What do you want to protect? Learn how to assess and choose the right insurance product, and estimate how much insurance is enough for you.
Key takeaways
Know how to assess your protection needs.
Get term insurance if you only have life protection needs.
Know what other types of insurance can meet your needs.
Know what you can afford.
What are your insurance needs?
Nowadays, it is possible to be insured against all sorts of risks. But it may not be necessary to cover yourself against all risks. Finding the right insurance product is about knowing what you want to protect and how much you will need to cover a financial loss if the event were to happen.
Here are the 3 main categories of insurance and how they can help you:
Life Insurance
If you’re worried about Consider this type of insurance How it helps
Death of the breadwinner Life insurance
Provides some money for your family if you pass away.
Total & permanent disability Life insurance Provides some money for you and your family if you suffer from a total and permanent disability.
Death of mortgagor/main borrower of home loan
Mortgage reducing term assurance (a form of life insurance)
Pays off the mortgage if the mortgagor passes away.
See also: Guide to types of life insurance
Health insurance
If you’re worried about Consider this type of insurance How it helps
Trauma or critical illness Critical illness insurance Pays a portion or lump sum on the first diagnosis of a serious illness.
Medical bills for major illness or accident Medical expense insurance, e.g. MediShield Life (compulsory for Singapore Citizens and PRs), Integrated Shield Plans, other hospital and medical plans and riders. The main medical expense insurance plans pay a portion of hospital and surgical costs if you’re ill or suffering from injuries due to an accident.
Complementary plans such as riders cover the co-payment portions (e.g. deductible and co-insurance) that are not covered under the main plans.
Long-term care for disability Long-term care plans, e.g. ElderShield, ElderShield supplements Pays a fixed monthly amount for long-term treatment upon the insured’s inability to perform a number of “activities of daily living” such as bathing and dressing.
Loss of income because of hospitalisation Hospitalisation cash insurance Provides income if you’re hospitalised.
See also: Guide to types of health insurance
General insurance
If you’re worried about Consider this type of insurance How it helps
Loss of or damage to your belongings Home contents insurance Pays for repairs or replacement if you suffer loss or damage to your home or its contents. If you are renting your home, it’s your responsibility to cover the loss of or damage to the contents of your home.
Damage to or theft of your car Car insurance Pays for repairs or replacement if your car is stolen or damaged.
Damage to your home Fire or home insurance Pays for repairs or replacement if you suffer loss or damage to your home as a result of perils such as fire, flood, burglary.
Loss of luggage, trip delays, cost of medical care while travelling Travel insurance
Pays for repairs or replacement if you suffer loss or damage to your belongings. Also pays for financial loss if there are delays or cancellations.
Pays for costs related to a personal accident while overseas including medical and repatriation expenses.
Protecting your pet Pet insurance Pays for vet’s bills. Some will pay for you to advertise if your pet has been lost or even for kennel/cattery fees if the pet is suddenly admitted into a hospital.
How much insurance is enough?
To help you decide what insurance you need, make a list of the risks or events that concern you. Assess the likelihood of the event happening and the financial loss you or your dependants may suffer if so.
Consider how you would cover the financial loss. Buying a watch to replace a lost one might be fairly easy, but large hospital bills could set back your retirement goals if you don’t have savings or insurance to cover this. If you already have some insurance policies, check to see if these cover you for the risks you are concerned about.
Remember you do not need to have insurance for everything, just the things that could set back your financial situation or your financial goals.
Buying Direct Purchase Insurance
What is Direct Purchase Insurance (DPI)?
Direct Purchase Insurance (DPI) are term and whole life insurance products that you can buy directly from a life insurance company, without paying a financial advisory (FA) representative.
As DPI is sold without financial advice, no commission is charged, and you pay lower premiums as a result. The broadly standardised features also make it easier for you to compare products when deciding which DPI to purchase.
Tip
DPI products can be identified by the prefix “DIRECT” in their product names.
Here’s a quick introduction to DPI:
Who it is for
If you know which type of insurance will meet your needs, how much coverage you need and you don’t need any financial advice for your purchase, DPI is for you.
You may also use the following tools to work out your needs, financial goals and budget on your own.
Insurance Estimator to calculate the amount of life insurance coverage you would need
Budget Calculator to check if the premium that you will pay is affordable based on your current income and expenditure
However, if you’re unsure about how much coverage you need or what insurance to buy, you should consult an FA representative.
Types of DPI
The two main types of DPI available are:
Term life with total and permanent disability (TPD) cover and an optional critical illness (CI) rider
Whole life with TPD cover and an optional CI rider
Both types cover death and terminal illness.
Here are the key differences between the two types of DPIs:
Feature Term DPI Whole life DPI
Term Provides protection coverage for a fixed period of time.
Provides life-long protection coverage or up to a specified maturity age (e.g. 99 years old).
What it offers Pure protection with no savings or investment feature.
Protection and an investment component. Premiums are invested to build up cash value in addition to paying for insurance coverage.
Suitable for Insurance coverage for a limited period of time (e.g. duration in which your dependents are financially reliant on you). Life-long insurance coverage with an investment component.
Cost Generally cheaper as there is no investment component. Typically more expensive, as premiums are also invested to build cash value.
Cash value
None. Builds up over time.
Note: There may be no or little cash value if you end the policy in the first few years as most of the premiums would have been used to pay for the initial administrative expenses.
What DPI covers
The features of DPI are broadly standardised for easy comparison. But do read the small print, as not all DPI products are the same across life insurance companies.
Protection amount
You can buy protection of up to $400,000, based on your needs:
Sum assured
Term DPI: $50,000 to $400,000 per insurer
Whole Life DPI: $50,000 to $200,000 per insurer
The maximum sum assured is aggregated for all Term DPI and Whole Life DPI at $400,000.
Entry age Minimum age: 18 years old
Maximum age: 45, 60 or 65 years old depending on the type of DPI purchased
Amount of TPD benefit
100% of sum assured
Amount of optional CI rider benefit
100% of sum assured (except for illnesses that require angioplasty and other invasive treatments for coronary artery).
For illnesses that require angioplasty and other invasive treatments for coronary artery, the payout will be 10% of the sum assured, subject to a maximum amount of $25,000.
Coverage period
You can choose different coverage periods for a term life DPI. For whole life, consider if you can afford to pay the premiums up to the age you have chosen. Don’t forget, you may not be earning any income after retirement.
Period Term DPI Whole Life DPI
Policy coverage period
5 years (renewable)
20 years (non-renewable)
Up to age 65 (non-renewable)
TPD and optional CI benefits cover up to age 65; death and terminal illness benefits cover up to age 85.
Up to death of insured or up to a specified maturity age (e.g. 99 years old), except for TPD benefits which will be up to age 65.
Premium paying period Same as policy coverage period. Up to age 70 or age 85.
Which insurers offer DPI
Most life insurance companies offer DPI. You may choose to buy directly from their customer service centres or websites, if available.
How to buy DPI
If you’re considering DPI,
- Do your research
Understand your own insurance needs. Use the budget and insurance coverage calculators to determine if you can afford the insurance policy and how much coverage you need. - Compare
Shortlist three to four products. Compare their features and benefits on compareFIRST.sg, an online portal that helps you compare products among different insurers.
You can compare the different types of DPI, as well as between DPI and non-DPI, in terms of:
Premiums
Features
Benefits
Cash values
Distribution cost
- Buy directly
Select the product that meets your needs. Buy directly from the customer service centres or websites (if available) of the life insurance company.
Before purchasing any DPI, go through the DPI Fact Sheet and complete the checklist that you will receive from the life insurance company. These documents set out important information that you should consider when buying DPI.
