Adulting can be exciting until you have to make serious and difficult decisions, which include figuring out your insurance. It might not be fun but getting the right policies and coverage is definitely an important piece in the puzzle of adulting.
With so many types of insurance, providers, and policy choices, many young Singaporeans tend to settle on whatever their insurance agent friend recommends. But just like any other financial product, knowing how to choose an insurance plan that suits you best will make sure you get the most bang for your buck.
In this guide, we will introduce the various types of general and life insurance policies, compare the differences between them, and assist you in exploring which insurance you would need.
What is General Insurance?
General insurance is a broad umbrella term that refers to many different types of insurance, such as vehicle, home, and travel. It’s sometimes called Non-Life insurance, meaning that it covers almost everything other than death.
With general insurance, you’re essentially protecting your assets rather than your life. This means that the provider will compensate you for financial loss associated with everything from health, travel, business or your property.
General insurance policies also offer financial protection from man-made and natural disasters such as fires, floods, thefts, and accidents. These policies are important as they protect your most valuable assets.
Types of General Insurance
From your car to your home, here are just a few of the most common types of general insurance policies you’ll find in Singapore.
- Health and accident insurance (also available under life insurance)
Health insurance typically covers you for surgeries, hospitalisation or critical illnesses. These policies shield you from exorbitant healthcare costs and give you peace of mind while recuperating.
- Motor insurance
Motor insurance compensates for damage caused to your vehicle or a third party’s vehicle due to situations like accident or theft. While it is a legal necessity, getting comprehensive coverage can better protect you and your assets.
- Travel insurance
A must-have for travellers, this will reimburse you costs associated with flight delays and cancellations, loss of baggage, emergency medical expenses abroad, and more.
- Home insurance
Home insurance protects you and your valuables in the case of damage to your home due to natural disasters or man-made disasters such as fire and burglary.
What is Life Insurance?
The biggest purpose of life insurance is risk management. Essentially, it is a contract that ensures that upon your demise, your beneficiaries will receive financial compensation to help support them. Some life insurance policies also cover terminal illnesses and permanent disability to various degrees.
Life insurance is particularly important if you’re the sole breadwinner in your family. Risk is present all around us, and in the case of sudden death, you’d want your family’s financial security to be taken care of.
You pay either a lump sum or periodic premiums to your life insurance provider to ensure ongoing coverage.
Types of Life Insurance
The different types of life insurance cover the different needs of an individual. While they can be somewhat similar as they essentially protect your dependents after your demise, they can be split into these categories:
- Term life insurance plan
A term life insurance plan is the most basic type of life insurance. The “term” in term life insurance means that you will only be covered for a specific time — for example, a term of 30 years or up to 80 years of age. If the policyholder passes away before the term ends, their nominee/s will get the coverage amount. However, if they survive the term, there is no payout.
Term life insurance is the most affordable and straightforward life insurance plan, but doesn’t accumulate any cash value.
- Whole life insurance plan
With increasing life expectancy, a whole life insurance plan might be more suitable for some as it covers the policyholder up to 99 years of age, as long as they are paying the premiums.
While it may be pricier than term insurance, your beneficiaries may get to receive an extra cash payout on top of the sum assured. If the policyholder survives beyond 99 years old, they will also receive benefits such as guaranteed payout, death benefit, survival benefit, or policy maturity benefit.
- Endowment plan
With endowment plans, there is more of an investment component rather than just insurance coverage.
The premiums you pay are essentially split into two buckets — one for the actual life insurance, and one for investment. Once the policy matures, you receive a payout called an endowment.
- Money-back plan
Money-back plans and endowment plans are similar in that they’re both an investment and insurance policy at the same time. With money-back plans, however, you receive the payouts at predetermined intervals rather than at the end of the policy.
- Personal Accident plan
Personal accident insurance provides payouts in the case of death, disability and injury caused by accidents. The benefits of a personal accident policy usually cover situations ranging from evacuation, hospitalisation and treatment, to rehabilitation and recovery.
Comparing the two: General Insurance vs Life Insurance
The whole premise of insurance is that you, as the insured, pay to protect yourself and your beneficiaries against the possibility of unexpected loss.
With general insurance, that loss is more specific. It could be losses related to your car, home or luggage. With life insurance, the loss in question is your life. Life insurance may also involve an investment component to it, something most general insurance policies do not.
While general insurance policies are generally quite straightforward, getting a life insurance policy is more complicated and should start with assessing how much coverage you will need. That does not have a one-size-fits-all solution.
|Types||● Health & accident insurance|
● Motor insurance
● Travel insurance
● Home insurance
● Health & accident insurance
● Term life insurance plan
● Whole life insurance plan
● Endowment plan
● Money-back plan
|Objective||Compensation for unexpected loss or damage up to a certain amount|
Financial compensation to beneficiaries in the case of the policyholder’s death + investment product
|Coverage||Highly specific, depends on the nature of the loss or damage|
Death, terminal illness or permanent disability
|Insurance claim||Sum insured is paid upon the insured event|
Sum assured is paid upon the insured event, or policy maturity
|Cash value||None||Depends on policy|
Read More: Comparison of whole life insurance policies
General Insurance vs Life Insurance: Which do I need?
There are some insurance policies that we are obliged to get, while others, while not a must, are so important that they are almost a need-to-have.
For instance, you should consider getting some form of life insurance the moment you step into the workforce. It is especially important if you have someone who depends on your income. That could be your spouse, children, or even elderly parents.
Unfortunately, many tend to put it off as they are intimidated by the costs of getting a life insurance plan, especially when they are presented with complicated endowment policies. However, remember that life insurance does not need to be expensive. An affordable term insurance policy with some coverage is better than none at all.
Furthermore, any debt that you might leave behind, be it education or housing loans, will be passed onto your dependents (if you’re single, this is likely your parents) in the absence of life insurance.
General insurance, on the other hand, is to be decided on a case-by-case basis since it operates on a claims and reimbursement basis.
Motor insurance is mandatory in Singapore and most other countries. You can choose between simple or comprehensive motor insurance according to your budget and needs.
If you travel often for work or leisure, you might want to opt for annual travel insurance as a precautionary measure. This is especially helpful if you find yourself going overseas frequently on short notice. Otherwise, there are often discounts available for single-trip travel insurance, and some credit cards also bundle a simple travel insurance policy when you purchase your air ticket with their cards.
When it comes to insurance, it is always better safe than sorry. If you have more insurance-related questions, feel free to reach out to the Planner Bee team at email@example.com for assistance!