People in Singapore usually get two kinds of insurance which will be elaborated below.
The first one is the medical bill reimbursement insurance which will assist you to pay for the hefty hospital bills and costly treatments. This is the very basic insurance that everybody should have. However, this type of insurance will not cover your other expenses such as food, mortgage and other bills. If you only have this type of insurance and you are suddenly unable to work, you can imagine the problem you may face.
Many people also take the second type of insurance in which a lump sum payment due to critical illness, total and permanent disability, or loss of life, will be paid out. This insurance helps to replace part of your lost income in the unfortunate event of critical illness or total and permanent disability. The problem is that there is no guarantee your coverage will be enough for you and your family especially if such incident happens early in your life.
Normally, people will only cover 5-10 years of their income using lump sum payment insurance because it can be very costly to cover longer term period. Can this kind of insurance cover 20 or 30 years of your income when you are no longer able to work? Possible but it will cost you a bomb.
So, if you are looking for a longer term coverage without overpaying on premiums then you should consider the DI insurance because it can provide up to 75% of your normal income when you are disabled, temporarily or permanently and you are not able to work.
Here is an illustration on how a DI insurance works.
Mr. Tan, age 30, is a sales manager and earns $8,000 per month. One day, he has an accident and he cannot continue working as a result. Lucky for him, he has enrolled in a DI Insurance which covers up to $6,000 per month (75% of his normal salary). If Mr. Tan is temporarily disabled two years, his insurance will cover $144,000.00 in total (24 x $6,000) when he is unable to work. In the unfortunate event that the disability is permanent, Mr. Tan will potentially be protected from the age of 30 up to 65 (retirement age) with a total coverage of $2,520,000.00.
Disability Income (DI) coverage usually has a very reasonable premium. If you are interested to know more about this kind of coverage, you can ask your personal insurance advisor or you can always contact us.
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