Tips for your Car Insurance in Singapore

Do you know the feeling when walking from the closest MRT station towards your house and it simply takes forever? Driving around the island of Singapore is a true pleasure. One hardly ever encounters a traffic jam and generally gets quickly to any desired place. There isn’t any problem with pollution or a high car density. However, driving and owning a car in Singapore can be a costly undertaking. It is not only the car and its license that is expensive, but also the car insurance can weigh heavy on one’s finances. No matter how much money one has – there isn’t any chance that one can lower the government-imposed charges for the usage of the car. Therefore, it is even more important that one finds a beneficial deal for the car insurance.

The first trick to safe money is the oldest one in the book – drive safely. However, many people are not aware of the system that car insurances around the world use. If one has a car accident, the rate one has to pay monthly or yearly is instantly increased. If you are driving safely around Singapore over a long period of time, your car insurance will remain the same or even shrink slightly. Those people, who tend to crash their car, will not only pay for the reparation, but also for the continuously increasing car insurance. Many car insurances offer a no-claim discount (NCD). This allows for a 10% discount for every year in which you haven’t claimed anything. If you for example have only a minor dent in the car, you may want to consider not claiming it from your insurance, as you can possibly save more with the discount. The NCD can reach a maximum discount of 50%, with which one can safe potentially thousands of hard-earned dollars.

Not only being a safe driver, but also being a law-obeying driver can help you with the insurance. Fancy and fast cars are extremely attractive in Singapore, but even if you have one of those racecars, you are still subject to the speed limits. If you have a clean license over an extended period of time, you can earn a further discount instead of another ticket. After three years driving without committing a traffic offence, you can get the Certificate of Merit (COM), which brings you a further 5% discount on top of NCD. Using all this saved money, one can buy a ticket for the Formula 1 Race in September and enjoy proper racing.

When you are arranging a new car insurance policy, then pay attention to what you actually commit. Many policies often include unnecessary points. Go through them and use your commonsense. It can be that your car insurance also covers you for something that you are already covered for. A personal injury policy within your car insurance is very good, but a total waste of money if your health insurance already takes care of you in the case of an accident. Being covered twice for the same cause will not bring you double money and doesn’t mean you can claim it twice. Furthermore, one should check exactly what policy covers what points. When renting a car, one might be already covered in the case of an accident through another insurance. Different policies might have different names, but cover actually the very same thing. A rental-car insurance might include the same points as a collision policy. Therefore, it is very important, if one wants to save money, to double check the covered points in a insurance. Furthermore, one should eliminate all unnecessary points.

Car and accident statistics aren’t the best friends of young drivers. Unfortunately, an inexperienced young driver has the tendency to crash a car more often than older and more experienced drivers. This results in a higher insurance policy for younger drivers in general. Even if you are driving perfectly, you are paying more by default. Therefore, it is advisable to let your experience on the road be reflected in your policy. If you have been driving for more than ten years without any accident, then you should make a point of it in your new insurance. Not everybody has the possibility to do so, but there is another trick. One can for example insure the car on another person or include a driver with more experience into the policy. Mixing a high risk and a low risk profile will in most cases reduce the insurance. Therefore, one should check who is a low risk profile. Statistically older or female drivers will fall in this category. Listing such as the main driver in one’s car insurance policy, can save some money.

Each car is categorized with a certain amount of insurance money that the owner has to pay. It is generally known that the bigger the engine of the car, the higher is this amount. The reasoning of the car insurance companies is the higher risk. Statistically cars with a higher engine are more likely to crash. For obvious reasons insurances are all about statistics. So if you can beat the statistic, you will save some money. Most people will not modify their car, however there are car enthusiasts that do. A simple engine tweak or any other car modification can quickly become very expensive. What seems like a body shop bargain, can become a killer within the insurance policy. Therefore, it is worthwhile to check with your car insurance whether an upgrade is necessary.

Of course one could say that the insurance company doesn’t have to know. This is however an extremely risky undertaking. In case you do have an accident with your modified car and you haven’t notified your insurance about it, you can loose your cover immediately. Even if you haven’t caused the accident, the insurance company can refuse to pay anything. Hence, one shouldn’t modify outside the regulations of the Land Transport Authority (LTA) and definitely not keep it a secret. Handling your car insurance correctly doesn’t take too long and can award you with some extra cash.

