Top 5 Most Popular Insurance Policies

As I approach my tenth year in the life insurance and financial advisory business, it has come to a point in my career where I am embarking on a new challenge, that is to groom and train young people into successful financial consultants. As such, I have been away from writing articles for a while, busy juggling both client consulting and mentoring responsibilities.

All newly minted financial consultants have to undergo intensive product training, mastering one product at a time, until they reach a level of proficiency and experience where they can flap their wings and fly on their own. While I was training the new blood of our industry, it is inevitable that that the new consultants ask which products do our clients like the most.

Although financial planning is a highly customised affair, and no two persons' financial needs are exactly the same, some products are indeed in higher demand than the rest. This may be due to a greater awareness for certain types of policies. And during my time in the business, I have seen the consumers become more and more proactive in procuring insurance. In recent years, I have also been receiving more call-in enquiries, and it is also apparent that certain products are really more popular.

As such, here is my unofficial list of the top 5 most popular insurance plans, according to my experience. Disclaimer: Do note that a plan's popularity does not mean that it is automatically suitable for everyone, as your financial needs may be different from others. Also consult a qualified financial consultant to assess your financial goals and needs, and ascertain suitability of the plans purchased.

1. Hospitalisation and Surgical (H&S) 

H&S plans, especially "Integrated Shield Plans", have always been the product with the hottest demand. With the rising cost of medical care, as well as the overcrowding in government hospitals, consumers who prefer a higher ward class or private medical care would definitely get themselves a H&S plan to cover for any hospitalisation expenses. Furthermore, since ISPs are payable via Medisave, most Singaporeans and PRs are more willing to purchase it as it requires lesser cash outlay.

For the foreigners that I have worked with, they also have no qualms with forking out full cash for a H&S plans, as most would agree the cost of medical treatment in Singapore is higher than that of their home country, even when compared to other developed nations like UK or France. As foreigners get no subsidy in our hospitals, and they do not contribute to Medisave, it is therefore even more vital that they have a good H&S plan that provides full coverage for their medical needs.

A good H&S package should provide "As Charged" coverage with full cover from the 1st dollar onwards, with Deductible and Co-insurance covered. Aim for the longest pre- and post-hospitalisation coverage duration if possible (e.g. 180 days*) as I have seen some cases whereby the follow-up with the specialist doctor took more than 3 months, and the client's policy did not cover beyond 90 days.

*Reference plan: PruShield A Premier.

2. Term Life Insurance

Ten years ago, it was rather inconceivable for many to purchase a million dollar term life insurance. This used to be the domain of high net worth individuals. It was more common to write policies of about $100k in sum insured.

Now, the mass market is warming up to the fact that a person's life insurance needs are more than they imagine. Today, we are writing $500,000 policies even for young adults in their twenties and thirties. Higher income earners who are not yet HNWIs are already buying policies in the region of $1 million to $3 million.

Let's put things into perspective. A typical Singaporean earning $3,000 a month would be able to earn a total of more than $1.4 million throughout 40 years of working (age 25 to 65). Should a disability or premature death impede this future potential earnings, the lost income would be at least a six-figure sum.

It's best to start as young as possible for term life insurance, and to stretch the cover as long as you may potentially need it. I bought a $1m policy in my 20s, and it only cost me $100 a month*, cheaper than my mobile phone bill!

*Reference plan: PruTerm Vantage

3. Early Stage Critical Illness

Did you know that not all cancers are covered under a normal Critical Illness (CI) policy? Back in 2008, a local newspaper reported that a lady was unable to receive any payouts from her 3 insurance policies when she was diagnosed with carcinoma-in-situ of the breast, or in layman's term, Stage 0 cancer. It was further elaborated that the condition has not progressed to the level of severity that triggers a claim.

Following that incident, insurers started launching early stage CI policies, which pays out even in the early or intermediate stages of specified illnesses. This gives the assurance to policyholders that they will still receive some payout at the onset of critical illnesses, which may help greatly in covering medical expenses and lost income.

Early stage CI coverage may be taken up as a standalone policy, or as a 'rider' to whole life insurance policies. Either way, they provide an additional layer of security for the insured. They are not cheap though. Mortality charges for such coverage are typically at least 3 times higher than the usual CI policies that only cover for the late stages of illnesses. It probably also means that the likelihood of a claim is as high.

4. Retirement Plan

Retirement might probably be the hottest topic on social media over the past week, with the Rebecca Lim publicity stunt. Whether you think of her post as distasteful or brilliant, it is hard to argue that this incident has indeed drawn a lot of attention to the topic of retirement planning.

As a financial planner, it is always difficult to educate and advise our clients to start planning for their retirement early.

A very popular endowment savings plan launched recently (link) has been garnering much positive response for the unique way that it works. It allows the policyowner to save up a retirement sum at a decent projected rate of return, and provides the flexibility to withdraw whenever funds are required. If managed properly, it becomes a continuous supply of retirement fund. If withdrawals are not required, the plan can be kept going and growing until the policyowner reaches the maximum age of 100. Prior to this point in time, the plan may be passed on to a spouse or a child.

Hence it meets the needs of those who are concerned with building up for retirement or creating a legacy to pass on to the next generation.

I have met clients who signed up for endowment savings plan when they started working when they were in their 20s. Today they are in their 40s and their policies have matured, paying out a lump sum of maturity benefit, which they are grateful for. However they face a dilemma now, how can they reinvest this money without another 20 years of locked-in commitment?

The aforementioned plan would be able to resolve this headache as it allows the policyowner to continue having the funds invested and to allow compounding to exponentially grow their savings.

5. Whole Life Policy with Multiplier Effect

In recent years, a very interesting form of whole life insurance policy has been introduced to the market. These are whole life policies with a multiplier effect, which can be thought of as a hybrid of a traditional whole life policy and a term life policy. They go by various names in the market, and for the purpose of this article, I shall refer to them as "multiplier plans"

Multiplier plans provide a multiple of the base sum assured until a specific age. Let's use an example of a policy with a base sum assured of $100k. Prior to the age of 65, this policy provides a multiplier of 300% of the sum assured, which means that the policy would pay out $300k in the event the policyowner passes away or becomes disabled, instead of just $100k. After the age of 65, the cover reverts to the base of $100k plus the accumulated bonuses accrued over the years.

Personally, I find this concept to be very clever. The bulk of a person's financial commitments are from the 30s to the 50s. During this period, there is a huge mortgage to clear off; the children are still young; retirement funds and asset pool are relatively low; parents may still be alive and required financial support; and one can't afford not to work. After 65, virtually all commitments have been either fulfilled or ceased. Therefore by ramping up the coverage during the period before 65, it helps to protect the policyowner during the most financially vulnerable period.

In this sense, a multiplier policy is like a combination of a whole life plan plus a term insurance policy that expires at 65. It's the best of both worlds and is great for people in their 20s and 30s.

Here you have it, the top 5 most popular plans based on my almost decade-long experience in the financial planning field. Should you have any questions about any of them, feel free to contact me at Cheers!