Insuring the unexpected

1. What are the events that should be insured?

You should insure the unexpected events, i.e. events that may or may not occur but if it occurs would cause a high financial impact.



2. What are examples of events that should be insured?

You should insure against premature death, i.e. death occurring at a young age, due to accident or unexpected illness, Adult Mortality (the risk of dying after the 15th birthday but before the 60th birthday) in Singapore IS 8.7% for men, 4.7% for women(from MOH WEBSITE http://www.moh.gov.sg/mohcorp/publicationsinfopapers.aspx?id=24478), and should be insured. You should insure the inpatient cost, the major illness bill is unexpected. You should insure the critical illness and permanent disability, because if you suffer from critical illness or permanent disability your income will stop, what’s worse you have to consider the additional medical cost or nursing cost on top of your normal every day expenses. You should also insure against a major car accident if you drive, You do not need to insure against small accidents, as the chance of its occurrence is higher and you can afford to pay for the cost of repairs. This is why it is all right to have a motor insurance policy that has an “excess” where you pay for the first $500 of repair cost – as it removes the small accidents.



3. What are examples of events that should not be insured?

You should not insure against events that is likely to occur frequently, or events that do not have a high financial impact. Most people have to see the doctor for minor ailments a few times each year. A motor car has to be serviced every year. The tires have to be changed every 3 years or earlier.

These types of events should not be insured. They should be paid out of personal savings. In most cases, the financial impacts of these events are small.

There is no need for an elderly person, above 75 years, to buy life insurance as the chance of death is likely to occur within the next 15 years, and the financial impact is small.



4. How do I pay for the events that are not insured?

You should pay them out of your personal savings. This is called “self-insurance”. As the financial impact is small and the frequency is high, you can set aside savings to meet these events.