STI: Advice you can use!

Apr 27, 2004

Advice you can use!

Needs will dictate a change in focus

 

CHOOSING the right insurance coverage can be a daunting task. Here are five tips from Standard Chartered.

 

Don't rely solely on your company plan for coverage

 

Otherwise, you won't have any back-up policy when you leave or are retrenched.

 

Adapt your insurance to your needs

 

When you're just starting out, life insurance may not need to be the key focus, although some cover may be necessary in case of emergencies. Focus on disability plans, which will protect your savings and a loss of earning potential should you be unable to work.

 

If you have a family to support, however, life insurance is vital to protect your dependants against the loss of income should the breadwinner die. Disability policies become relatively less important as you build up your level of savings.

 

Finally, medical insurance is the top priority in your old age, whereas life insurance is less essential unless needed for estate planning purposes. Your insurance focus should therefore change according to your needs.

 

How to calculate the life protection cover you need

 

One of the most important things you must consider when buying life insurance is whether your dependants will be adequately covered.

 

Calculate the amount of cover you require by multiplying your yearly income by the number of years you will need to support your dependants. Subtract it by any existing protection you already have.

 

How to calculate the disability cover you need

 

Disability income plans replace around 60 to 75 per cent of your salary. This is different from the 'total and permanent disability' cover found in most life insurance plans. Disability income payments will usually stop when you have recovered, or by a specified age. They may, however, be reduced if you obtain additional cover from your employer.

 

To calculate how much disability income you need, take your total monthly salary and multiply it by 75 per cent. The result will be the monthly income you need replaced under your disability policy.

 

Apply for medical insurance in advance

 

With the rising cost of medical treatment, some insurance to cover this is necessary. Most plans, however, are for the 'healthy', and you may be disqualified from applying for a medical plan because of poor health.

 

So apply for medical insurance in a timely manner, to prevent poor health from making it difficult to find cover.