insurance portfolio to optimise the coverage-to- premium ratio; and We analyse policies from various insurance companies in Singapore to give you the ideal policy.
Even for a financial hub like Singapore, financial planning can be complicated and time-consuming. Now that you know why your financial adviser says you might be under-insured, why not engage a financial consultant now to ensure your financial plan is effective and fully optimised to your advantage?
