As every young adult knows, breaking out from under his or her parents’ financial umbrella can be a scary thing. All of a sudden, you are responsible for your own spending and saving habits. You also have to build your own financial plan, part of which includes buying your very first insurance policy.
If it were up to the insurance companies, you would be decked out in every insurance policy known to man. From a practical standpoint, you probably only need to start with one. The three main types of insurance are health, life, and general. All of them break down further into their different policy types that cater to specific needs.
The process of selecting the right one for you starts with one simple question – what are you most worried about? If you are concerned about your health because you have a family history of certain medical conditions, consider looking into a health plan as soon as possible. Applying for a plan while you’re still in good health ensures that you pay a lesser premium while also preventing your plan from excluding certain conditions.
Understanding what you need at this point of your life should give you some strong hints about which plan to buy first.
Recommended Insurance Type
Health insurance should be at the top of your list, as significant medical bills due to long hospital stays can cause you great financial hardship. Even though all Singaporeans and Permanent Residents are covered under Medishield Life, the coverage is quite basic and only allows you to stay in lower class wards in government hospitals.
Government hospitals are also busier than private ones, and you may not be able to get timely appointments or admissions if you have a pressing medical issue. An Integrated Shield Plan (IP) is offered by private insurers and sits on top of Medishield Life to provide additional coverage.
The level of coverage you get should largely be determined by two factors – the premium you can currently afford and what you’re willing to cover on your own in the event that you lack coverage. Generally, the higher the premium, the higher the coverage you will receive.
If you do decide on an IP, the highest tier gives you access to private hospitals along with lower deductibles and coinsurance payments. Opting to pay even more will let you purchase riders that are able to cover a certain portion of said deductibles and coinsurance.
Higher premiums also have higher maximum claim amounts for insurable items. In the unfortunate event that you need further medical care and you’ve already hit the maximum yearly limit on your plan, you will not be able to make further claims. Any charges thereafter will have to be paid out of your own pocket.
This leads in to the next factor that affects the assessment of your needs, which is how much you’re willing to pay yourself in the event that your coverage is insufficient. If the amount that exceeds your yearly maximum is significant, it could result in some financial difficulty if you’re unable to cover it.
Recommended Insurance Coverage
Choosing the right amount of coverage is essentially a balancing act of how much you can afford to pay now to protect against future events versus how much you’re willing to pay later in case you don’t have enough coverage. This goes for any type of insurance, not only the IP example we used above.
If you’re a young and relatively healthy individual, it may be overkill to pay a large premium for more coverage that you may not need. You might as well save or invest the extra funds that you have from paying a lesser premium. If you find that you do need more coverage, you can shop around for a plan with an affordable premium that still meets your needs.
Whether you know someone in the industry or you were approached while out and about, insurance agents are the main conduit between consumers and their plans. As a first time insurance buyer, you may be confused about all the plans that are available. If this is the case, speaking to an agent could help you gain a better understanding of what they offer.
However, if you are very sure of your needs and are comfortable with the amount of research you’ve done, you have the option to purchase a plan on your own. There are many insurance aggregators like GoBear and CompareFIRST that allow you to apply yourself, thereby saving the trouble of getting in touch with an insurance agent who may try to sell you insurance products from a specific company.
Recommended Insurance Purchase Method
For most people, it would be beneficial to speak to insurance agents from many companies to get an idea of what they offer. Even with a lot of research, there may be information that’s only made available to them that you can’t find online.
You shouldn’t feel obliged to buy from the first person you speak to, as the idea is to survey the market for the best plan that meets your needs. As for taking the leap and purchasing one on your own, it is possible to do that if you’ve already done your homework and are very sure of what you want and need.