Financial Planning

Covering Your Bases: How Insurance Fills Protection Gaps in Singapore

byNicholas Yeo
  • Dec 04, 2023
  • 6 mins
family coming together

Navigating the financial landscape in Singapore comes with a set of unique challenges. For singles without children, when it comes to determining how much insurance coverage you need to be well-protected, you have to consider your retirement plans, and what it takes to care for ageing parents, which adds a layer of financial complexity. 

On the other hand, as parents you face the challenges associated with being part of the ‘sandwich generation’, namely the dual responsibility of providing for your children's future while potentially supporting your own ageing parents. The costs associated with raising children, including education and healthcare expenses, can be substantial. Balancing these financial demands while planning for retirement can be especially challenging.

This is why it's imperative for both segments to address protection gaps early, so you are not vulnerable to unforeseen medical crises. 

A protection gap is simply the difference between the financial resources that you have and the resources you need, in the event of a medical crisis, like a critical illness or injury.

Let’s take for example, James who has a total of $300,000 worth of critical illness insurance coverage and cash savings. If he gets diagnosed with cancer unexpectedly, the costs may add up to $1M for medical bills plus living expenses for him and his family. Here, James’ protection gap is $700,000, the sum that he needs to fork out on his own to get the treatment he needs and to ensure his family can continue to sustain while he recovers.

A recent study by the Life Insurance Association (LIA) underlined that economically active adults in Singapore have an average mortality protection gap of 21% and a critical illness (CI) protection gap of 74%. These gaps amount to S$169,673 and S$256,826 respectively. These staggering figures suggest that there is room for improvement when it comes to preparing Singaporeans to guard against financial impacts arising from medical crises.

Some common reasons why working adults may avoid thinking about addressing their protection gaps:

  • A reluctance to broach topics involving injury, illness, or mortality
  • Some might believe that their youth and good health allow them to delay obtaining insurance
  • Uncertainty on how much insurance coverage is appropriate
  • Perceived high costs and complexity of insurance

Although these concerns may be understandable, neglecting insurance coverage entirely can do more harm than good.

writing on paper

To conveniently assess if you have a protection gap, you can consider using this Protection Gap Calculator1. In just 3 minutes, you will be able to have a broad overview of any potential gaps.

Remember, different life stages and milestones, such as marriage, parenthood, or caregiving for elderly parents, can alter your protection gaps. So doing regular checks on your protection gaps can ensure that your coverage aligns with your changing circumstances.

How To Calculate Your Protection Gaps

Understanding your protection gap can be simplified to 3 simple steps:

Step 1: Calculate the Necessary Resources

The Life Insurance Association offers a simple guideline to determine the resources required in case of death or critical illness.

To secure your family's financial stability after an unexpected passing, it's advised to have resources equal to 9 times your annual income. For critical illness, a recommended amount of coverage is at 3.4 times your annual income. This ensures you and your loved ones can manage financially while adjusting to significant life changes.

Step 2: Evaluate Your Existing Resources

Once you know what's needed, evaluate your current resources. This encompasses cash savings, easily convertible assets, and insurance coverage payouts (such as those for death, disability, or critical illness).

Add up these resources to understand the financial support available to you and your family.

Step 3: Calculate Your Protection Gap

With figures from Steps 1 and 2, apply the formula to find your protection gap:

Protection Gap = Needed Protection or Resources - Available Resources

If the result is positive, you may have a protection gap which you should look out for.

If you've identified a protection gap, your next step is to bridge that gap with the right insurance products, with the help of a qualified financial advisor. To do so, consider factors like your budget, the number of dependents you have, and the type of coverage that aligns best with your circumstances.

Plan for the Long-Term with The Right Insurance Solutions

Generally, the key categories of protection insurance include, but are not limited to, health and life insurance.

Hospitalisation insurance, which falls under health insurance, shields against unforeseen medical expenses, inpatient hospital costs, and medical expenses that may not be covered by other policies, ensuring financial stability during health crises.

As for life insurance, Income's Term Life Insurance policies are good all-rounded options you can consider to plug your protection gaps.

For those taking care of their parents’ finances, term life plans like Complete Cancer Care can play a pivotal role in ensuring families remain well-supported should illness or injury strike.

Complete Cancer Care may alleviate some of the financial burdens associated with cancer treatment:

Income's offering is the first in Singapore to provide a guaranteed post-cancer cover option2. This means you can purchase a new term plan for extra coverage upon the diagnosis of advanced stage major cancer, providing extended protection. It also allows those insured to receive up to 1% of the sum assured per month for up to 24 months3 to help reduce out-of-pocket expenses associated with cancer treatment, providing valuable financial relief. Finally, Complete Cancer Care provides 10% of the sum assured4 to support hospice and palliative care, mitigating costs for necessary care during challenging times.

And for those with children, term life insurance plans such as Term Life Solitaire could help safeguard your family's financial well-being in the event of death and terminal illness with a sum assured5 of at least $500,000.

As working adults transition into caring for their ageing parents, exploring insurance options like Income’s Star Secure Pro can provide a comprehensive solution for this stage of life, ensuring that you're well-equipped to take care of your parents as it offers protection against death, total and permanent disability (TPD), terminal illness, plus mental conditions with the Early Life Accelerator rider add-on.

Furthermore, Income also provides insurance savings plans such as Gro Saver Flex Pro that helps you stay protected6 against death and terminal illness, providing peace of mind.

Lastly, when it comes to your health and the health of your loved ones, you want to be able to access the best healthcare solutions when you need to. However, your MediShield Life insurance primarily covers expected treatment expenses in Class B2 or C wards of public hospitals. This is where a private Integrated Shield Plan (IP) can bridge the gap. Enhanced IncomeShield is one such IP, offering you the flexibility to access private healthcare without the fear of overwhelming medical bills as it increases your policy's yearly claimable amount from $150,000 (with MediShield Life) to a maximum of $1,500,000.

As life circumstances change and new insurance options emerge, seeking guidance from an advisor for an annual review becomes crucial, ensuring you maintain the right level of protection without overburdening yourself or leaving gaps in coverage.

family at beach

Take care of your financial protection gaps, with the right insurance coverage. Explore Income's range of insurance products now, or speak with any of our advisors about potential protection gaps, and what you can do about it.

Don't wait until uncertainties knock on your door. Take steps today to safeguard your financial well-being and that of your loved ones.

Nicholas is a proficient writer who possesses a keen interest in disseminating knowledge on various subjects. Whether it is pets or matters relating to health and wellness, his articles are consistently informative and captivating, offering readers valuable perspectives and practical recommendations.

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