Quora Answer: What Type of Insurance Policies are Absolutely Necessary?

The following is my answer to a Quora question: “What type of insurance policies are a must have?” 

Within the Singapore context, there are three kinds of insurance policies the average person must have: hospitalisation, accident, and a life plan with disability and critical illness coverage. 

The first is a hospitalisation plan.  The basic plan is largely paid through the Medisave.  But if you can afford it, it would be prudent to get the rider.  With premium inflation at high levels, it is a necessity.  This is an obvious choice.  Integrated shield plan coverage for the highest tier ranges from $1.5 million per annum to $2 million per annum, renewable. 

The second is an accident plan.  An accident plan is a multiple claim plan for everything from a sprained ankle to severe burns.  While a hospital plan pays for hospitalisation treatment, which is from the insurer to the hospital.  An accident plan reimburses you for accidents, which is from the insurer to the policy owner. 

The final plan of the triumvirate is a life plan, preferably a whole life plan with limited pay, so that you pay in your earning years, and be covered until age 100 years.  The average life expectancy in Singapore is around 84 years, which means that the average Singaporean will live long enough to get a critical illness.  Just as the hospitalisation plan covers most of the hospitalisation cost, the critical illness coverage covers the loss of income for the insured, and the likely family member that has to become a caregiver, meaning a loss of more than one source of income.  The average Singaporean should be considering coverage of around $500,000 for death, disability and critical illness.  Cancer and heart disease are major killers.  Cancer treatment alone can cost around $300,000 on average. 

Once all these are addressed, we can have a conversation about investment-linked plans, endowment plans, and other options for estate and financial planning.