Investment alone is not enough, protect your wealth with insurance
When it comes to planning your finances, getting an insurance plan usually has the least priority. With many other financial commitments to manage, such as paying for your own entertainment expenses, HDB mortgage, your car loan or your newborn’s expenses, you might realise that there is not much left to spend or save, let alone on something as needless as insurance.
I mean, do you really need to spend on that extra insurance plan to get coverage for some peace of mind?
Is insurance a waste of money?
As a starry-eyed young adult, new to the workforce and full of energy, you may feel like you are ready to take on the world and scale to the top of the corporate ladder.
Ready to take on the world.
You have an air of invincibility around you and you think nothing can happen to you. We often hear people say something like this,
“I want to build my wealth by investing. Insurance is just a waste of money.”
“Why should I pay for something that won’t happen?”
“I have enough savings, I don’t need to insure anything.”
These mindsets are not wrong, but can be problematic. If 2020 and 2021 have taught us anything, it is that anything can happen.
The Olympics can be postponed, a country’s military can seize control and kill its own civilians in protests, and a virus can change the way we live and how businesses operate overnight. In today’s world where political uncertainty can be rampant and where the Coronavirus remains unresolved, we are all struggling in a tsunami of uncertainty. Who knows what other black swan events will happen in a post-Coronavirus world?
Likewise, how can you be certain that your future will go the way you plan? How sure are you about your own life expectancy and health? How can you control unexpected health incidents or accidents? How certain are you that you will not lose your job? How many years of quality living will you have after an early retirement? How will your loved ones cope when you are gone?
This is where an insurance plan helps. It is a safety net for you and your loved ones.
When you protect your financial portfolio, you are, by extension, protecting your loved ones.
With the correct coverage, you can ensure that your family will not be worried about covering costly medical bills should anything untowardly happen to you. You can even use an insurance plan to cover your daily living expenses while you recuperate.
What else does insurance do?
Insurance goes beyond protecting you from accident and health costs. It can also be seen as a form of ‘forced’ savings that allows you to accumulate wealth to attain a financial milestone, such as retirement planning or succession planning.
It puts your money somewhere else to prevent you from wasteful spending, which also allows you to manage your money better through means such as the 50-30-20 budget rule.
How much insurance should I buy?
Now that we understand the need for insurance, the next question is how much should you be covered for. You have expenses, investments, and debt repayments to pay. As much as you want to be fully insured for every possible outcome, it may not be realistic to do so.
A general rule of thumb is to be insured for 10 times your annual income.
Your insurance should cover at least 10 times your annual income.
If you have a full-time job that earns a monthly income of $6,000, with a month of Annual Wage Supplement (AWS) and approximately three months of bonus, your annual income will be $6,000 x 16 = $96,000.
You should then be insured 10 times that amount, at $960,000.
You should also factor in your remaining life expectancy, the number of dependents you have and their needs, any outstanding liabilities such as mortgage and any inheritance that you want to set aside for your dependents. Remember to include buffers too.
Is there a thing as too much insurance?
Insurance sounds essential and great, but can you buy too much insurance?
The short answer is, yes!
While being covered by different policies will give you a more complete coverage, being overly protected can contribute to financial stress. If you're still unsure about what you need, how much you need, or what type of insurance to buy, consult a financial advisor.
What type of insurance should I get?
As of 2020, there are 19,219 insurance agents in Singapore.
As you can imagine, there is an endless list of insurances available on the market from reputable insurance providers such as AIA, Aviva, AXA, FWD, Great Eastern, Manulife, NTUC Income, Prudential, Tokio Marine and more.
How does Life First advisory differ from everyone else?
Life First Advisory focuses on allowing you to live in the moment, knowing that your future finances are well taken care of.
Here, we have a team of experienced non-tied financial advisor representatives who can evaluate multiple insurances across providers to give you the best customised plan. We are not bound to any specific insurance providers, so you can be assured that we will have your best interests.
Come to us if you believe in planning your life right, starting from your finances.
Think of us as professionals who can guide you toward the right monetary returns, following a desired timeframe, to enable the best life that you want to live in.
We are here to provide you with a peace of mind, without which any monetary return is argueably pointless.
Speak with us today to find out more on how we can value-add to your finances.