How Much Should You Spend on Insurance in Singapore?

Would you carry 5 umbrellas everywhere you go?

I’m guessing your answer is no, and not because umbrellas aren’t useful. Having an umbrella handy is always a good idea in Singapore’s unpredictable weather. You probably put one in the bag you carry when you go out, have a few at home, and maybe leave one in the office. That way, no matter where you are, you’re covered. Again: an umbrella is always a good idea.

But imagine filling your bag with 5 umbrellas. What if you had 50 at home, and another 50 in the office? At some point, it stops being practical and starts becoming, well, excessive. It’s neither space nor money well spent.

Insurance works the same way. Having the right policies provides essential protection, but having too many? That’s just wasted money and unnecessary clutter. So how do you know if you’re paying for more coverage than you need? Let’s break it down.

 

Guide to how much you should spend on insurance in Singapore

1. 3 pillars of insurance—Protection comes first
2. How much coverage do you need for each type of protection insurance?
3. How much of your income should you spend on insurance?
4. How much should health insurance cost in Singapore?
5. How much should term life insurance cost in Singapore?
6. How much should critical illness insurance cost?
7. What should you do if you’re overspending on insurance?
8. Other tips for managing your insurance portfolio

 

1. The first thing you should understand: Protection comes first.

Insurance can be broken down into 3 key pillars, each serving a different purpose. Here’s how they work:

Pillar 1: Wealth protection—the basics you shouldn’t skip

Think of this as your financial safety net, covering you in case life throws a curveball. These include:

• Health insurance – the most essential (and easiest to get), covering your medical bills so you’re not left drowning in hospital costs.
• Life insurance – the next insurance you should prioritise, this helps support your loved ones if you’re no longer around.
• Personal accident insurance – a good-to-have, but not strictly necessary since health insurance already covers some medical expenses.
• Disability insurance – another good-to-have, offering payouts if you can’t work due to severe illness or injury. In Singapore, disability insurance complements CareShield Life.

 

Pillar 2: Wealth accumulation—growing your money over time

Once your protection is sorted, the next step is building your financial future. This includes savings plans, retirement funds, and investments—all of which help grow your wealth so you can reach financial goals like buying a house, retiring comfortably, or funding your kids’ education.

 

Pillar 3: Wealth distribution—passing it on (if you have lots to pass on)

If you’ve built a sizable fortune, you’ll want to plan how it’s distributed. This is where legacy planning and retirement strategies come in—ensuring your wealth is passed down smoothly to loved ones without unnecessary legal or tax hassles. But unless you have significant assets, this pillar is less of a priority.

 

Which types of insurance do I need?

At the end of the day, not all insurance is necessary for everyone—it’s about having enough coverage for your needs and objectives without overpaying. No 2 people will have the exact same needs and objectives, so no 2 people will need the exact same insurance portfolio. 

The order matters too. If you don’t even have your health insurance sorted to protect you from astronomical hospital costs in the event of a medical emergency (touch wood!), you have no business buying insurance policies that focus on investing and growing your wealth—yet. Prioritise protection first.

Because it’s the most essential, protection insurance or personal insurance is going to be the focus of this article. For the other 2 pillars, check out our guide to investing for beginners, our numerous investment articles, and our estate planning checklist.

Before we jump in, a quick note on other types of insurance. General insurance like car insurance, home insurance, and maid insurance are considered needs, and they are mandatory  by law in Singapore anyway. Travel insurance is not mandated, but you should consider it a must in order to protect your holidays from lost luggage, medical emergencies, travel disruptions, and more.

 

2. How much coverage do you need for each type of protection insurance?

Type of protection insurance	What it does	Recommended coverage	Sample annual premium (30 year old male, non-smoker)
Health insurance	Covers medical expenses such as hospitalisation, surgeries, and outpatient treatments. Essential for managing healthcare costs.	No specific recommended sum assured—you will already get coverage from MediShield Life, and can get an Integrated Shield Plan (ISP) to top up your coverage for a private, Class A, or Class B ward.	Private: $520 Public (Class A): $360 Public (Class B): $330 Costs above are for both MediShield Life and ISP premiums
Life insurance (whole life or term)	Provides a payout to your beneficiaries in the event of your death. Whole life policies have a savings component, while term life covers you for a fixed period.	10x your annual income	$220 to $320 for $500,000 sum assured
Critical illness	Pays a lump sum if you’re diagnosed with a serious illness like cancer, heart attack, or stroke, helping to cover medical costs and loss of income.	At least 5x to 7x your annual income. For the best coverage, go for 10x your annual income.	$1,150 for converge of $250,000 in the form of a single payout

3. How much of your income should you spend on insurance?

As a general rule of thumb, follow the 50-30-20 rule:

• 50% of your income (at maximum) should go towards your expenses.
• 30% of your income can go towards paying outstanding liabilities, such as your home mortgage. This is in line with the MAS rule that your mortgage servicing ratio (MSR) is capped at 30% of your income.
• 20% of your income can go to your insurance, savings, and investments.

