Cover Your A** (With Insurance)
For those rainy, thunderstorm-y, hurricane-y days that lie ahead.
Insurance is one of those things that nobody really wants to think about, because it conjures up negative vibes of doomsday and (at least for me) pushy insurance agents trying to sell you something you don’t even think you need.
Except you do.
Need insurance, that is.
Insurance is basically an Emergency Back-Up for when shitty things happen to you from out of nowhere - when your car get hits or when you hit someone else’s car or when you fall sick or when you fall really, really sick.
You pay a certain amount to a company in exchange for their promise that they will help you when you get into trouble (only up to a certain agreed-upon limit, of course - they're not your fairy godmother). For example, you pay $50 a month for the guarantee of $100,000 if something bad happens related to the thing being insured.
This acts as a resource for you in hard times. Say you get diagnosed with something that requires $50,000 worth of a surgeon’s time on the operating table. If you have insurance, no problem, they’ll take care of it for you. If you don’t have insurance, have fun taking $50,000 out of your bank account. If you don’t have $50,000 sitting around, well, have fun scrambling to find it in your unhealthy state.
“But what if I don’t need insurance?”
It is natural to think we don’t need insurance. After all, some of us are super healthy adults who barely suffer through a measly flu fever - why would we need to pay a random company for the super low possibility of needing an operation?
While that may be true now, there is no guarantee that it will remain true for you 10 years, 20 years or 30 years from now. Because here’s the sad truth about our bodies: they break down with time. They depreciate under wear and tear and sometimes pop up with unpleasant surprises like a kidney stone or two.
A quick glance at the elderly population around us is enough to give us a glimpse of what we will be like when we are older. My mother’s conversations with her friends comprise almost exclusively of medical talk and the various diseases each of them suffer from. Sometimes they even compete on who has to take the most number of pills daily! See, that’s entertainment for you in your 50s.
So while you may not need it now, I can assure you that you likely will in the future. Plus, you should get insured when you are young and in the pink of health, because that will make your premiums (or monthly payments) low. Try getting an insurance in your 40s or after you’ve been diagnosed with a disease - either you will be rejected outright, or your premiums will go through the roof!
Where is the lie?
"But I already have company insurance!"
If you are working for a company, your compensation package typically includes insurance, which can generously cover your family members as well. So why would you want to take on yet another insurance?
There are two setbacks to relying on company insurance:
1) the package is a group one and may not suit your individual needs - chances are, you had zero say on the types of coverage and amounts covered;
2) it is only valid if you continue to work for the same company till you die - which, in this day and age, is a rarity.
Unless you are pretty happy with the company insurance and are more-or-less confident that you won't leave or be fired ever, then you need not take on another one.
Nevertheless, I recommend doing so, in the off chance that you decide to switch careers or become self-employed in the future. The longer you wait to do so, the higher your premium will be when you finally get around to finding one of your own. Some company insurance can be transferred to you as an individual when you leave the job, which can work as long as it still suits your needs.
"Ok fine, so what insurance do I need then?"
Thus far I’ve focused a lot on medical insurance, as that is the most basic, but there are a lot of different kinds of insurance you can get for yourself. You can insure your car, your house, your pet, and even a body part! I once heard that Mariah Carey actually insured her legs, but am never sure how much of that is true.
In any case, what insurance you need depends on what you want to protect and what risks you are exposed to. Below is a quick run down of the kinds of insurance you will need depending on your situation:
Everyone (and yes, that includes you): Health Insurance & Medical Card
A health insurance, usually in the form of a medical card, will help pay for your medical bills and for room and board in the hospital. It will also pay for outpatient treatments, pre-hospitalisation and post-hospitalisation treatments, and cover common ailments and diseases, should you ever be diagnosed with any. This is the most basic of all basics, and everyone should have this.
If you have kids or dependents: Add Life Insurance
Should you die (as we all eventually will), a life insurance will pay out an agreed-upon sum to your family members and dependents to help them carry on in your absence. This is especially important if you are the sole or main breadwinner of the family, and if your kids are still young and require a lot of financial support. The amount covered should be reasonable enough to help your family pull themselves back on their feet after your death.
If you own a home or rent a place: Add Home Insurance or Renter Insurance
A home is a basic need for most of us, and is also often the biggest expense in our lives. Depending on where you are located, you may be exposed to the risk of your house burning down (if you live near a volcano) or falling apart (if you live in an earthquake-prone zone), or being burgled. Home insurance can help with that. Same goes for Renter Insurance, though the coverage may be a bit different.
If you own and drive a car: Add Car Insurance or Auto Insurance
An auto insurance will typically cover your liability and damages to the car when involved in an accident. So if you hit someone’s car (or God forbid, someone), the insurance will cover the expenses to fix the car (or the person). Some insurance may also cover vehicle fire or theft, and will reimburse you the market value or the agreed value of your car.
If you are in a profession where people may sue you: Add Personal Liability Insurance
A Personal Liability insurance will protect your assets and help pay for the costs associated with a lawsuit should you be accused and brought to court, for whatever reason.
If you want to insure everything in life: There’s travel insurance, pet insurance, jewellery insurance, cellphone insurance…etc. Feel free to explore.
How to choose the best one
Let me start with how NOT to choose your insurance: agree with the first insurance agent you meet, especially if they are a family member / good friend / cousin of a cousin.
Purchasing insurance is kind of like getting into a long-term relationship. You will be paying this company a sum for the next 30-50 years of your life, and you hope they will remain faithful and true to their words even after all that time.
