I’m sure at some point in our lives, we’ve all wondered: when did my childhood end? When did our lives stop consisting of playgrounds and blistering summer heat, sleepovers with our best friends and waiting for our parents to check for the monsters that lived underneath our bed?
Somewhere, along the stages of growing up, we’ve outgrown our childhood dreams and fears, where the monsters hiding in our closets turn into monthly letters hiding in our mailboxes. I’m sure we certainly treat our bills almost the same way we did our childhood demons: pretend it’s not there and it no longer has the power to haunt us.
Similarly, our adult-ish fears of failure, debt, and poverty are likely to be the demons that keep us awake at night, and as a new adult, one of the most common and haunting questions we ask ourselves are: When is the right time to start thinking about my personal finances? Am I doing enough to build a stable foundation for my future wealth?
What many fail to realize is that insurance plays a vital role in protecting our wealth from the spontaneous misfortunes that life may throw at us. Underprotection is a prevalent diagnosis that many Financial Advisers agree to plague ordinary Singaporeans, as they can be under the delusion that CPF and Medisave are enough to cover them, so anything else is excessive and a waste of money. This is far from the truth. While we’ve all heard insurance horror stories such as misleading policies or overly priced premiums, horror stories that come from being underinsured don’t get nearly enough clout and the chances of being debt-ridden and misfortune stricken is more likely to occur to you than the former situation. Hence, as a new adult, the next step after mastering your budget is to protect the very wealth you’re so carefully cultivating. Here are 3 guiding principles to help you understand why you should never underestimate wealth protection.
1. IT’S WAY CHEAPER
Remember when a bowl of noodles at school used to cost you $1.50? One of the reasons why our youth seems so sweet is how affordable everything used to be back then, and how little we needed as well. Similarly, a huge benefit of buying insurance early on in your career is that it will definitely be cheaper while you’re younger, and less at risk. Then begs the question: How much should I be spending on insurance?
A general rule of thumb would be to use 10-15% of your income to purchase a form of wealth protection. However, the last thing you want is to be oversold and paying for too much. Hence, it’s important to do some research and compare each policy before reaching a decision. If you feel like you need further guidance, check out our list of users on the SyncWealth App to find a suitable Financial Advisor for your needs.
Another important question is what kind of insurance would a young adult such as yourself need? A popular and practical choice would be term insurance (learn more about whole life vs term insurance here) as it covers most of your bases for the time being, as well as being more straightforward.
2. FRUGALITY COSTS MORE
Medisave, CPF, employment benefits, not to mention subsidized healthcare at polyclinics and CHAS subsidies…sounds like enough, right?
Maybe for the common cold. How about for more serious, chronic illnesses that would not only drain your bank account from recurring treatment costs but also affect your ability to come into work every day? In the 2019 National Day Rally, it was revealed that 1 in 9 Singaporeans has diabetes, and cancer is one of the top reasons for hospitalization in Singapore, with 36 people diagnosed every. single. day.
In this situation, being underinsured is a dangerous game to play. A study by AON showed the gross medical inflation rate of Singapore stood at a high 10% in both the years 2017 and 2018, and while Singapore has one of the best healthcare systems in the world, it’s a known fact that there is a rising shortage of healthcare workers. This means greater inefficiency in public healthcare centers and a greater potential risk for a speedy recovery. On the flip side, are you prepared to tank a medical bill of $1 Million dollars for private treatment?
While the government indeed tries its best to provide for our needs, do not make the mistake of solely relying on their efforts. The true cost of healthcare in Singapore is not a cost that an average Singaporean can tank on their own without the help of a private shield plan. At the end of the day, it is your life and your responsibility, and it’s always better to be safe than sorry.
3. IT GOES BEYOND YOURSELF
So it’s cheaper to die than to fall sick right? What about the emotional cost on the ones who care for us? Your life is precious and holds an intrinsic value to those around you. Being well covered by insurance isn’t just wealth protection, it also protects the emotional wellbeing of yourself and the people impacted by your life. The last thing you and your loved ones want to happen when you’re critically ill is to worry about whether or not it will cause you to go bankrupt as well. Save everyone the heartache and grief, and invest in insurance early so that down the line, the main focus can be your health, not your wealth.
NOW, GO FORTH AND PROSPER
We may not have been able to protect ourselves from our childhood demons and monsters, but we can protect ourselves from unforeseen illnesses and other risks. Now that you know the importance of obtaining proper wealth protection, make sure you do your research to avoid over-buying policies of no use to you or buying too little coverage. Familiarise yourself with the most common terms that are found when buying insurance, and use tools to compare policies to make the most informed decision.
Check out more articles on insurance here!
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