You will list every premium you pay and estimate how much goes to cover and how much to savings.
Ask Jun Hao what he spends on insurance and he would have said "about two and a half thousand". When he finally added it up, the real figure was higher, part of it was coming out of MediSave without him noticing, and most of the biggest premium wasn't buying cover at all. Most people who do this find at least one of those surprises, and in this exercise you build the sheet that shows you the same things about your own policies.
It takes about 25 minutes if your documents are to hand. Collect them first: your insurers' apps or policy schedules, your CPF statement for anything paid from MediSave or your Ordinary Account, and your HR portal for group cover. Lesson 4.4 of The Singapore personal finance system, end to end, Find the gaps in your cover, shows where to find each one if you haven't done that yet.
Open a spreadsheet and make these columns: policy, type, premium, frequency, yearly premium, sum assured, premium term, cover term, level or stepped, paid from, and estimated savings share.
Give every policy its own row, including riders that carry their own premium. A hospital plan and its rider are two rows, because they are priced and paid differently. Put group cover in too, with a premium of zero if your employer pays it, so you can see it in the list. Include national schemes that charge you, such as the Dependants' Protection Scheme if you are covered by it.
For the yearly premium, convert anything monthly or quarterly. A monthly premium times 12 is the yearly figure. Some insurers charge slightly more in total for monthly payment than for one annual payment, which is worth noting if the gap is large.
Use lesson 1.2, Why premiums rise with age, and how level premiums hide it, to label each premium. If the documents show a premium table by age, or say premiums can be revised, mark it stepped. If one premium runs for the whole premium term, mark it level.
Then the payment source. Write cash, MediSave, CPF Ordinary Account, or a split. For an Integrated Shield plan, the MediShield Life part and part of the private part can come from MediSave, and the rest is cash. Your CPF transaction history shows the MediSave deductions. Riders are cash.
The source matters because MediSave money is still your money. It's money you won't have later for other medical bills, so count it in the total rather than treating it as free.
For any policy that builds a cash value, such as whole life or an endowment, estimate how much of the premium is savings rather than cover. The method is deliberately rough: get a term quote for the same sum assured over a sensible term, with the same riders where you can, from compareFIRST or an insurer's website. The term premium is roughly what the cover alone costs. The rest of the savings plan's premium is mostly the savings part and the costs that come with it.
Savings share = (savings plan premium minus term premium) divided by the savings plan premium.
The estimate overstates the savings share a little, because a whole life policy keeps covering you after a term policy would end. It is still close enough to answer the question that matters: is this mainly cover or mainly saving?
For pure protection, such as term, hospital plans and riders, the savings share is zero.
Add up the yearly premiums. Then make two totals: cash only, and cash plus CPF. Divide each by your yearly take-home pay, which is your monthly net pay times 12, plus any bonus you can rely on.
There is no correct percentage. The point is to see the figure, and later to compare it with the premium budget you set in lesson 7.5, Write your household insurance plan and adviser brief.
Every figure here is an example made up for the exercise, not a quote from any insurer.
His whole life policy has a S$100,000 sum assured with an accelerated critical illness rider of S$50,000 built in. The premium is S$2,400 a year, level, cash, payable to age 65, with cover for life. A term quote for S$100,000 to age 65 with the same critical illness rider comes to S$300 a year. Savings share: (2,400 minus 300) divided by 2,400 is 87.5%. So roughly S$2,100 of his biggest premium each year goes to saving and its costs, and about S$300 pays for cover.
His Integrated Shield plan costs S$700 a year, stepped: S$600 from MediSave and S$100 in cash. The rider costs S$350 a year, stepped, all cash. Group term life of S$100,000 and group hospital cover come free from his employer and end when he leaves. He is covered by the Dependants' Protection Scheme, with premiums paid from CPF; he copies the sum assured and premium from the CPF website rather than guessing.
Cash total: 2,400 plus 100 plus 350 is S$2,850 a year. Adding the S$600 from MediSave gives S$3,450, before the DPS premium. His take-home pay is S$5,800 a month, or S$69,600 a year. Cash premiums are about 4.1% of take-home, and about 5.0% with MediSave included.
Two things stand out on his sheet. Of the S$2,850 he pays in cash, S$2,100 is savings, not cover. And two of his premiums are stepped, so the cheapest lines today are the ones that will grow.
A finished sheet has every policy and rider you hold on its own row, each marked level or stepped and by payment source, with a savings share for anything that builds cash value and a zero for pure cover. Below the rows sit the two totals and their share of take-home pay. Add one short note on anything that surprised you, because that note is usually where the next module starts.
Build your premium breakdown sheet for every policy you hold, with yearly totals and the estimated savings share of each premium.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).