The Real Cost of Long-Term Care in Singapore

In the next fifteen years, 20% of the population in Singapore will be aged 65 and above. That figure is astonishing when you put this into perspective: there will only be 2 citizens in the working age band (aged 20-64) for each elderly citizen.

Singapore is not too far away from Japan as one of the fastest ageing population in Asia. With low fertility rate and later marriages, Singapore faces the challenge of a declining working population and stagnant economy.

With the increase in the number of elderly to 900,000 in 2030, healthcare and long-term costs are expected to rise alongside.

The concern of whether our 3M (Medishield, Medisave and Medifund) healthcare system is adequate to address the impact of a silver tsunami should be reviewed.

Besides the 3M approach to healthcare, what about the costs of long-term care (LTC) after being discharged from hospital? LTC refers to those with chronic medical conditions that has rendered them severely disabled to the extent of not being able to perform 3 out of the 6 activities of daily living which include washing, dressing, toileting, transferring, feeding and mobility.

The Eldershield scheme is designed to provide financial protection for long term care which seeks to provide a cash payout of $300 or $400 per month for a period of 5 to 6 years.

The question is if that amount is sufficient? Let’s take a look.

Inpatient care:

Community Hospital

You may be discharged from the hospital but that doesn’t mean you have fully recovered. You will need additional inpatient care such as therapy and rehabilitation, nursing care and the need of caregiver to provide help with daily living. The estimated cost is around $8,000 – $9,000 a month. There are government subsidies between $1,800 to $7,000 a month which you can apply for.

Nursing Home

These are for patients who cannot take care of themselves in their own home and need significant assistance. It costs around $1,200 – $3,500 a month. You can tap into government subsidies and Medifund for selected homes only.

Respite

Those that require temporary help can apply for respite care costing around $100-$150 a day.

Inpatient hospice care

Patients who suffered from serious and progressive diseases may need extra attention from a highly trained medical team.

It costs around $7,000 a month payable via Medisave.

Day centres:

Day rehabilitation centre

Suitable for patients who need therapy to regain the ability to perform daily tasks. Estimated cost: $700-$1,000

Dementia day care centre

Estimated cost: $700-$850

Hospice day care centre

Patient with cancer and life limiting disease. Estimated cost $700-$850

Care services at home:

Home medical service:

For those with mobility issues, home medical service is an option and cost around $130-$200 per visit

Home nursing:

Suitable for bedridden patients. Estimated cost: $80 per visit

Home therapy:

Estimated cost: $100-$150 per visit

Home help:

Patient who live alone and can’t leave their home will need some assistance which cost around $100-$150 per visit

Hospice medical/nursing home care:

Suitable for cancer patients. Estimated cost: $150-$220 per visit

Cost of informal family care

In a study by NUS, 80% of informal care for the elderly was provided by family member. That is to say, elderly who can’t afford to look after themselves financially will need assistance from their loved ones. These duties usually have a negative impact on the caregiver with majority of them having to make work accommodations, take leave of absence or to turn down a promotion.

It also changes the family dynamic of the caregiver as they have less time for their own family which can strain the relationship between spouse and children.

Ways to pay for it

Fortunately our government values our Pioneer Generation and has various schemes in place to help shoulder the burden of long term care cost. Here are some options:

Medisave: Medisave can be used to pay for the expenses at approved community hospitals, hospices, day rehabilitation centre.

Medifund Silver: Forms a safety net and to be used as last resort for elderly who can’t afford basic healthcare. It has been extended to include non-residential intermediate and long term care (ILTC) services.

Eldershield: Cash payout of $300-$400 a month to help defray living costs

Personal Savings: You may have to tap into personal savings should your long term care cost exceed the total benefits you can claim

Foreign Domestic Worker (FDW) Grant & Levy: A monthly grant of $120 to support families who hire a foreign domestic worker

Senior Mobility and Enabling Fund (SMF): Subsidies for assistive devices, specialised transport and consumables

Enhancement for Active Seniors (EASE): Home modifications to make it more conducive and safe for them

Pioneer Generation Disability Assistance Scheme: PioneerDAS provides $1,200 a year to help pioneer with their care need

Interim Disability Assistance Program for the Elderly (IDAPE): Provide $150 or $250 a month for a maximum of 72 months for those who are not eligible for Eldershield due to age or pre-existing condition

Subsidy for intermediate & long-term care (ILTC): Eligible patients can claim for subsidies through mean-testing and depends on the per capita monthly household income

Should i buy term or life insurance?