Therefore, the insurance company you choose must be a reputable company with strong financials and history - after all, you can’t claim money from a company that goes bust.
The agent you end up with must be responsive and quick to address your concerns, not just when you’re about to sign the papers, but beyond the sales. The agent may talk sweet and all that, but remember, you will be putting in claims via your agent, and if they are not prompt or proactive, expect a lot of hurdles in getting your money’s worth.
The best way to choose your insurance company and agent is to hold an audition. Yes, just like they do on TV.
Step 1: Decide on your parameters
How much coverage do you want? What lifetime limit and annual limit are you comfortable with? What special considerations do you want in your insurance package?
Step 2: Contact multiple companies or agents
Send an email to all of the insurance companies you know, or straight to the insurance agents if you already have their contacts. Tell them your parameters and ask them to provide you with a quote. (You may also opt to do this on insurance aggregator websites, but I prefer dealing with the companies and agents straight, because I want to test them, not the websites)
Step 3: Hold an audition
Pick a day and tell all the companies or agents to meet you then. Arrange back-to-back interviews with them, and let them compete to win your business. In particular, observe them. Did they come on time? Were they able to satisfactorily answer your questions? Were they willing to tailor a package to your needs, or did they keep pushing a particular package? Do you think you can trust them?
Step 4: Test them further
After the audition day, send each of them an email with follow-up questions and see how they respond. Are they still prompt? Were they able to answer in a timely and satisfactory manner? Though not always accurate, how they treat you now is a good indicator of how they will treat you in the future.
Step 5: Compare the different offers
You should have received offers on very similar parameters (that you decided on in Step 1). Compare them side-by-side, and make your choice. Don’t just look at the price, but consider the additional perks, the hospitals that are included, whether the coverage extends overseas, and of course, whether the company and agent are trustworthy, long-lasting, and responsive potential partners.
CAUTION: Read the fine print
Always, ALWAYS read the fine print in the insurance agreement you are signing up to pay for the rest of your life.
Remember, the whole business model of an insurance company is to take your money and try their best to never have to give any back to you. To that end, they put in a lot of clauses and exceptions that will nullify your right to an insurance claim, so you better know up-front what those are!
Also remember, the fine print is in fine print for a reason. If the information is in small unreadable font in incomprehensible legal language that looks very unappealing to go through, you can bet there is super crucial information there they don’t want you to know but have to put somewhere by law.
Take the extra 5 minutes necessary to thoroughly go through the fine print - better to know now than to find out 30 years later when you’re trying to claim for the $50,000 medical bill that you no longer qualify because of some random thing you did or didn’t do.
While you should definitely insure your own health and other valuable aspects of your life, you need not go overboard with it out of sheer fear of all the bad things that can happen to you.
While we all probably want to be insured up to the millions, realistically, we only need to be insured up at an amount that we truly require, on top of the savings and investments we already have going for us. Some things you can recover the cost of on your own, or be able to cover with your own savings.
For example, I could subscribe to a car insurance to cover any damages I inflict on it, but realistically, I can afford to pay for a fix-up every now and then on my own. Or I could pay for dental insurance in case anything happens to my teeth, but I am able to afford most of the dental services so there is no need to. I also don’t bother with travel insurance, because while I have had my luggage delayed and have had to change travel plans before, it happens so infrequently that it’s unnecessary.
But of course, insurance is a game of chance, and circumstances differ for each of us. You may have a much higher chance of losing luggage or of cancelling flights for whatever reason (this is especially true for frequent work travel), so travel insurance will be worth it for you.
But seriously, don’t over-insure. You can always add on to your insurance later as your lifestyle changes or your needs grow, but the opposite is not as easy.
It’s a relationship, not speed dating
As mentioned, purchasing insurance is kind of like getting into a long-term relationship. That's why you want to get it right as much as possible the first time. You can’t simply stop paying or change insurance companies on a whim - well, you can, but you’ll be on the losing end.
Failing to meet your monthly premium payment or canceling on an insurance means you forfeit all of the money and protection you’ve paid for. You just gave the company free money.
Then, assuming you then want a new insurance, starting over with a new company will typically mean higher premiums because you are older now and may have been categorised as high-risk for past cancellations. Hello, expensive!
There are, however, two valid reasons for canceling:
You no longer need the insurance: you sold your car or your house, or your dependents have grown up and become adults, so there’s nothing to insure anymore.
You found a good deal that works out better for you in the long run: maybe another insurance company came up with a better plan that suits you needs more or a similar plan with lower costs. Make sure to calculate the cost of canceling your current plan against the benefits or savings of taking on a new plan.
I guess this will work too...
THINGS FOR YOU TO DO NOW:
Make a list of things you want to insure: your health, your family, your car, your house…etc.
Decide the amount you want to be insured for, which should decently cover expected costs that you will incur if you get hit by a tragedy. That means an amount enough to cover your estimated medical bills or for the upkeep of your family after your death.
Contact multiple insurance companies or agents, and hold an audition. Put the onus on them to impress you and give you exactly what you need, and let them compete amongst themselves.
Compare the plans that the agents draw up for you - they should be pretty similar in terms of what they offer based on your pre-decided parameters - and evaluate on relevancy, comprehensiveness and price.
In addition, evaluate the trustworthiness, proactiveness and promptness of the agents.
Read ALL THE FINE PRINT in the brochure, agreement, infopack, etc. Know exactly what you are getting into and note all of the things that will nullify your right to claim insurance.
Take your top pick and sign the papers.
Maintain a good relationship with your insurance agent and contact him or her whenever you need clarification or want to claim for something.