- Personal Accident Coverage (non-optional)
- Hospitalisation Plan (non-optional)
- Critical Illness (non-optional)
- Life Insurance (Optional for those without aging parents or children or a family or dependents, non-optional for those who have dependents)
- Disability Income
- 6 months – 1 Year of Expenses@150% in savings
- Yearly Comprehensive Health Check-Ups
- Some useful links for comparisons
These are the 8 things I think all successful long term investing is built on. Foundations bloody matter. No one builds an impregnable castle on god damned sand. Get this shit right or you’ll be eating a lot of pain later for no good reason.
Note I’m not a financial advisor – this merely represents what I think is optimal. Your needs may be different, so check. Do the homework. Don’t shove everything to your advisor and expect him/her to just help you sort your life out.
#1 – Personal Accident, Accidental Loss of Limb (non-optional, must get)
Back in December 19′, I had a nasty fall that resulted in severe joint pains and some sprains and bruises. Doctors recommended an MRI on each location of the pain. The total cost amounted to nearly $5,000.
Since I wasn’t hospitalised, I would not have been covered if not for my personal accident plan. This plan is meant to cover you from accidents that DON’T land you in the hospital.
As can be seen, it’s still pretty damn expensive even without being hospitalised.
This is important to get first of all and can be gotten reasonably cheap from $15 per month and up. Do not shirk this responsibility. Get it first before you start investing. This will prevent you from having to sell stocks you own to pay for fees you can’t cover.
Note that the accident plan requires you to pay first before you submit the claim forms to be reimbursed. Some policies may differ. Check with your advisor. For this purpose, ensure you have sufficient cash at all times not meant to be invested or spent. I think $5,000-$10,000 meant to cover any liability in this area is healthy. This sum should ideally not be counted when you count savings meant for expenses in the case of loss of your job.
My Cost: $15-$100/month depending on sum of coverage. Check with Moneyowl for more details.
#2 – Hospitalisation Plan (non-optional, must get)
This one is a no brainer. The saying goes, you can afford to die in this country, but you can’t afford to get sick. Don’t scrimp on the hospitalisation plan. There’s some complexities involving ward stays (B2 and A class wards for example) have different payment sums (duh, privilege costs $$), so work out how much you can afford and how much you need.
I will recommend getting what you need and not what you can afford. Of course, also consider what you want when you DO land up in a hospital because most people end up having to stay in one at least once in their lifetime. If you can’t stand being in the same room as someone else, maybe pay up for a policy that gets you a private ward at a posh hospital (glen eagles, anyone?). If you’re more relaxed about it, you get to pay less.
I’m paying about $800 total between my CPF Medisave and cash lump sum per year for a very decent coverage. That comes up to about $66 a month. Note that if the plan pays for any stay in a hospital and any hospital related treatments for some duration before and after, so its quite comprehensive.
Make sure to double check that before/after treatments are included – you don’t want to be blindsided by random non-covered fees under the policy. They can be costly.
My Cost: $800/year
#3 – Critical Illness (non-optional, must get)
There was an old saying in the army, “One is none. Two is one.” This means having two of everything is mostly good because the first one might spoil or go missing and you can rely on your second one.
This concept extends to critical illness coverage for me.
Generally speaking, your stays in the hospital should be covered both pre-and post. Mine is covered for about a year pre and post hospital stay and all related treatments.
So if all your expenses are covered, why get this?
Simple.
I want some payback if I hit the negative lotto.
I might lose my job.
I might lose my ability to carry on life as per normal.
Having a big payout in case the shit hits the fan helps to cover the loss of my job and also helps to cover in case anything else is NOT covered under the hospitalization plan.
If nothing else – at least I feel a helluva lot better than without a nice big sum of cash.
This way, if the doctors tell me I’m stage 4 and I should prep to die, at least I can finally head to the USA and travel for a bit before coming back for some good old chicken rice in my death bed.
I’ve heard some really crappy stories from insurance agent friends who had to go and hand out these cheques to friends they sold policies to. Crying for your friend/family is all well and fine. But by gosh I bet handing them a big fat sum of cash and telling them their ass is covered feels 10x better. Trust me when I say none of them regret buying the damn policy. You might think this doesn’t matter.
