STI: Work out insurance needs as early as possible

Apr 27, 2004

Work out insurance needs as early as possible

Q  I'VE just started working and earning my own income, and although I understand that insurance is important, I don't want too much of my income to be spent paying the premiums.

As a general guide, how much should I be insured for, and how much should the premiums be?

A  START looking at your protection needs as early as possible. Some people make the mistake of putting it off. As with all insurance, it is best to start early as this is more cost-efficient.

Firstly, approach insurance planning as part of a holistic financial plan. It is important to review your finances in totality. Take into consideration your cash flow, protection, home ownership and planning, and cash and credit management, followed by investment.

As a general guide, you should consider an insured amount of five to 10 times annual expenses.

In your case, you should think of cover in three key areas:

Disability protection: protection and coverage to replace a loss of income as a result of a disability, be it due to an illness or an accident.

Medical protection: provides coverage for hospitalisation bills and medical expenses - critical, as you need to ensure that you have made plans if you need to cater for high medical costs.

Life protection: This provides protection for your dependents by paying a lump sum in the event of a death.