12 Questions to Ask when Reviewing Your Life Insurance Coverage

Policy review

I recently came across an article about an expectant mum who found out she had stage 4 cancer at age 33. Feeling the unpredictability of life, I’m compelled to write this piece.

Reviewing your life insurance coverage is a crucial part of financial planning and there are some key questions to ask to ensure you still have the right policy in place at the right cost.

Getting started: what you need

  • A copy of your original life insurance policy illustration
  • Summary of the policy features and benefits

Your current policy and circumstances

  1. Is my life insurance policy still in force?
  2. What type of policy is it? For example, term insurance or whole life insurance
  3. Have my needs changed?
  4. Is this still the right type of policy for my needs?
  5. Do I need more or less life insurance cover than I currently have?
  6. Can I still afford the premiums?
  7. If I need to increase my cover, has my health deteriorated or am I leading a healthier lifestyle that could mean better pricing for increased cover I may want?

Beneficiaries of your life insurance policy

  1. Who are your named primary beneficiaries?
  2. Are your name primary beneficiaries still those you would like to benefit from the proceeds of your policy?

Policy features and benefits

  1. Does my policy have any guarantees? If so, what are they? Are they still beneficial to me?
  2. Are there any ‘policy review’ points that I can benefit from? E.g. ability to increase the cover without further medical underwriting.
  3. Can I borrow against the cash value of my policy from the insurance company? If so, do you want to take advantage of this feature?

Why Should I get Disability Income Insurance?

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How would you get by if u lose your ability to work and earn a paycheck every month?

Financially speaking, working disability is worse than death. Our earning ability is our greatest asset. You are the golden goose that lay the golden eggs. Most insurance policies only pay when the golden goose drops dead or is critically ill, but this is not enough. What we need to do is to insure the golden goose’s “ability” to lay golden eggs.

But you may ask: I am already covered, right?

Some people may believe they are already covered for the risk of disability. Let’s look at the common misconceptions:

I have a policy that covers me for Total & Permanent Disablement (TPD)
This only covers very severe disability, such as losing a pair of limbs before your insurer pays you. What if a teacher loses her voice and has to quit teaching? This does not meet the definition of TPD, but is sufficient to trigger your disability income payouts.

I have a Critical Illness policy
Currently, critical illness insurance providers do not cover diabetes as one of the 37 critical illnesses. What if a pilot is grounded because his diabetic condition affects his vision? Critical illness policies work well to provide a lump sum in the event of a critical illness. But it falls short of the real disability need.

I have personal accident coverage

The weekly income payable from personal accident plans is payable only if the cause of disability is accidental, defined as involuntary and violent. Working disability from illnesses is not covered.

My employer will pay me
Most employers define how long you will receive your salary if you are unable to work. In Singapore, this is often between 1 to 3 months, which will not be sufficient in the case of long-term working disability.

Therefore, we need to consider a Disability Income policy that provides for replacement of income in all cases of disability. If a sickness or injury (of any severity) prevents you from working for at least 60 days, it can replace 75% of your earned income, by offering a tax-free cash benefit every month.

What Is A “Deductible” or “Excess”?

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A deductible or excess is something you have on your policy when you have either, Hospital & Surgical coverage or Motor coverage. And its a dollar amount – it could be $500, $1000 or $3,000.

Quite simply put, the deductible is what you are responsible for, before the insurance company pays out anything on your behalf to fix your vehicle or seek medical treatment.

The lower your deductible, the higher your premium is going to be. Conversely, the higher the deductible you have, the lower your premium is going to be. 

Reason is this – you, the driver or the patient, are taking on more risk with a higher deductible. When you have a lower deductible, you are putting more risk on the insurance company. As a result, your premiums are effected in this way.

Importance of Overseas Medical Coverage

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There is an essential aspect of Medical Insurance which some of you may not know – having overseas coverage. To illustrate the importance of it, below is the story of my colleagues’ client.

She is a 9 years old girl, who was diagnosed with Brain Cancer in 2014. After 2 weeks of treatment, her doctors gave up as the healthcare industry in Singapore does not have the necessary type of cancer treatment – Proton Chemotherapy.

Her parents sought advice from her doctors as to where their daughter could go internationally, in order to undergo Proton Chemotherapy. Doctors told them the nearest country with this treatment is South Korea, which is also the cheapest. Although she was unable to walk and had to move around in a wheelchair, the girl’s parents decided to bring her to South Korea.

After the treatment was done, she responded well and returned to Singapore, able to walk again. After follow-up Chemotherapy in Singapore, her cancer is now in remission.

Her parents and financial planner filed a claim for the medical bills incurred in South Korea, amounting to $110,000. Thankfully, their insurer paid for it, as the girl’s Hospital & Surgical plan covers overseas hospitalisation and treatment costs.

Many of us may feel that since Singapore is a very developed country, we should have all forms of healthcare. But this little girl’s story shows us that the opposite is true.

There are definitely more cases of patients being advised to seek treatment outside Singapore. So do check if your Hospital & Surgical Plan covers you for overseas treatment.

Why We Shouldn’t be Bothered with Fear-Mongers

bad-economic-headlinesThere is much fearmongering in the different media which we are exposed to everyday. Take a look at the money section of any website, newspaper or magazine and you will find stories warning you about the Chinese economy, the Federal Reserve’s interest rate policies, the impact of the U.S. presidential election, global oil markets and market volatility.

But none of these stories—while interesting to read and think about—is worthy of spending too much of your brainpower.

Why? Because these big global factors are beyond your control and will be resolved without the slightest help from you.

You cannot control how the S&P 500 will perform or whether the European region will restart pumping profits. History has shown us that there are times when the U.S. markets outperform foreign markets and when the opposite is true. This is also true when it comes to growth stocks, value stocks, small and large companies. There is no way to successfully or consistently predict what will happen next.

So why do we bother?

Psychologists call it the “illusion of control“. Our intellectual minds tell us we can figure it out, even when—trust me—we can’t!

Putting your precious time into what you CAN control is really the only sensible way to go.

Here are six actions where focusing your energies in will reap you rewards:

  1. Develop rational goals built on your values. Let’s face it, without a real plan, you have decided to drift and hope for the best.
  1. Consider possible life transitions and how they might impact your actions. Transitions rarely give notice, so considering the impact of possibilities allows you to put solutions in place.
  1. Build agreement with other stakeholders (your spouse, a partner) on strategies to reach your goals. With all parties working toward the same goals, you’re more likely to be working for each other and get things accomplished.
  1. Invest time and resources to work with professionals who can help move your goals forward. Whether it’s creating a retirement plan or a proper risk management plan, you’ll benefit from working with experienced experts.
  1. Know your financial numbers and assign priorities for savings, accumulation and spending. Consider a rating system from 1 to 5, where you assign a point system to where your paycheck and resources go.
  1. Understand more about the “whys” of your life. Our beliefs don’t just arrive in our thinking like a magician’s trick. On the contrary, your money beliefs—your mindset—come from your money history over the course of your life. And it’s that mindset that determines what you consider the norm. Taking the time to understand whether your beliefs support your values is always time well spent.

These actions are very specific to you—you make the choices, decisions and actions that will support the outcomes you desire.

Devoting time to the economic issues of China or whether equity markets will rise or fall is beyond your ability to control and will only divert your attention from what really impacts your life.