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It is common for us to use insurance policies to hedge against some financial loss. However, not all insurance policies are designed to be the same. In fact, there is no “one size fits all” policy. Therefore, it is important for us to have a basic understanding of what is offered in the market. In general, there are

3 types of insurance policies.

1. Life & Health

Main Purpose: Cover events concerning the life and health of a person (commonly referred to as the insured)

Commonly Covered Events: Death, Disability, Critical Illness, Medical expense, Long-term care

Type of plans available: Term insurance, Whole Life insurance, Investment-Linked Policies (aka ILPs), Personal Accident insurance, Hospitalisation insurance, Disability Income

Life & Health insurance provides financial security against financial loss arising from

three life’s major events:

1) dying too early;

2) inability to work till retirement; and

3) exhausting hard-earned savings too quickly.

After all,

I am the biggest asset that I own. Hence it is only right for me to insure myself comprehensively.

2. Savings & Investment

Main Purpose: To meet your financial goals

Commonly Covered Events: Wedding, Children’s education, House, Retirement

Type of plans available: Endowment plans, Investment-Linked-Policies, Life Annuity

Savings & investment requires the

ability to foresee how your future spending will be like.

Evidently, the world is becoming a more expensive place to stay in. While the cost of living continues to rise, bank interest rate remains low. Consequently, our hard-earned money falls in value over time.

To overcome this problem, we need to put our money into another channel that hedges against inflation. At the same time, it must not be readily accessible. Otherwise, we will always have the temptation to spend it rather than to save it.

SEE ALSO:  Activities of Daily Living (ADLs) Singapore

3. General Insurance

Main Purpose: Financial coverage for your belongings

Commonly Covered Events: House, Car, Luggage (during an overseas trip), Jewellery

Type of plans available: Property insurance, Motor insurance, Travel insurance

Majority of the things in this world have a value to it. As such, general insurance provides coverage for those that you treasure the most. In the event of a misfortune, you will be fairly compensated for the loss. For example, a motor insurance will cover the cost of repair for vehicle damage.

Conclusion on Insurance Policies in Singapore

On the whole, insurance policies have increased in complexity over the years. More often than not, it takes time and effort for us to understand each policy and whether they fits into our needs.

By and large, we will rely heavily on our trusted insurance agent to advise us on suitable policies. In any case, it will always be helpful to have some basic knowledge on the types of insurance policies offered in the market.

All in all, we are responsible for the decisions that we make in our life.

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