3 things I wished I knew about insurance in financial planning

Just to introduce myself, I am what they call a “kiam siap” person. I’ll go for the cheapest deals and order the cheapest meals. I’ll even walk home from work, which was a 30-minute walk, if I could save a few dollars. Nothing wrong with being thrifty, but there’s a fine distinction between being shrewd and being stingy. Carrying that “kiam siap” mindset into my insurance journey was not a good idea. I’m fortunate to have made some mistakes without lasting financial consequences because of this.

Here are the 3 things I learnt about insurance in financial planning.

Focusing only on savings and investments initially

Everyone wants to see their wealth grow. To save money and see my wealth grow was the best of both worlds to me. I searched high and low for the best high-interest savings accounts and investment instruments to grow my wealth. Roboadvisors, exchange-traded funds (ETFs), you name it. Insurance was the last thing that crossed my mind.

But what didn’t occur to me was that insurance should be the first thing I should have considered in my personal finance journey¹. This was because if an unforeseen health event happens, I wouldn’t be worrying if I need to liquidate my investments to pay for medical bills or treatment. Perhaps I didn’t consider insurance at the start because of the misconception that insurance plans are always expensive.

The good news is that insurance can be affordable! For example, with FWD Critical Illness Plus, I can get covered for early and intermediate stages of cancer, heart attack, stroke and 37 late-stage critical illnesses from merely S$15.30/month for a sum insured of S$50k*.

Going for the “cheapest” insurance policy

Initially, the most pressing thing on my mind was budget. I was hoping to get the “cheapest” policy with the lowest coverage amount I could get. I did not seriously consider the number of critical illness conditions covered by the policy either. I ended up purchasing a critical illness policy with the lowest coverage because I could not see the “tangible” benefit of what insurance could bring.

But as the saying goes, “you pay for what you get”.

Years later, I had a health scare because of a health condition. While my health condition was not serious enough to complicate my subsequent insurance policy applications, it made me seriously reconsider if my existing insurance coverage was sufficient.

It made me realise also that while I may not see the “tangible” benefit unless I receive a payout, sufficient insurance coverage can provide me with peace of mind. This is especially true because of the rising costs of medical treatment, such as cancer treatment. Sometimes I’ll wonder, what if something really happens to me that affects my ability to earn an income and I find myself lacking sufficient insurance coverage?

Read more: You can finally know how much insurance coverage you need

Don’t get me wrong, budget is an important factor to consider. However, if we are only looking for the “cheapest” insurance policy, we run the risk of under-insuring ourselves. Fortunately, the Life Insurance Association (LIA) has provided some guidelines pertaining to the reasonable budget we should set aside for insurance , as well as the recommended sufficient coverage for death and critical illness.

For example, the guide recommends 9x of one’s annual income for death coverage and 4x of one’s annual income for critical illness coverage to be deemed as sufficient. Of course, this is a guideline because ultimately, what is deemed as sufficient is dependent on your life stage and financial needs.

At the same time, while not everyone may have the budget to purchase the recommended coverage for death and critical illness, we can use the rule of thumb for the reasonable amount of money we should set aside for insurance as a guideline for us.

It is important to also note that not every insurance policy with a lower premium is “worse off” than the insurance policy with a higher premium. There might be other features and limitations that contribute to the pricing of the product.

Procrastinating my financial planning reviews

I was in the middle of a job transition then. While I was busy sending out resumes and attending interviews, my fellow school mate who became a financial planner requested to meet me for a financial planning review. I procrastinated, even though I knew that I would need to consolidate my existing insurance policies and identify my insurance coverage gaps.

In hindsight, what I often worry is that a financial planner might push for more policies but what they often do is to help us evaluate if our existing financial planning is still aligned with / on track to achieve our financial goals, and if there’s any existing gaps require actions.

Financial planning may seem like rocket science, but it can be simple. For example, the Life Insurance Association (LIA) has provided a simple financial planning guide for the average layperson to better understand the types and amount of insurance they need.

As mentioned above, I developed some health conditions. During that period, I couldn’t help but feel that it’s too late for me to have sufficient insurance coverage.

I was lucky that my subsequent insurance application went through. This taught me that I should not procrastinate my financial reviews but to conduct my financial reviews regularly.

Read more: How do you stay prepared if critical illness strikes more than once?

Learning from my mistakes

Although some of us might have made some mistakes in our personal finance journey, what matters most is what we learn from them. Financial protection and wealth accumulation should be two things we consider for a holistic financial planning. After all, insurance is meant to help provide a safety net so that we can fulfil our long-term financial goals.

If you are looking for a critical illness insurance option, you can consider FWD Critical Illness Plus. FWD Critical Illness Plus provides a lump sum payout if you are diagnosed with early and intermediate stages of cancer, heart attack, stroke and 37 late-stage critical illnesses. From S$15.30/month, get a sum insured of S$50k for a 10-year renewable term.*

If you would like to request for a personalised financial review, submit a request here.