Maybe you think you’re vegetarian, or work out a lot, or you’re young – trust me, I’ve seen the look on my uncle’s face talking about handing out these cheques to teenagers, monks, and pro-athletes.
You don’t want to be uncovered for these matters. Always ensure you have more than sufficient coverage because I assure you, somewhere, somehow, something will go wrong, and you need to be doubly prepared.
My Cost: $1200/year, ILP plan that I can claim if I don’t get hit by an illness eventually. Also pays out multiple times if I get hit multiple times. Yes. I’m paranoid. But as I have learned with some family members, it is best to be paranoid than be insufficiently covered.
#4 – Life Insurance/ Loss of Limb due to Medical Reasons (Optional only for those with no dependents)
If you have no dependents, good for you. You get to skip this stuff. If you do have dependents, this is non-optional.
By dependents, I mean spouse, children, parents. Trust me when I say that your death should not have to be handled with financial worries in the background.
Get covered for death. Get covered for loss of limbs if you can as well.
Make sure the payout is large enough to satisfy any leftover things your parents or spouse might find hard to pay for alone.
The house, education, medical care all come to mind.
Similar to above, get beyond what you think you need. Most of the time, what you think you need and what you really need are quite different. And it’s always better to have more than less when it comes to things like this.
I don’t have dependents, so unfortunately, I can’t give you a ballpark average. You can find out some comparisons here however.
#5 – Disability Income
Look, this whole post is meant to tell you about the various ways life can screw you over. Critical illness, accidents, hospital stays, death, etc cetera.
Disability Income is just one more way you get screwed possibly. This coverage kicks in for you if you get into an accident, lose your job and can’t work anymore. Some notables,
- This plan can be costly, so you need to have a high enough income that paying for this makes sense
- this pays out up to 75% of your last drawn fixed income
- fills the coverage gap especially when you are disabled but not able to claim for total and permanent disability
- Can cost between $6-900/year, so be sure you need it
#6 – Six months-One Year of Expenses @150% in savings
I’ve talked about coverage a lot above. This is a sum of cash for what you need BEYOND coverage and BEYOND the liquidity requirements for personal accident plans.
In short, this is how I calculate the sum I need to set aside before investing,
- 1 year full payment for all coverage plans
- + $10,000 for personal accident liquidity
- + ($1000×12) -> personal numbers is $1000 per month for expenses. I’m attached but not married, so this is blissfully low…for now.
Why do you need this sum of cash? The simplest reason is that you need to be prepared to lose your job and not touch your investments for day to day cash needs. The average time to find a new job can be between 6 months to a year, especially one where you intend to find the right fit. The cash cushion will ensure you aren’t rushed about jumping into a job and ending up in a place you hate or ending up with insufficient funds and having to sell some shares to have spending money.
Once again, save more than you think you need. You will almost always need slightly more.
#7 – Yearly Comprehensive Health Checkups
Look, an extensive health checkup isn’t as expensive as it sounds. People tend to think it costs thousands of dollars.
It doesn’t. The Raffles Deluxe Plus For Men/Women (just a quick search, no real bias) costs about $652.
If you’re earning between $5k-$10k a month, you shouldn’t be scrimping on these costs – especially when they can tell you whether you have upcoming health troubles and help you avoid them by getting ahead of them early or just changing your lifestyle habits.
Part of the reason Buffett is so rich is also because he’s had a long life. This makes sense when you think of the fact that investor returns are measured in years not in months. The longer lived you are, the more likely you are able to amass significant wealth and be able to enjoy it. Don’t skip the check up if you can afford it. You can do it once every two years too. But that’s as far as I’m willing to go without a checkup.
#8 – Useful Links for Coverage Comparisons
I’ve compiled a list of links that helps to cross compare coverage plans. My first pick is always MoneyOwl because of the lack of commissions, but do shop around.
Most importantly, don’t rush to invest if you don’t have these basics covered.
A final note: I’ve recommended using Money Owl most of the time because they’re non-commissioned. If you use a financial advisor, don’t begrudge the commission you pay them. Trust me, it’s not much that they’re getting from selling you low cost high coverage plans. If you don’t believe it’s a lot, go ask. They’re obligated to disclose their fees. And you are obligated to pay them for their time.
