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Things all beginners should know about insurance

Perhaps you’ve read Before you buy: things all beginners should know about insurance by The Woke Salaryman.

Image courtesy of The Woke Salaryman.

It is overall a good article, in simple language that helps laymen easily understand.

However, I’d like to comment on a particular point of concern:

Mistake 3 is itself a mistake. Covering yourself for up to 10 times your annual salary is basic coverage, not high, especially in the event of permanent disability.

And it doesn’t factor in inflation.

It also runs contrary to news articles that around 80% of Singaporeans are underinsured.

The poll also showed that 85% of Singaporeans are potentially under-insured, with only five times their annual earnings set aside for emergencies.

7 out of 10 Singaporeans have inadequate insurance cover, Insurance Business Asia

As for Mistake 2: Jumping straight into investing with insurance, I would like to mention that:

  • yes, one shouldn’t skip to cover the essentials first
    • however, one’s essential coverage varies over time and age. It is common to meet customers who’d opt for basic coverage first while setting a budget for savings or investment plan (ILP).
    • there is no hard and fast rule. A balance or a middle-ground can be struck, and that would be ideal.
  • yes, there are various investment instruments out there.
    • however, not all customers are investment-savvy.
    • ILP tends to be a safer choice, if it is advised properly, with its limitations highlighted along with its strengths.
    • there is a strength and advantage in an ILP that is not in any other investment instruments out there, especially when it comes to estate planning. (This would require a post on its own.)
    • one article available online that’s relevant to this: Why investment-linked insurance policies should be given a chance. (While it may seem to promote AXA’s Wealth Accelerate plan, the article is quite balance in presenting the pros and cons. And to the best of my knowledge, Manulife has a similar plan called InvestReady.)

Engage a trustworthy financial planner/consultant to advise on your insurance coverage needs. Not any Tom, Dick or Harry can explain insurance, especially when individual coverage needs varies.


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