If you don’t have a mortgage to pay, awesome. That means you have more money that you can set aside as savings or investment.

But remember the order of priority for insurance: Get protection first. Once you have your health and life insurance sorted out, you can then look into investments.

What if you’re spending more than 20% of your take-home pay on insurance? It may be time to compare your premiums against the market rates.

Here’s a look at the sample costs for a young adult in Singapore.

 

4. How much should health insurance cost in Singapore?

Hospitalisation insurance is considered essential in Singapore. If you don’t have any other form of insurance, this is the first type you should consider. This type of plan will cover most of your medical costs if you get hospitalised.

For Singaporeans, the most cost-effective type of health insurance plan available is the Integrated Shield Plan (IP), offered by 7 insurers in Singapore. Some of the premium would be payable by MediSave; however, as you get older, be prepared to fork out more of the premium in cash.

Turns out, you’ve got more to worry about than wrinkles as you age. Hospitalisation insurance premiums rise with age, so you’ll find yourself paying more each time you move up into a new age bracket.

 

Sample premium for health insurance

Let’s assume we’re looking at the health insurance premiums for a 30-year-old male Singapore citizen who does not smoke (smokers pay more!). Here are some sample premiums based on Singlife Shield for 3 different levels of health insurance:

	MediShield Life premiums	Integrated Shield Plan premiums	Total
Private (Singlife Shield Plan 1)	$254.67	$268.00	$522.67
Public, Class A (Singlife Shield Plan 2)	$254.67	$100.85	$355.52
Public, Class B (Singlife Shield Plan 3)	$254.67	$74.36	$329.03

The above premiums can be payable in CPF MediSave, but this is limited by the annual limit for your age group.

• $300 per year for those at age 40 years and below on their next birthday
• $600 per year for those at age 41 to 70 years on their next birthday
• $900 per year for those at age 71 years and above on their next birthday

Source: MOH

If opting for a co-payment rider, you’ll need to pay for it in cash. This is how much extra you should budget, based on the Singlife Health Plus, Prime plan:

• Private (Plan 1) —$666
• Public Class A (Plan 2)—$252.64
• Public Class B (Plan 3)—$199.67

 

How to lower health insurance premiums 

If you only have the default MediShield Life and want to upgrade to an IP, you can compare plans across the 7 IP insurers for a cost-effective option. However, there is no guarantee that your premiums will remain low forever.

Choose your provider carefully, as you will be stuck with that insurer once you develop any medical conditions. If you switch to a new insurer, they won’t cover any pre-existing health conditions.

If you are unwilling to risk that, you can consider switching from a private hospital plan to a public one. Many Singaporeans opt for the former for greater peace of mind, but it IS a lot more expensive than even a Class A IP.

 

5. How much should term life insurance cost in Singapore?

There are many types of hybrid products offering life insurance protection, but for the purposes of this article we’ll focus on term life insurance, ie. a protection-only plan that protects you for the duration of the plan’s term, and does not have any cash value or investment component. In contrast, whole life insurance has cash value and—as the name implies—covers you for your entire life.  

Life insurance is essential if you have dependents—this could be kids, a non-working spouse, parents, etc. who depend on you financially. Your life insurance plan will pay out a lump sum to replace your income if you pass away.

 

Sample premium for term insurance

A 30-year-old male non-smoker with a $500,000 sum assured and a policy term of 20 years should be prepared to pay about $19 to $26 per month for term life insurance. That’s based on the term life insurance Singlife Elite Term II, which annual premiums are $222.15 after discount and $317.35 before.

Term life insurance premiums are pegged to the age at which you sign up for the plan. Subsequently, the premium will stay the same for the term of your plan. So, if you have a 20-year plan, you will pay the same premiums for 20 years.

After the term has expired, if you wish to renew your plan, your premium will be updated based on your age at the time of renewal.

 

How to lower term insurance premiums 

The best way to keep costs down is to buy term life insurance as early as possible. Since the premiums are calculated based on age, buying early means you can lock down a cheap rate for the entire term.

Don’t forget to comparison-shop if you don’t have an insurance policy already! You can get free term insurance quotes and comparison across multiple insurers on MoneySmart.

To keep your long-term costs down, try to avoid signing up for a term that’s too short for your needs. That can save you from higher premiums come renewal time.

If you are just looking for basic life insurance coverage, consider buying direct purchase life insurance, which is cheaper and can be purchased without having to first speak to an agent. You can learn more about direct purchase insurance here.

 

Term life insurance—what age should you cover yourself till?

Generally, you should get a term life insurance plan that at least covers you till you reach retirement age, which is currently 63 years old. That means if you’re 30 now, you’d be getting term insurance that’s good for 33 years.

