Among every ten Singaporeans, nine Singaporeans surveyed said that savings is important to meet financial goals.
67% of Singaporeans opined that insurance is an important part of personal finance.
Yet, the sentiment isn’t reflected in their actions. In Singapore, majority of Singaporeans seem to be ill-prepared for life crises.
According to life insurers, 85% of Singaporeans are under-insured by the industry’s standards with a protection gap of up to five times of their annual income.
So why is there such a gap when most of us find insurance important? The main reason is the misconceptions about insurance.
To help Singaporeans make better financial plans, we will be debunking three common insurance myths and misconceptions to help you understand insurance.
1. The more I earn, the pricier my insurance premium
This might sound intuitive to those who do not understand insurance.
After all, if the insurers don’t earn as much as they can from the high earners, then who can they earn from? Yet, this is a myth waiting to be busted.
Insurance is about the pooling of risks to protect individuals from adverse events that could have a huge financial impact.
From the insurer’s perspective, every person who buys insurance will pay accordingly, depending on your age and current health condition.
The only time when you have to pay higher insurance premium is when you are older or if you have existing health conditions that makes insuring you a higher risk for the insurer.
2. Medishield insurance coverage and employer-provided coverage is all you need
Medishield Life is a basic health insurance plan that is being paid for by your CPF.
MediShield Life provides universal coverage for all Singapore Citizens and Permanent Residents, even those who have pre-existing conditions!
For some of us, we also enjoy health insurance coverage provided by our employers as part of employee benefits.
But are these really enough to protect us against the financial impact in the event of sickness?
While the benefits from Medishield Life might seem like a lot at first glance, it might surprise you that this is only enough for normal hospitalisations.
But insurance is meant to protect us from the worst-case scenarios, isn’t it? What happens if you get hospitalised for critical illnesses like cancer or accidents that affect your ability to take care of yourself?
3. You’re too young to worry about insurance
Insurance is just like every other thing that we take for granted each day. When we don’t need it, we don’t realize that it’s missing. It is only when we really need it, then we start searching high and low for it.
Most of us do not think about insurance when we are young. Young adults tend to think that we are invincible and too healthy to think about any insurance.
Moreover, when we have no use for it, we overlook its importance. We only start to realise the importance of being insured when we see the financial impact that falls on our loved ones or relatives.
But like every other human, we are equally vulnerable. It is precisely because of the vulnerability of life that we need to start thinking about insurance.
For those who have yet to get an insurance, now is always the best time to get one, or at least start thinking about one. Oh, and did you know, insurance is always cheaper when you buy it at a younger age?