Congratulations. You have just tied the knot, moved into your new house and plan to start your own family. What’s next?

You have also acquired the debts and liabilities of having a mortgage to service and a family to feed.

Now the most important question daunt you. What happens if an unfortunate event renders you and/or your spouse incapacitated? Imagine a pillar that gave way and cause the entire building to collapse. It will be a disaster for that to happen.

How do you address that then?

You need another pillar to support the building. Insurance is the key – the third pillar. Getting yourself covered is the most responsible thing you can do for the family.

What are the different type of insurance?

There are many types of insurance in the market and knowing which is the most appropriate for you is an important financial decision. There are two main types of life insurance.

1. Term Insurance
2. Whole Life Insurance

Term insurance, as the name suggests, covers you for a term period you define. It can be as short as a yearly renewable term or it can cover you all the way until you become a centenarian.

Whole life insurance covers you for the entire life. The key difference is there is no cash value for a term plan as compared to whole life insurance.

The question now boils down to if you should get term or whole life insurance or a combination of both?

Term versus whole life insurance

Whole life insurance might seem attractive with a guaranteed cash value being paid out should you decide to surrender the policy later in the policy years. It seems like a no-brainer then – to get whole life insurance rather than a term policy that expires with no cash value. At least, that’s what many financial planners out there are advocating. Why pay to rent a house (in this case, purchasing term insurance) when you can afford to pay for the house and own it (purchasing whole life insurance)?

First, here’s a nifty infographic that put them side by side to show you the main differences.

Now after understanding how both products work, let’s place both of them side by side and examine them.

Let’s assume the following scenario:

Paul, a 25 years old male who wishes to get covered at $100,000 sum assured for death, terminal illness and disability. He also wants to accumulate some cash for retirement.

There are two options he can consider:

1) Buy a whole life insurance that can meet both needs; or
2) Buy a term insurance and invest the difference in other assets

1) Buying a Whole Life Insurance

It will costs him $112/month to get a $100,000 cover for death, terminal illnesses and disability. Should he retires at 55 years old (30 years later), he can choose to surrender the policy with a guaranteed cash value of $28,646 together with a non-guaranteed portion of $30,142 (using a bonus rate of 4.75%) – having paid $40,170 in premiums altogether.

Not too bad isn’t it? Even if the economy has taken a beating and Paul doesn’t get the guaranteed portion of $30,142, he still gets back $28,646. Then the outlay for his protection would cost him $11,524 over 30 years. Well, no free lunch in this world, so the question is if it is justifiable for him to pay that amount for insurance?

a) Yes, it is reasonable to pay $11,524 for protection over 30years. Furthermore, it only costs him around $384/year.

b) Some may also argue that there is still a possibility of him getting some of the non-guaranteed portion and even have the chance to make a ‘profit’ of $18,618.

Wait..

Let’s take a look at the second option and see how it matches up.

2) Buying Term Insurance and investing the difference

A similar term cover for Paul would cost him $12.80/month under the SAF Group Term Life insurance. That adds up to $153.60/year. It covers Paul for 30 years and it expires without cash value when he is 55.

The difference of $99.20 as compared to the first option can be invested into other assets such as STI ETF which has return 7-8% for the past 30years.

Assuming a 8% growth, Paul would have accumulated approximately $147,843.66 when he is 55 years old. Now contrast that with the first option of a guaranteed $28,646 plus a non-guaranteed of $30,142. The difference is huge.

Even if Paul is more conservative and expect a growth of 4%, he should be expecting a cash value of $68,849.90 after 30 years.

Wait, isn’t it non-guaranteed as the first option? But hey, Paul has the full control and flexibilities on when he can liquidate his invested assets should rainy days come.

We have our winner: Buying term insurance and investing the difference is the way to go!

And if you are still not convinced, Suze Orman says it all.