Insurances – Part V

Today I will cover other portions of the common insurance plans you may have considered or are considering.

Hospitalisation Plan
As mentioned in the very first part of the series, get this plan if you do not live in a country where medical bills are covered by the Government. It is practical and useful. Medical bills are extremely expensive and the older you are, the more frequently you visit the hospital. You do not wish to have your life’s efforts and savings wiped out in order to get medical treatment for yourself or your loved ones. You also do not want to come to a stage where your filial piety and moral values are tested and pushed to the brink – ie to continue pouring resources to save your loved ones or to give up on them. You want them to be able to get through the hospital and surgeries without a big impact on your bank account.

Critical Illness Plan
A plan that pays you money if you suffer from critical illnesses such as cancer. There are tiered plans, such as early stage critical illness or advanced stage critical illness. The plan which pays out earlier is often the more expensive one. The rationale is this: That if you are sick, and you are still young, you would want to have money to sustain your life and focus on recuperating. When you are sick and unable to work, the bills are not going to have sympathy on you. Your children will still need to eat and go to school. This is where the payout comes in. Do take note the hospitalisation plan mentioned above only covers your hospitalisation bills. It does not give you free money to sustain your life when you are sick.

Women’s critical illness plans are more expensive compared to mens’. Apparently they deemed women to be more susceptible to critical illness despite women having a higher lifespan than men. I am not an expert in this area, but if the insurance companies determines that to be the case, they would have done their research proper.

Do you need this plan? It is good to have, but not necessary to have. Yes, there is a risk if you do not get this plan. But everything has to be weighed in terms of probability. In your early years, the chances of getting any critical illness is low, yet the plan is expensive. I would consider it a more logical choice to put aside the money for critical illness insurance, and grow your money via other means. If you plan well financially, you would have multiple sources of passive income which will allow you to continue getting money in even when you are not able to work.

Accident Plan
Accidents may happen to anyone. An accident plan is a very cheap plan which pays out money to you in the event of an accident. Some find it cheap enough to feel it worth getting one. Personally, I do not think it is necessary. If I get into an accident, whether I live or die, my multiple sources of income is able to cover myself and my family. Assuming I am in a critical period of financial growth where my money is stretched across many investments and I cannot afford to die, I would have a term insurance to cover me for that period. One may argue that it is a cheap plan to have, so why not? There is nothing wrong with getting one. Just that for me, in the path to financial freedom, earning and saving what I earned are equally important. I do not wish to spend unnecessarily on something which I do not need.

In summary, in my opinion:
Hospitalisation Insurance – definitely needed if you are in a country where hospital bills are not covered by the Government.
Life insurance – Get a term plan to cover your critical period and golden years. Whole life insurance is unnecessary.
Savings Plan – a complete trash you should stay far away from.
Investment Linked Plans – a complete trash you should stay far away from.
Critical Ilnness Plans – Not necessary. Might be better to use the money elsewhere. But if you do buy it, remember not to stretch your finances too tight.
Accident Plans – Good to have, but not necessary to have. Cheap plan.

Insurances are originally meant to protect you against unforseen circumstances. Yet companies have turned them into many different financial instruments, with the cover of insuring you but with the intention of taking away your hard-earned money. They are always adapting, improving, improvising and creating new products. Keep things simple, keep insurance and investment separate.

Insurance should be taken as throwing a small portion of money into the sea to safeguard the bulk of your assets. Any instrument which has a mix of insurance and investment would not be an ideal product. Always think critically, and decide for yourself which type of insurance is most suited for your situation. Everybody’s circumstances are different, and there is no one size fits all answer.

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- Resources Price
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