Life Insurance

3 Big Myths Some Singaporeans Still Believe About Insurance

life insurance myths

Peter Lin

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As Singaporeans, we’ve heard of the myths and legends surrounding our little country. Like how the legendary Sang Nila Utama was supposed to have seen a lion when he stepped foot on our shores, and not at the Mandai Zoo either. Or about the boy killed by the jealous sultan who bled and bled until Bukit Merah got its literal name of “red hill”. Or what about the myth when COE was just $2? Wait, that really happened? Don’t lie lah.  Anyway, we’re smarter Singaporeans now, right? We can tell when something is real and something is just bull. Except when it comes to insurance, apparently.

Here are some of the big insurance myths that Singaporeans still believe in.

 

Insurance Myth 1: Insurance should also be an investment

You can blame many of your distant relatives, army buddies and primary school classmates for this one. You know, especially the ones that became insurance agents and started selling you investment-linked policies. Many Singaporeans may have thought that it was a great idea when they were being sold on the idea – since you’re paying your hefty insurance premiums anyway, you might as well get something out of it when you’re ready to retire.

But the truth is, just because an insurance policy claims to be able to give you returns in the future doesn’t mean it’s a good deal. In fact, never buy an insurance policy based solely on the kind of returns you’re being promised. That’s no better than buying a Big Sweep ticket every week. Sure, you COULD win a million dollars, but the chances of that happening are slim to none. A good insurance policy is one that is able to protect you, not just one that promises the highest returns.

Let’s put it simply – a term life insurance policy that doesn’t have any investment features will probably only cost you as little as $200 to no more than $1,200 a year. On the other hand, a whole life insurance policy with all the bells and whistles will set you back a few hundred dollars each month. At least. And the best part is? They both offer you the same kind of coverage.

Depending on your situation, you may be better off just buying term insurance and putting the money you’ve saved into other investment options that aren’t related to your insurance company. But wait, you say. I’ve always been told term insurance is worthless! Well, that brings us to the next myth.

 

Insurance Myth 2: Term Insurance doesn’t protect you as much as Whole Life Insurance

Not all insurance agen- sorry, I meant to say, financial planners, are alike. It’s true, most are genuine about wanting to help you and serve you in the best way possible. Sadly, there will always be one or two who care more about the commissions they will be earning from you than actually making sure you’re told the truth, the whole truth and nothing but the truth.

If you’ve ever been led to believe that term insurance is somehow inferior to whole life insurance, then I’m afraid your financial planner may not have your best interests at heart. The truth is, when trying to answer the question, “Which is better? Term life insurance or whole life insurance?” The answer is: they serve different purposes. It doesn’t mean that one is better than the other. It just means that you should pick the policy that is best for you. Which means your financial planner should help you understand how both work and sell you the most appropriate policy – and not the policy which gives your financial planner gets a higher commission.

The truth is, term life insurance often gives you the same coverage as whole life insurance, and at much more affordable premiums too. If you’re just starting out on your career path, and cashflow is a problem, then a term life insurance policy is probably the more sensible option. However, because premiums get more expensive as you get older, there will come a time when paying for whole life insurance may be the more prudent option. At this later age, you not only can afford the higher premiums, but you should be a little more savvy and appreciate the freedom of choice when it comes to investing.

 

Insurance Myth 3: Insurance from the government is enough

Finally, there are those Singaporeans who trust the government implicitly and believe that they have your best interests at heart. Because of that, there’s no need to rely on anything more that what the government offers. For example, with health insurance schemes like MediShield Life, medical savings schemes like MediSave and life insurance schemes like the CPF Dependents’ Protection Scheme, you may think that you’re sufficiently covered by the government’s many programmes. Heck, even when you buy a property or a vehicle, the law forces you to get the most basic of fire and accident insurance for these. The keywords here, however, are “most basic”.

Take MediShield Life for example, while it covers everyone for the most basic of medical needs, it’s only meant to ensure you have the bare minimum of health insurance, hence our comparison of it to a Chery QQ. If you can afford it, and most Singaporeans can, you should apply for an Integrated Shield Plan – a type of health insurance that gives you better coverage without duplicating the compulsory MediShield Life.

Because, at the end of the day, the biggest myth that Singaporeans believe about insurance is that they’re sufficiently covered. But until you take the time to go through your policies and know exactly just how much insurance coverage you have? You run the risk of going extinct and becoming no more than a legend – the Singaporean who didn’t have enough insurance.

 

What other insurance myths do Singaporeans still believe? Share them with us.

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

  • Amresh

    When comparing both the term plan and whole life plan, one needs to be concerned about their estate should anything untoward happens. 70% of Singaporeans who are living in HDB should have the home protection scheme to protect their estate from creditor liabilities. That being said the term plan will also come in handy for the insured’s dependents. The 30% who are living in non-HDBs should be concerned that their insurance coverage might not be sufficient enough to give their beneficiaries the liquidity to settle the estate debts should anything untoward happen. That is where the term plan comes in best.

    The benefits of a whole life plan is that. It offers that guaranteed amount to your estate for life and there’s that guaranteed surrender value bit. Which would definitely put bank interest rates to shame. The non-liquid factor of a whole life plan may put people off and having a single Whole life plan is definitely not sufficient in terms of protection. I always believe in a combination of the both in any given portfolio. But majority of a person’s coverage should come from a term plan.

    Very informative article overall!