INSURANCE: Complicated, but critical

by Roshan Kanesan

The idea that you may one day need insurance can be scary.

It’s a little like writing a will, you don’t want to dwell on the idea of bad things happening, so you put it off entirely. But if you’re reading this, it means the idea’s been like a bad penny; it just keeps coming back.

So, assuming you’ve decided that ‘okay, I’m going to finally figure out how this works’, here’s where you start – when it comes to insurance it is important to understand the broad areas of coverage, their purposes, your needs and then your options.

So the way insurance was generally explained to me is that there are 4 quadrants that you want covered: (1) life & total permanent disability, (2) personal accident, (3) hospitalisation & surgical and (4) critical illness.

Each of these quadrants addresses a particular range of issues, and compliments the others to form holistic protection.

So not having one quadrant can leave you vulnerable in that particular space, but remember that your needs might be different from other people, so assess that first.

What are the four quadrants?

Life & total permanent disability is one of the big ones. This quadrant is  all about protecting your future income, should something happen to you that takes away your ability to generate income-- say, death or total permanent disability.

On a similar note is personal accident, which hopes to soften the blow if you happen to be injured in an accident, by offering you monetary compensation.

The remaining two quadrants, critical illness and hospital & surgery, are similar, in that they’re respectively there to help cushion the cost of treatment of a critical illness or hospitalisation and surgery should they be required.

How Much?

How much insurance you get will eventually come down to what you want to protect as well as your budget. Generally when thinking about this, keep in mind that at the end of the day (in no particular order), you want to (1) protect your future income, (2) cushion the blow of an injury due to accident, (3) pare down the cost of hospitalisation and surgery should you need it, and (4) hedge against the potential cost of critical illness, if necessary.

However, don’t lose sight of what’s feasible for your current financial position. The last thing you want to do is buy more that you can afford and end up with the insurance premiums putting you in a financial pickle.

These phrases play a big part of why some avoid or delay getting insurance, and that’s a big problem. Deep down we know that insurance is important but because it’s not immediately necessary to our day-to-day lives, there is a certain lack of urgency to get it. It perpetually plays second fiddle to other daily priorities, or fires we have to put out.

All I can say here is this: the only time to get insurance is before something happens. Not after. There’s no point buying an umbrella after it’s rained and you’re all soaked, except in reality you could get way worse.

Insurance is important but not urgent, and that’s a problem…

“But hey Roshan, my company’s got me covered!”

While that may be the case for many of us with regard to medical or hospital and surgical coverage, you also want to keep in mind that (1) you may not always be at the company, and there’s no guarantee that the next one will cover you, (2) the company may change its policy in the future so you want to make sure that you know your options and can quickly get covered if that happens, and (3) the company policy on medical simply may not be enough.

Look up your company policy. And remember that company coverage isn’t a blank cheque or a license to ignore insurance; you have to take responsibility for your own protection. Even if you’re in the ideal situation-- i.e., you’re never planning to leave; have the best ever protection with the company; and your company is run by saints who will never change the policy – none of this protects your future income, for you or your current and future dependents, if anything should happen to you.

So at the very least, start small and build up your cover over time. You don’t have to get everything at one go, especially if your budget is tight. Prioritise based on your needs and wants, and then in time as you build your income, carve out a budget for more insurance to better and more proportionately protect yourself, both now and in the future. Think of it like buying a small umbrella first. Eventually, when you have the funds, you want to upgrade that umbrella to a bigger and better one, at least so your shoulders don’t get wet when it rains.

Ultimately, insurance can get complicated but it is extremely important. So, stay the course and don’t let the big terms scare you off or push you to procrastinate. Look at your options, take notes, write down questions, and use Google, experts or the local financial product comparisons sites to get a clearer idea of what you want.

The comparison sites can be a great way to get an inkling of what insurance costs, and they’ll help you start the process of identifying what you can get based on your budget. And if that still doesn’t feel like enough, seriously consider making an appointment with a financial advisor to help you with the process because insurance is complicated…

…and it’s totally okay to ask for help.

check out RUMIT’s full video on INSURANCE!

Stella Ler, Licensed Financial Planner for Blueprint Planning, explains all things insurance.

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