You will be able to name the events that should trigger an insurance review and what to check at each.
Jun Hao's whole life policy was bought at 26, when he was single, rented a room and had nobody who depended on him. Eight years later he's married, has a daughter and a flat, and owes S$280,000 on it. His cover from age 26 never changed in all that time. Nothing was wrong with the policy. His life had simply moved on, and nobody, including him, had looked at the two side by side.
Insurance needs tend to change in steps, at particular moments, rather than gradually. This lesson names those moments and what to check at each.
Most changes in what you need come from a short list of events.
Marriage brings a partner who may rely on your income, and often a shared home loan soon after. Check your life cover against the needs method in lesson 2.1, Needs-based cover beats a multiple of salary, and update your nominations.
A child is usually the biggest single change. It adds years of support and education costs, and it can push your cover term out by two decades. Lesson 2.4's test, a second child, raised Jun Hao's gap by S$248,000 in the example.
A home loan adds a debt your family would inherit. Check whether the Home Protection Scheme applies, which it does only for HDB loans paid with CPF, and what share it covers. If you move to a bank loan or a private property, HPS no longer covers that loan, so the gap it filled reopens.
A job change can end group cover and change your income, which affects how much disability income cover you can buy.
Leaving work, whether for retirement, a career break or caring for family, ends group cover, removes income that needed protecting, and makes premiums a larger share of a smaller budget.
Group cover from your employer usually ends on your last day, or soon after. That includes group term life, group hospital and any group disability cover. If you fell ill between jobs, or your next employer's cover didn't start immediately, you could be uncovered at the worst moment. And a condition diagnosed while you relied on group cover can make personal cover harder to buy afterwards.
So before you resign, check three things in your benefits handbook: what group cover ends and when, whether any of it can be converted to a personal policy and by what deadline, and when your new employer's cover starts. If there's a gap, decide whether to close it with personal cover, ideally bought while you're still healthy and employed.
Reviews aren't only about adding cover. As children become independent and loans shrink, your life cover need falls. Jun Hao's support need halves by the time he's 44, as lesson 2.3, Set the term from your youngest dependant and your loan, showed.
That matters because you may be paying for cover you no longer need. If you split your cover into two policies, one may now be ready to end. If you hold cover far beyond your need, reducing it can free cash for things that matter more, such as retirement savings or the rising hospital premiums from lesson 4.4.
Reduce with care, though. You can always cut cover later. Adding it back after a change in health may not be possible.
Between big events, a short yearly check catches most problems early. Pick a fixed date, such as the month your hospital plan renews, and go through:
every premium against last year's, with a note of anything that rose and why cover against your needs sheets from modules 2, 5 and 6, updated for any change in income, debt or family nominations on CPF and on each insurance policy, and whether they still say what you want policies that have ended, lapsed or become paid-up, and any automatic premium loan quietly growing on a whole life policy group cover, if your job or employer's benefits have changed
Nominations deserve their own mention. CPF savings and insurance payouts with a valid nomination pass outside your will, so an out-of-date nomination can send money to the wrong person. Lesson 8.2 of The Singapore personal finance system, end to end, CPF and insurance nominations, explains how they work.
Jun Hao wrote the events he expected. A second child within two or three years. A possible move to a condominium with a bank loan, which would take the new loan outside HPS. Mei returning to full-time work once both children are in school, which would lower the support his pay needs to provide. A possible job change.
Beside each one he wrote the cover it would change. The second child would raise his life and critical illness needs and push his term to 58 for the whole amount. A condo loan would add a debt with no HPS behind it. Mei's return to work would reduce his life cover need. A job change would end his group cover, so he'd check his personal cover first.
Your list may be shorter or longer. Write the events you actually expect, not every event that could happen, and the cover each one would change. Those become the triggers in the plan you write in lesson 7.5.
List the life events you expect in the next five years and the cover each one would change.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).