Essential questions to ask before choosing an insurance policy

[SINGAPORE] Life is full of uncertainties. We never know what tomorrow will bring, let alone what will happen in the next hour. Despite this, we make efforts to plan ahead, hoping to mitigate life's unpredictability. One key element of this planning is insurance—a tool designed to provide financial protection against unexpected events and losses.

In recent years, the insurance industry has undergone significant changes, particularly with the rise of digital platforms that simplify the process of comparing policies and purchasing coverage online. While this digital convenience has made things easier, it’s crucial to fully understand the details of your insurance policy. Misunderstanding the terms or overlooking gaps in coverage could lead to unexpected out-of-pocket expenses, underscoring the importance of doing thorough research and seeking professional advice.

When planning your finances, it's important to include insurance coverage that addresses potential health costs, critical illnesses, and other unforeseen needs. Take the time to research your options and consult with insurance providers to find the most appropriate plan for you.

It's also essential to keep in mind that insurance needs can change depending on where you are in life. For instance, young professionals might prioritize critical illness or disability coverage, while families may focus on policies that cater to education or retirement planning. Understanding these evolving priorities ensures that your insurance portfolio remains aligned with your current lifestyle and goals.

With that in mind, here are four important questions to ask your insurance agent:

1. Which Type of Insurance Do I Need?

The insurance industry is governed by the Insurance Act, which regulates who can establish insurance businesses and outlines the responsibilities of agents. In Singapore, insurance agents must be licensed by the government and are responsible for arranging contracts and collecting premiums. Your agent can help tailor your policy to suit your specific needs.

Recent innovations in insurance products, such as hybrid policies that blend investment and protection, offer greater flexibility. These options may appeal to individuals looking for both growth and security, but they can also be more complex. Working with an agent can help clarify these products and ensure they align with your financial goals.

There is a wide range of insurance options available—endowment policies that focus on saving, and protection-type policies that guard against unforeseen events. Prior to meeting with an agent, it’s a good idea to do some research. Being transparent about your financial situation will help you ask the right questions, such as clarifying the differences between health and life insurance policies. With so many options, it’s understandable to feel overwhelmed initially!

2. Do I Have to Pay More When I Make a Claim?

Let’s focus on health insurance for a moment. While these policies can help cover substantial medical expenses, you will still be responsible for certain costs, such as deductibles and co-payments. A deductible is the amount you must pay out-of-pocket before your insurance begins covering the rest of your claim. Co-payment, on the other hand, refers to the shared cost between you and the insurer after you’ve paid the deductible.

In recent years, some insurers have started offering policies with lower deductibles in exchange for higher premiums. This could be beneficial for those who expect frequent medical visits or procedures, but it’s important to carefully weigh the costs over time. Higher premiums may not always make sense for everyone.

Also, be aware that many health insurance policies don’t cover certain treatments, such as cosmetic surgery. Make sure to ask your insurance agent about the scope and limitations of your coverage before committing to a policy.

3. What Will Insurance Cost Me?

Whether you’re buying car insurance, life insurance, or health coverage, it's important to evaluate your options to find a policy that fits within your budget. The cost of insurance can vary greatly depending on the type of policy you choose.

Rising inflation and increasing healthcare costs are pushing premiums higher, so it's critical to plan for potential rate increases in the future. Some policies include a premium lock-in feature, which provides pricing stability but may limit flexibility in coverage.

In general, insurance premiums reflect the level of risk involved. For example, people in high-risk professions, like factory workers or construction foremen, might face higher premiums due to the increased likelihood of accidents. This practice, known as occupational loading, is common in personal accident insurance. Additionally, premiums may be affected by factors such as the length of time you’ll hold the policy.

Don’t hesitate to ask your agent about these costs. If you feel that a full coverage policy might be out of your budget, your agent can help prioritize your needs and suggest more affordable options.

4. How Often Should I Update My Insurance Policy?

As life progresses, our needs and priorities change. That’s why financial experts recommend reviewing your insurance policies annually. Consulting with an insurance agent or financial advisor can help you decide whether it's time to increase your coverage.

Major life events—like marriage, the birth of a child, or buying a home—often require adjustments to your insurance plan. These milestones could prompt the need for additional coverage or new policies to address emerging risks. Regularly updating your insurance ensures it continues to protect you throughout all stages of life.