What if for some reason, you’re unable to commit to a 33-year term life plan? It’s also worth thinking about your specific needs and objectives. These can change based on your season of life and circumstances.

For example, perhaps your parents are getting on in years and need caring for, or perhaps you recently became a parent yourself. When you have a dependent (i.e. a child), the most pivotal years you should think about are the years during which your child is still studying. Most parents would at least want to provide for their children until they start working, which will probably be in their early 20s. At the absolute minimum, you should get a term insurance plan that covers you for as long as you need to provide for your child.

 

6. How much should critical illness insurance cost?

Critical illness insurance is a good-to-have form of insurance that you should consider if you already have health insurance and (for those with dependents) life insurance. This type of insurance usually offers a lump sum payout if you get diagnosed with a serious illness.

You can get critical illness protection by purchasing critical illness rider for your life insurance policy. However, getting a critical illness payout may then render your entire policy void.

For this reason, plenty of Singaporeans opt to buy standalone critical illness insurance plans. There are a few permutations, all priced differently:

• Cancer insurance
• “Big 3” (cancer, stroke, heart attack) insurance
• Standard (late-stage) critical illness insurance
• Early stage critical illness insurance
• Multi-payout critical illness insurance

Sample premium for critical illness insurance

Based on the Singlife Comprehensive Critical Illness plan as a sample, a 30-year-old male can expect to pay about $1,150 annually for a stand-alone standard critical illness plan that offers a single payout of $250,000 upon late-stage diagnosis. That’s about $95 per month.

However, this can vary greatly depending on the type of plan and coverage, so don’t forget to compare among a few insurers before you commit.

How to lower critical illness insurance premiums 

If your critical illness insurance is too expensive to maintain, you may consider cancer insurance or “Big 3” insurance, which can be cheaper.

The obvious disadvantage is that they are limited to cancer, possibly resulting in a morbid worst case scenario where you end up actually hoping to get diagnosed with cancer as opposed to the 37 diseases covered by a more comprehensive critical illness insurance plan.

Alternatively, you may want to look into a term life insurance policy with critical illness rider. This also tends to be more affordable.

But note that you’ll only be covered for the term of your choice. If you don’t get a serious illness (or die) during that period, then you don’t get a payout—tough luck if you get sick in old age.

 

7. What should you do if you’re overspending on insurance?

Some people think they’re overspending on insurance because their peers pay less than they do. Another group thinks they’re probably overspending on insurance because they don’t know how much they’re paying in the first place. As you can guess, baseless peer review and ignorant guesswork are hardly hallmarks of assessing insurance properly. Here are the questions you need to be asking instead.

Question 1: What are my needs and objectives?

As mentioned earlier in this article, your needs and objectives depend on your life stage and circumstances. Having dependents (children or aged parents) is a common factor that will sway your insurance protection requirements—what will happen if you are unable to provide for them? Think about how long you will need to cover them till, and how much coverage you’ll need.

Question 2: Coverage vs premiums—how much am I paying for how much protection?

It’s not exactly light reading, but you need to get a hold of all your policies and consolidate what you’re paying for and how much coverage you’re getting. Maybe you’ll discover you’re underinsured for your life insurance, but overinsured for critical illness coverage. Or perhaps you’ll learn that you’re very well covered across the board, but are simply paying too much for insurance given your current level of income.

When assessing your protection, remember to keep your needs and objectives in mind. For your premiums, make sure you’re not spending more than 20% of your income on insurance as mentioned at the start of this article.

Question 3: Which policies are the most cost effective?

If you really are overspending on insurance, it’s time to Marie Kondo your insurance coverage, forgetting for a second that it’s highly unlikely that any of your policies spark joy. Pick out the policies that are no longer cost effective and consider surrendering or switching them out with more affordable plans.

Focus on what you really need—the protection, rather than other factors that you got swayed into signing up for by a glib agent.

For instance, if you’re holding on to a whole life insurance plan with low coverage, you might want to consider surrendering it and buying term insurance with higher coverage.

If you discover you’re underinsured, the same question applies. Explore insurance policy options and ask yourself which policies are the most cost effective to meet your needs and objectives.

Need help? Our financial advisory specialists can provide individualised advice for your specific situation. Find out more and get a personalised insurance plan.

 

8. Other tips for managing your insurance portfolio

It can feel like a chore, but you should set aside time to review your policies periodically, either alone or with a financial planner. Life happens, circumstances change, and your coverage needs to keep up with you.

Another helpful tip that people don’t know about: You can nominate a beneficiary for your insurance policies from the get go. In the unfortunate event of a policy owner’s demise, this nomination determines who will receive the policy’s death benefits.

Have existing policies, but no idea who’s nominated? There’s a chance no one is. Get in touch with your financial advisor to nominate a beneficiary for your existing policies with death benefits.

Psst, while you’re at it, you might also want to go through our estate planning checklist. Nominating a beneficiary is just 1 of 7 important things you should settle before you’re six feet under.

 

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