Got Life insurance? Chances Are, It’s Not Enough. Here’s How To Check Your Protection Gap And How You Can Fill It Quickly

A recent survey by the Life Insurance Association titled 2017 Protection Gap Study – Singapore, has found that on a cumulative basis, Singaporeans are underinsured to the extent of S$355 billion, termed as the Protection Gap. At an individual level, that works out to an average of 2.1 times the annual income of every working adult. Are you one of these working adults?

Singaporeans are generally very savvy when it comes to insurance, yet few realise they may be in real danger of being underinsured.

Underinsurance means that the coverage being provided by their existing insurance policy is inadequate, such that any claims that are being made on the policy exceeds the amount that the insurer will cover. This would result in the policy holder having to fork out cash to pay for the claim.

While this isn’t the case for everyone, it often occurs for young people who purchased their insurance policies when they first started working, and then failed to review their coverage after they got married or after they have children. In fact, it is these young families who will feel the impact most acutely, if the breadwinner is underinsured and suffers from a serious medical condition.

Many Singaporeans don’t have enough life insurance coverage

How did the survey, carried out by Ernst & Young Advisory, arrive at the $355 billion figure? Here’s how.

Protection gap for individuals

Assume you earn S$60,000 a year.

Your insurance coverage needs to be a little more than 9 times your annual income.

S$60,000 X 9.1 = S$546,000

If you managed to save 2.8 times of your annual salary, your savings will help to cover a portion of your protection needs.

2.8 X S$60,000 = S$168,000

Perhaps you purchased life insurance policies to cover another 4.2 times your annual salary.

4.2 X S$60,000 = S$252,000

How much is your insurance gap?

S$546,000 – S$168,000 – S$252,000 = S$126,000

So, if an individual earns S$60,000 per year, the underinsurance is to the extent of S$126,000, or 2.1 times your annual income.

These are average figures. Your insurance needs may be much higher or lower depending on factors such as debt or dependents.

But at a national level, the protection gap of S$355 billion is worrying because just a few years ago in 2012, the national protection gap was significantly lower at S$262 billion.

Life insurance needs to be an essential component of your financial plan. This is especially true if your children or other members of your family are dependent upon your income for their living expenses.

Essential Life insurance Considerations

When you are calculating your life insurance requirements, you need to decide on the type of policy that you will buy. Should you buy a term policy or a whole life policy?

Term policy – the insurance benefit is payable to the beneficiary if you pass away prematurely. If you survive, there is no payout. This is “pure life insurance”, and it carries a comparatively low premium.

Whole life policy – as its name implies, you are covered for your entire life. So, a payout is assured. However, the insurance premium is relatively high. In many ways, this is a form of investment.

What life policy do I need?

The type of life policy you choose depends on the stage of life you are in. Do note that premiums tend to be lower when you purchase at a younger age, as individual risk is perceived to be lower.

Source: TIQ by Etiqa Insurance

You can also use a free online tool to help you to calculate your insurance protection gap and the amount of insurance that you need to buy.

Consider getting life insurance online that does not need a medical examination

One of the easiest ways to fill your protection gap quickly is through direct purchase insurance that is available online. Some do not even require a medical examination, which saves you even more time and hassle.

For instance, TIQ is currently offering a promotion for its term life insurance plan which can help individuals fill in their protection gap up to a coverage of $2 million.

Right now, you can enjoy a 15% discount on premiums for the first year, when you purchase the ePROTECT term life policy. Here are some of the policy’s features:

⇨ You can buy life insurance coverage of an amount between S$401,000 and S$2 million.

⇨ You can choose a five-year term that is renewable (renewal is guaranteed subject to certain conditions), a 20-year fixed term, or coverage until the age of 65.

⇨ A medical examination is not required. If you opt for the five-year renewal term, the state of your health will not influence the insurer’s renewal decision.

Buying life insurance shouldn’t be put off until tomorrow

Term life insurance costs very little. Case in point, the ePROTECT term life plan is available for as little as S$0.13 per day, for a male, non-smoker who will be 30 years old at his next birthday.

Despite the low premium rates, many Singaporeans defer their purchase decision. Some can’t seem to find the time to buy insurance. Others think that the subject is too complicated.

In reality, a term life policy is one of the most straightforward insurance products. You should buy one as soon as you can. It’s a decision that will give you peace of mind and one that your family could be very grateful that you made.

(By ZUU online)

Related Articles
- Travel Taboos You Should Follow – Better Be Safe Than Sorry!
- Here’s Why Short-Term Endowment Plans Are ALWAYS Oversubscribed In Singapore
- Here’s Why You Should Switch To A New Home Insurer