Yahoo Finance 5 Tips For Buying Your First Insurance Policy in Singapore
So you’re all grown up now and one of the things you need to do to get this adulting thing right is to buy your first insurance policy.
Okay, so poring over insurance policies and actually speaking to insurance agents rather than running away from them isn’t exactly the most enjoyable way to spend a Tuesday night.
But making sure your first insurance policy is right for you isn’t rocket science—yes, even if you have no clue what insurance you need or even why you need it. Here are five tips to get yourself on the right track.
1. Listen to what the insurance agent has to say, but don’t feel obliged to buy from him
You should totally avoid insurance agents like the plague—unless you actually do want to buy insurance but aren’t sure what plans you need.
If you have no clue where to start, it would probably benefit you to make an appointment with an insurance agent in your social circle, or even one of the random ones who’s accosted you on the street. Sit down with them and have them explain the various types of insurance policies.
You’re not going to need all of the plans the agent talks about—for instance, be aware that the agent is likely to try to get you to sign up for an investment-linked savings plan, which may not be a good idea. But some plans are more appropriate as your first insurance policy, such as health insurance and personal accident insurance.
The agent will be able to give you a pretty comprehensive overview of what the various insurance plans are for. Of course, there is no substitute for reading the actual policy. But if you’re totally clueless, an agent can give you a good introduction.
2. Understand what insurance you actually need
Once you’ve parted ways with the agent, you should have a decent idea of what the various types of insurance entail. Now you need to figure out what you really need—obviously, if the agent had his way, you’d be buying everything.
As a general rule of thumb, a health insurance plan is highly recommended for every young Singaporean who’s started working. Yes, we have MediShield Life, but it is very limited in scope and you’ll be stuck in overcrowded government hospitals if you have only that to rely on.
If you have dependents—such as children, aged parents, a non-working spouse—who rely on you financially, you should also consider life insurance. Note that there is a big difference between a straight-up life insurance plan and investment-linked life insurance.
You might also be wondering if investment-linked life insurance is actually a good idea. This article elsewhere on MoneySmart explains how it works and might help you decide whether this is something you want to buy into.
3. Compare plans from the various insurance companies
The insurance agent you spoke with is likely to be working for one insurance company. Don’t jump up and sign up for his plan immediately. The last thing you want is to regret your first insurance policy. You now need to compare plans between several companies.
You can do this for free using MoneySmart’s insurance wizards—here’s one for personal accident insurance. The personal accident insurance wizard makes it easy to compare quotes from insurance companies.
4. Understand how your first insurance policy works before buying
When you’ve narrowed down your search to a few plans, you want to delve into the nitty gritty details and really understand how each one works before making your final decision.
Other than looking at and comparing the lists of what’s insurable and exceptions, you also want to understand concepts like deductibles and co-payment.
A deductible is basically a sum of money you need to pay before you can make a claim. So, for instance, if your health insurance has a $5,000 deductible, that means that if you get hospitalised and your bill is $10,000, you’ll have to pay the first $5,000 before you’re allowed to claim the remaining $5,000.
A co-payment portion is very common in health insurance policies. It basically means that you will need to pay a percentage of the bill you’re trying to claim. So, if your policy requires 10% co-payment, you’ll have to fork out $10,000 on your own if you make a claim for a $100,000 bill.
5. Check if you can afford the premiums
The more kiasee amongst us might immediately jump at the chance to get insured for every mishap under the sun.
But before you sign up for an insurance policy, ask yourself if it’s really what you need, and whether you can afford the premiums. Take into account that premiums for, say, health insurance will rise as you get older.
While it can be tempting to get insurance for everything short of the common cold, resist the urge, as over-insuring yourself could cost even more than all the payouts you claim over a lifetime.
Do you have any insurance policies? Tell us which ones in the comments!
The post 5 Tips For Buying Your First Insurance Policy in Singapore appeared first on the MoneySmart blog.
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