An earlier column discussed why it is essential for women to embark on planning for their financial future as early in their lives as possible. A higher life expectancy, shorter career spans, and a higher susceptibility to old age illnesses are some reasons that the modern woman needs to take financial matters in her own hands.
Part of this is reviewing her insurance policies and medical plans to make sure she is adequately covered. Many women are not aware of the policies and coverage they have and end up being underinsured or paying premiums for policies they do not need. Worse yet, some women may rely on their partner's employer policy, which may be rendered useless in the event of divorce or death.
Broadly, there are several kinds of insurance you need to consider:
Life Insurance
This lets you set aside money now to provide some form of financial protection for your dependents (parents, spouse, children) in the event of your death. Clearly then, a single woman who has no dependents relying on her for financial support does not need life insurance. However, because of the cash value and bonus payouts that come with many whole life policies, many people without dependents still purchase life insurance, treating it as a form of savings and investment.
This is not the best strategy for growing one's wealth. Instead of paying high premiums for something you do not require, better returns can possibly be reaped by putting your money into savings and some form of investment plan. However, life insurance is essential for anyone with dependents.
Homemakers should not discount their own contributions just because they do not earn an income on the work they do at home. In the event of death, financial costs will be incurred in hiring someone to perform the roles - driver, housekeeper, nanny, cook - she had previously done.
These costs should be accounted for and included when calculating how much coverage is needed on a life insurance policy, and they may add up to a lot more than you think.
Medical Insurance
Hefty hospitalisation or procedural costs can be incurred in the event of any foreseen or unforeseen medical situation and medical insurance can help defray some of these costs. While many working women are covered by MediShield or their employer's health insurance plans, these are basic policies which place limits on claims.
Upgrading your MediShield to Shield plans, which are offered by private insurers and which working women can opt to pay for out of their MediSave accounts, is a good option. As many policies are pegged to ward classes, opt for a plan that provides the services you want and how much you can afford.
Critical illness plans and disability insurance
While medical insurance can cover hospitalisation costs, they do not make up for the loss of income and are not able to defray medical costs incurred when one is diagnosed with a critical illness which can be long drawn and does not hospitalisation. Similarly, they do not provide cover when one is rendered disabled and is unable to work due to a prolonged recovery period.
By paying out sums that can compensate for income loss or go towards paying for nursing services, medical supplies and equipment, critical illness and disability insurance bridges the gap between life insurance and medical insurance.
Insurance plans are designed for a purpose - to spread the risk and provide protection against life's contingencies and catastrophes. In the face of rising medical costs and longer life expectancies, insurance protection becomes all the more vital. If you get the right insurance, you will be assured that your family and your own needs are met.
However, you should review the options as well as study the terms and conditions with the financial adviser representative selling the plans, before deciding if it is appropriate for your needs and means.
This article was contributed by Ms Shikha Gaur, Senior Vice President and a Licensed Financial Adviser Representative with ipac financial planning Singapore private limited, which is licensed with the MAS, Financial Adviser's Licence No FA100003-2.
In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any person. Before making an investment decision, you should speak to a financial adviser to consider whether this information is appropriate to your needs, objectives and circumstances.
