Insurance Protection
In the story of Goldilocks and the Three Bears, Goldilocks encounters three bears’ belongings: porridge, chairs, and beds. Each time, she tries three variations of the objects with one being too hot or large, one being too cold or small, and the last being just right. In insurance, there is a similar concept in that you can have too much, too little, or just the right amount.
Questions to consider: What insurances do you need? How much coverage for each policy should you have? Is a work-related policy sufficient or should you have your own individual policy? What coverage will you have when you no longer work for your current company?
There are many types of insurance, but the below discusses three important types for expats: health, life, and travel. Coverage needs shift overtime, so what works today, might not be appropriate for tomorrow. It is beneficial to periodically review coverage levels as life evolves.
Health Insurance
One main risk is health care. A lone medical incident can cost hundreds of thousands of dollars, particularly if there is a situation that requires continuous care. An event like this can derail an otherwise on-track financial plan. It is these high-severity occurrences that make having adequate protection essential.
In this regard, it is also important to look at what coverage you’ll have in the future upon leaving your job, retiring, or moving to another country. In Singapore, there is very little leeway to get coverage if you have a preexisting condition, so it could be good to get a retirement health insurance plan in-place when you are young and healthy. If a medical condition occurs, you might not be able to get local coverage, premiums could be significantly hiked, or the condition might be excluded. For US persons, accruing sufficient Social Security credits is vital as it provides access to Medicare post age 65.
Additionally, when moving to a new country, the current policy might not be portable, so it is beneficial to review options in the new jurisdiction or develop a backup plan well in advance.
Generally speaking, in terms of the Goldilocks analogy, it is better to have more coverage rather than less due to incidents potentially having large financial implications.
Life Insurance
The need for life insurance increases as responsibilities and financial liabilities are undertaken such as mortgages, kids, and caring for parents. This type of insurance would replace your current and future earnings to take care of these commitments in the case of premature death.
Term life insurance is usually the “cheap and cheerful” option to limit costs, but provides adequate coverage in case of unforeseen circumstances. However, there are reasons to acquire a whole life insurance plan such as tax and estate planning benefits.
Over-insurance is common in Singapore since a lot of savings-type products have an insurance component. However, from our experience, the benefit is frequently not worth the cost, as policy holders tend to be overinsured and required to pay high annual premiums. Surrender penalties are also high, and there is less disposable income for savings-investments to increase net worth.
Under-insurance is also an issue as getting a policy is not exactly on the top of everyone’s “to-do list.” For US persons, it is not beneficial to get foreign life insurance, and US life insurance can only be acquired while in the US, so getting coverage generally happens during trips to the States for leisure or work.
Particularly for life insurance, you don’t want too much or too little, but just the right amount.
Travel Insurance
Since many of our clients are global citizens who live all around the world and have a passion for travel, we can’t forget about this!
It is possible to buy coverage on a per trip basis or an annual plan. When I first moved to Singapore, I would buy single trip coverage on the MRT ride to Changi Airport each time I went for a weekend jaunt. However, after doing this several times, I decided to get an annual plan for convenience purposes.
It is important to consider how much benefit you are applying for as some plans cap out at $500,000, while others cap out at $1,000,000. A missing bag or delayed flight is inconvenient, but a medical emergency while abroad can be financially impactful.
Finally, it is important to read the fine print. Sometimes add-ons are needed for adventure sports like skiing, scuba diving after a certain depth, and wake boarding. Moreover, some plans only cover you in specific regions and most plans exclude the US, so you’ll want to ensure your destination of choice is included.
Conclusion
As the saying goes, “Hope for the best; prepare for the worst.” The above provides a brief overview of three important types of insurance, so you have a plan for now and in the future. There are other insurances to consider as well, depending on your circumstances. They include: disability, long-term care, liability, vehicle, content, jewellery, and antiques.
To review your current coverage and, like Goldilocks, ensure you have the “just right” amount of coverage, please reach out to one of our wealth planners.
This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/ and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.