Insurance basics
Insurance is meant to protect you, your family and things you care about. The insurance you buy depends not only on what you want to protect but also what you can afford.
Some insurance policies are must-haves. You can’t drive without car insurance or get a mortgage without fire insurance in most cases.
With so many types of policies out there, how do you choose the right one? What do you look out for? Even if you can afford it, you don’t have to buy them all.
Types of policies
Here are 3 main types of insurance policies and their purpose:
1. Life insurance
| Purpose | Examples |
|---|---|
| For your dependants (to receive financial support in the event of your death or total permanent disability) | Term life insurance, Whole life insurance, Dependants’ Protection Scheme, Home Protection Scheme |
| For your savings and investment | Endowment policies, Investment-linked policies |
| For a regular income during retirement | CPF LIFE annuities |
2. Health insurance
| Purpose | Examples |
|---|---|
| For yourself (helps pay medical costs due to illnesses or accidents) | MediShield Life, Private Integrated Shield Plans (IPs), Critical illness, Disability income, ElderShield/CareShield Life |
3. General insurance
| Purpose | Examples |
|---|---|
| For yourself and the assets that you own | Car insurance, travel insurance, property insurance, work injury compensation insurance |
How insurance works
Assess your needs and choose a policy
The first question to ask yourself is, do you need insurance at all? If you’re unsure, take a look at what you have now — your work, life, family and everything you worked hard for. Which part of it do you want to protect if something untoward was to happen to you? Your answer can lead you to the type of insurance you need.
Your insurance policy is a contract that lists exactly what you want to protect against. For example:
- Death of the breadwinner
- Total and permanent disability
- Critical illness
- Loss of belongings
- Damage to your car
- Damage to your house
Pay the premium
Premium is the amount you pay for the insurance. It could be monthly, quarterly or yearly. It could also be a one-time payment for travel insurance.
Generally, it costs less if you pay the premiums annually instead of monthly or quarterly.
The amount of premium depends on the risk and on the value of the potential loss you’re being insured for. For example, you may want your family to continue to receive your monthly income if you pass away prematurely so your insurance policy will cost more for this benefit.
Make a claim
If something happens that’s covered by the policy, you can claim on your insurance. Tell the insurer what happened, they’ll investigate and if the claim meets with what you’re protected against, then they’ll pay you as agreed.
Before you buy: Things to look out for
Before committing to an insurance plan, run through this checklist to make sure you know what you’re buying.
- Can you afford it?
- Is it a bundled product?
- What about short-term policies?
- Can you switch policies?
- Are there limitations?
- Do you know what you’re signing?
- Have you disclosed everything?
Before buying, compareFIRST
You should always compareFIRST before deciding which life insurance product to buy.
CompareFIRST is an information portal on insurance products. It allows you to compare the premiums and features of life insurance products available to the retail market in Singapore.
You can customise your search by selecting:
- The coverage you want
- Premium type and coverage duration
- Inclusion of critical illness riders
After that, you will get a list of life insurance products for you to compare side by side.
Don’t buy an insurance product based on the premiums alone. Also look into the benefits, features and coverage of the product and assess if it meets your needs.
After you buy: 14-day free look
After you’ve bought a policy (any policy except travel, car and maid insurance), you have at least a 14-day free look or cooling-off period for you to review it. The free-look period starts from the date you receive your policy document.
Read through the documents carefully and see if the policy meets your needs.
If you decide not to keep the policy, write to the insurer to cancel it within the cooling-off period. The insurer will refund all premiums less medical and other expenses incurred. For investment-linked policies, the insurance company may work in any change in the market value of the policy.
Always check if the policy you’re buying has a free-look period.