Insurance and you
Shortly after my mother turned 50, she decided to buy some life insurance. She had to pay a high premium of just over $1000 due to her advanced age, but it was money well spent. A year later, she was diagnosed with a brain tumour. She underwent surgery to have it removed and suffered some permanent damage to her brain in the process. The insurance policy paid out $50,000 in cash as compensation and she was able to retire from her job to focus on taking care of her health.
As Forrest Gump so famously said, “Mama always said life was like a box of chocolates. You never know what you’re gonna get,” and that is why insurance is so important.
WHAT IS INSURANCE?
Put simply, insurance is transferring your risk to a third party for a fee known in the world of insurance as a ‘premium’. You pay a premium to the insurer in exchange for a guarantee from the insurer to compensate you in the event of a loss. You are then given a contract, or insurance policy, which details the conditions and circumstances under which you will be financially compensated. The amount you pay for the premium is determined by the insurer and is influenced by factors such as your age, medical history and the amount of coverage you require.
Notice how the writer has used a personal recount as an introduction to describing the benefits of life insurance. This is a good example of a hybrid text
The second paragraph moves away from the personal recount but the writer uses the second person “you”. This shows that the reader is included in the writer’s thoughts. It personalises the information in the text.
TYPES OF INSURANCE
There are many different types of insurance, but the most common include Life insurance, Personal Accident insurance and General insurance.
Life insurance guarantees that in the event of your death, your designated beneficiary will receive a sum of money as a form of compensation for your death. Depending on the policy, some life insurance policies like my mother’s, make payouts even for critical or terminal illnesses. This kind of insurance should, therefore, be purchased by those who are the breadwinners of their family as their untimely death or incapacitation due to illness could leave their families without a source of income to provide for their living expenses. However, as life policies often involve large sums of money, there are often exclusions written into the terms such as suicide or fraud to prevent people from taking advantage of insurers.
Personal accident insurance is another important form of insurance to purchase. It guarantees compensation in the event of an accident. In 2008, accidents were the number 1 cause of hospitalization in Singapore. Because accidents can happen to anyone at any time, it is wise to get a personal accident plan to help you and your family cope with the financial burden resulting from an accident. Accident plans tend to be more affordable and can cover a range of accidents from those only requiring outpatient treatment to those whereby the accident has led to a loss of a limb or even permanent disability. So, for a sum of just $100 per year, you can get covered for medical reimbursements like getting X-rays or stitches, disability and even death.
General insurance is insurance which covers things like your car, your home or even your travels. These sort of policies are not as critical as the previous policies we have discussed but they are good to have as a form of risk management. Take, for example, travel insurance. Most travel policies cover you for serious mishaps like if you are involved in an accident or die while you are travelling. But they also cover you for simple things like if your flight is delayed or if your luggage is lost or damaged. Premiums start from as little as $45 depending on the destination and length of trip, a small sum to pay for peace of mind to fully enjoy your holiday.
While this is clearly informative to the reader, the writer has once again drawn reference to his personal experiences with his mother
The value of your investment is dependent on the rise and fall of the funds you have invested in
Then there are insurance policies which help you ‘grow’ your money such as investment-linked policies (ILPS). Such plans typically combine the benefits of insurance protection and investment. In general, a portion of the premium you pay will go towards the cost of insurance and the remainder will be invested in one or more managed funds. One of the most important things to note about ILPS is that neither principal nor performance is guaranteed because the value of your investment is dependent on the rise and fall of the funds you have invested in. Good insurers will provide regular updates on how the various funds are performing so you have the chance to switch funds if you feel that you are not getting the returns you want.
WHEN SHOULD YOU START BUYING INSURANCE?
Because insurance premiums are usually lower when one is younger, everyone should try to purchase it as soon as they can afford it. Ideally, everyone should have a life policy which offers protection, as well as a form of savings. A good hospitalisation and surgical plan together with a personal accident plan would be the next best thing to get.
Given the rising costs of medical and hospitalization fees, parents should buy basic health insurance as soon as their children are born. A good hospitalisation and surgical plan would help reduce the financial burden in the event that their children need to be hospitalized due to illness or accident.
Young adults should buy insurance as soon as they start working and can afford premiums. If they are on a tight budget, they can purchase term policies. These are short term policies, typically ending at the age of 75 that offer protection but have no savings element. That is why they are much cheaper than life policies and are ideal for those who need protection but have limited funds.
When you buy your first property, it is very important that you purchase some form of home insurance. After all, you will be spending an exponential amount of money on this and you will undoubtedly want to protect it. The most basic form of home insurance is a ‘home contents plan’ which provides coverage for your furniture, valuables and even the accidental death of yourself or your spouse in the event of burglary, fire or anything out of your control.
Accidents and disasters can and do happen, and if you are not adequately insured, it could leave you in a financial ruin You need insurance to protect your life, your ability to earn income, and to keep a roof over your head.