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4 Insurance Questions You Need To Ask Yourself In Your 40s In Singapore

Published by Autumn on 

At some point in your 40s, you are likely going to find yourself at the halfway mark between the start and the end of your career. When faced with the reality that you are ageing and your career is halfway gone, some may spiral into a mid-life crisis.

A better way to manage this period of uncertainty is by re-evaluating your life goals, as well as review your financial plans, especially if you haven’t been doing so since first formulating them at the start of your career.

While heeding the call to pay more attention to your retirement needs in your 40s is understandable, it is equally essential to review your insurance needs.

In your 40s, your insurance questions would be quite different from what they were when you were just starting out in your career.

1. Do I have enough life insurance?

The ages between 40 and 49 are typically the peak earning years of your career.

In your prime, you may also have the highest levels of debt and financial commitments as you potentially upgrade to a bigger home, purchase a family car or even invest in a rental property.

Your 40s is also a time when your kids would likely still be in their teens and at least a few years away from joining the workforce and becoming financially self-dependent. At the same time, your parents are likely to become increasingly dependent on you for support – including financial and emotional – as they leave the working world behind.

Considering all of this, you may find that your financial commitments are much higher than the level of life insurance you purchased in your 20s or 30s. If something unfortunate were to happen to you, your dependents may not have enough to continue living their current standard of life.

Rather than buying more life insurance, you can speak to your financial advisor or insurance company to check if you can increase coverage on your existing plans. If you cannot do that, another sensible alternative can be to purchase term life insurance, as you may not require the same heightened level of coverage once you pay down your properties and your children start working in the years to come.

2. Are my Integrated Shield Plan premiums sustainable?

If you bought health insurance a decade or two ago, you may be holding an older variation of the Integrated Shield Plan (IP) insurers currently offer today. This makes it important to review your health coverage if you haven’t already done so.

Even for those who bought your IP as recent as before 1 April 2019, you had the option to purchase a full rider along with your IP. As medical costs in Singapore can be very expensive, this may have looked a good option then. Today, such riders are no longer sold, to ensure a co-payment requirement from patients.

While IPs with a full rider provides comprehensive coverage, it can also be more expensive, and the cost of coverage continues to go up significantly with your age. Those in your 40s may find yourself having to fork out easily over $1,000 per year for this coverage. If you still think it is expensive but valuable, you also need to consider sustainability of premiums in the longer-term as they continue rising, estimated to cost over $3,000 per year in your 60s and up to over $6,000 per year in your 70s.

Moreover, these premiums typically have to be paid in cash due to the Additional Withdrawal Limit from our MediSave Account.

3. Should I enhance my disability income coverage?

After working hard for two decades to climb to the peak of the corporate ladder, it is important to be able to secure this level of income if your ability to continue working and earning the same amount is ever affected by an unfortunate accident or illness.

Disability income insurance is an often-overlooked policy in Singapore. This may be due to a confusion over the coverage level of severe disability plans, such as ElderShield and CareShield Life.

CareShield Life, which replaces ElderShield from 2020, is a government-mandated severe disability plan that provides a payout for those who cannot perform at least 3 out of 6 Activities of Daily Living (ADLs), including eating, bathing, dressing, transferring, toileting, and walking or moving around. In reality, a serious disability such as losing a limb or loss of hearing may not qualify you for such payouts while potentially robbing you of your ability to continue working in the same capacity.

You can also see that payouts may only be enough for basic living expenses of the person, rather than considered an income replacement to provide for their families.

Disability income insurance is equally important for your dependents as it is for your own daily living expense, at your current standard of life, and to accumulate for your old age. According to MoneySense, disability income insurance provides monthly payouts of up to 80% of your average monthly salary.

4. How do I supplement my retirement income?

As your income grows, you will naturally start indulging in a more expensive lifestyle. When you retire, you need a much bigger retirement pot to be able to continue affording this lifestyle.

Depending on how much you are earning, you may want to enhance your retirement income streams by setting aside and investing more than what you already contribute to your CPF from your monthly salary.

One of the first things you can do is to contribute more into your CPF account via the Retirement Sum Topping Up (RSTU) Scheme, which also gives you the added benefit of an annual tax relief on contributions up to $7,000 in your CPF account and a further $7,000 in a loved one’s CPF account.

Another way you can boost your retirement income stream is to purchase a retirement plan from an insurance company. Typically, such retirement plans provide greater flexibility than CPF LIFE, giving you the option to start your monthly payouts earlier than 65, the current CPF LIFE payout eligibility age.

However, you need to understand that such retirement plans grow your retirement pot by investing in the financial markets. The benefit is that you can take a hands-off approach to building your retirement income. By doing this, you are essentially taking on investment risk, and payouts may not last your entire lifetime, unlike CPF LIFE.

Never too early or too late to plug your insurance gaps

These are just some common insurance questions you may find yourself having in the middle of your career. The biggest difference in your life will be how far you have progressed in your career, how your early financial habits have translated into growing your wealth and how many dependents you have.

At the end of the day, no two persons of the same age would face exactly the same life situations. Insurance is a personal subject and you have to assess your individual requirements based on your situation in life at this point. It’s natural to have uncertainties, even if you are financially savvy, and speaking to a trusted financial advisor can help you navigate your questions and spot potential blindsides you may have missed.

* The information in this article is not intended to be and does not constitute financial advice, investment advice, trading advice, or recommendation of any sort offered or endorsed by Autumn.

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