No one has enough budget for financial planning
Your finances will never improve to the level, that you do not need to set a budget aside for financial planning. Personal expenses and lifestyle options will increase along with your new found finances. Trust us, the right timing is always the next pay increment. And upon achieving it, that next one after it. The reason you need to take actions on your health and wealth planning is due to a shortfall in your finances, for the day will never come when you have an excess budget to plan for your finances.
If you already drowning in a pool of cash and liquid assets, most medical conditions or life events are not going to make a significant dent in your saving. For everyone else, know that budgeting is about separating aside a part of your current earnings. Excess in your future earning, should not be the reason you are delaying on basic coverage. The day you have an excess in your finances is probably not happening anytime soon for most of us.
Financial planning does not have to be costly
It will be costly to your finances when you are not prepared for an unfortunate event. Basic health and protection coverages are designed to be accessible to everyone and it does not have to drain you financially. You may just have to cut down on an expensive dinner or two monthly, a couple of drinking sessions or a short overseas holiday yearly.
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This is what coverage for essential health and protection needs cost you:
1. Medical and hospitalisation expenses
Enhance your MediShield Life coverage with an Integrated Shield Plan (ILPs) and its respective Integrated Shield Plan rider. An Integrated Shield Plan, which can be paid for using funds in your MediSave account, covers most of the cost of treatment from public hospital Ward B all the way to a private hospital. There are currently 6 approved ILPs insurers by CPF Board, which offers varying levels of coverage and premium.
To fully cover the cost of deductibles and co-insurance, an Integrated Shield Plan rider can be attached to your Integrated Shield Plan. The rider ensures that no cash will be payable, however, the premium has to be paid using cash. The cost of the premiums can be as low as S$20-30 dollars a month, with level and scope of coverage varying among insurer and plans offered.
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2. Critical Illness and Early Critical Illness
When major Illness strikes, chances are that your job and career will have to be put on hold. Income will likely drop will you take time off to rest and recover from your illness. A Term Insurance policy is a low-cost way to get coverage, as long as you paid the premium when it is due on a yearly basis. Term insurance is an affordable means to get cover for the short to mid-term, without much impact on your finances. Various riders are available to increase coverage amounts and payout claims. While a Term insurance plan has no cash value accumulated over the years, the premium is relatively cheap and decent coverage can cost as low as S$50 – 80 dollars monthly.
For those with a higher budget, a Whole Life insurance policy allows for protection and an option to generate cash returns over the years. A policyholder can choose to pay the premium for a fixed number of years, typically anywhere from 5 years to 25 years. As one reaches retirement, the Whole Life insurance policy may have sufficient cash value generate to allow for lump sum withdrawal or yearly payout to complement income. Premiums are higher, as part of the premium paid are used to generate compounding investment returns for the policies in the later years. Expect premium no lesser than S$200 to 250 dollars monthly for such policies.
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3. Total and Permanent Disability and Disability Income
Should you woke up one day finding that you have lost partial use of your body, you will panic even though you have Total and Permanent Disability (TPD) coverage. Total and Permanent Disability can be added to a Term insurance policy or Whole Life insurance policy to pay out a lump sum when said event occurs. The good news that after the initial period of shock and panic, you know that you still can maintain a certain standard of living. Premium can be as low as S$2 dollars monthly per S$100,000 lump sum amount of coverage.
Disability Income Insurance policies as the name suggested pay out a regular income in the event of disability. Bills and other financial commitments do not stop when you are disabled, neither does life. Various insurances company offers Disability Income Insurance with premium as low as S$30 monthly, depending on the amount of income u wish to receive.
For those above Age 40, ElderShield and ElderShield upgrades can be paid by funds in MediSave account to receive a basic level of payout. ElderShield is currently an opt-out scheme, meaning all CPF members are enrolled unless they choose to be excluded from the scheme.
Without coverages, how much are you willing to pay for these?
A major surgery should result in at least S$50,000 medical expenses and loss of income. Early to intermediate stage cancer and related treatment will set you back no less than S$70,000 to S$150,000, including time set aside for recovery. Now then, getting a reasonable amount of coverage should not have cost you more than 20% of your monthly take-home income.
If that is still too much of your current income to give up, where are you getting the funds required when illness strikes? Health and protection coverage is definitely cheaper, compared to the expenses required when you do not have it. After all, is it really a budget constraint, or are you not willing to give up some pleasures in your lifestyle to start thinking about financial planning?
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You do not need to own every financial plan
At least where financial planning is concerned, not all financial objectives and goals are equally important. Set your priorities on essential needs and get over with it. After having your health and protection needs covered, move on to other financial goals such as building wealth or income for yourself. Just remember that you may still generate wealth as long as you are healthy, but you may not be able to get coverage after illness strikes.
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Don’t put financial planning for later just because you think you do not have enough budget for it.
Talk to a financial adviser or drop us a message.