After some research, I found that insurance can generally cover the following areas (disclaimer: to the more sophisticated, please pardon the simplification) -
- Death - this can take a few forms, such as term life or whole life participating policies.
A term life policy pays out the sum insured upon death.
With a whole life participating policy, the sum insured is paid out together with a 'bonus value' (accumulated over the years) upon death. Alternatively, one can surrender the policy at any point whereupon he or she will receive the 'cash value' of the policy. For this, one should note the 'breakeven point' of the policy, which is the point where the cash value (which builds up over time) catches up with the cumulative premiums paid. Nowadays for paying of premiums, there is the option of 'limited pay', which means that instead of spreading out the premiums over the entire duration of the policy, one can choose to front-load the premiums over the first e.g. 10 / 20 years, albeit at higher amounts of course. - Total and Permanent Disability (TPD) - in most cases, this is usually tagged along with death benefit, meaning that the sum insured will be applicable for death and TPD.
- Terminal Illness (TI) - this is paid out when the person insured is declared by a doctor to have a condition which is likely to lead to death within 12 months. As with TPD, TI sometimes accompanies death benefit.
- Critical Illness (CI) - based on my understanding, the list of insurable critical illnesses has been standardised to the current 30 by the relevant authorities and now applies to all insurance companies.
CI can be standalone policies (more pricey?) or as a rider to life policies.
Since the case of Theresa Tan, there are now also early critical illness plans which cover the early / intermediate stages of the list of 30 CI, the most prominent being that of cancer. As a comparison, early CI pays out (up to $75k) even when diagnose with benign tumours while CI only pays out if it is malignant or invasive in nature. Note however that early CI can be more expensive than CI since there is a higher chance of payout.
- Accident - personal accident plans are relatively cheap (in the order of a few dollars a month) and pays for TCM and for e.g. loss of limb, etc.
- Hospitalisation and Surgical - in Singapore, this is covered by MediShield (which can be paid for from Medisave Account). Personally, I feel that this is probably one of the more essential types of insurance for protecting oneself and one's families, and had discussed this previously.
- Disability Income - this kicks in when one is declared unable to work as a result of injury or illness (I was quoted hand injury in the case of a surgeon and depression in the case of an office worker as examples), and will pay a monthly amount in place of the salary which one would have been earning. These are highly customisable - for instance, one can choose the amount to be paid (up to 75% of last-drawn salary), paid up to what age (e.g. 60, 65, 70), and the waiting period before the payouts start (e.g. 60, 90, 180 days).
- Savings - an example is an endowment policy which pays out upon maturity. In most cases, this is used to help meet a specific financial objective, such as saving up for children's education.
- Investment - an investment-linked policy (ILP) allows one to practise 'dollar cost averaging' and build up a position in a desired asset class / geographical market by putting in a regular fixed amount each month. I had shared a little personal experience of this previously.
