You will be able to describe the cover a single-income household needs on the earning partner.
Ask a couple with a new baby what they have insured, and you will often hear about the baby first. A hospital plan for the child, sometimes a savings policy started in the first month. Ask about the parent whose salary pays the mortgage and the answer is often vaguer: "I think there's something through work."
That order is backwards. In a one-income household, the person whose loss would cost the family the most is the one earning the money. This lesson is about making sure that person is properly covered. It does not compare policies or tell you which to buy. Insurance Decoded teaches how the products work. Here the question is narrower: what must this household not leave uncovered?
Think about what would happen to the family's money in each of three events affecting the earning partner.
If they died, the income would stop permanently. The mortgage, the children's costs and the non-earning partner's living costs would all continue, perhaps for decades.
If they became permanently disabled and could not work, the income would stop and costs would often rise, because a disabled person may need care, equipment or changes to the home.
If they had a serious illness such as cancer or a stroke, the income might stop for months or years, and treatment could cost more than basic hospital cover pays.
Each of these is far less likely than a common cold, but each one would change the family's finances completely. That is what insurance is for. Lessons 4.2 and 4.3 of The Singapore personal finance system, Term life: replacing income for people who depend on you and Critical illness and disability income cover, explain these types of cover in more detail.
Many earners feel covered because their employer provides group insurance. Group cover is useful while it lasts, but it belongs to the job. If the earner is retrenched, resigns, or is too ill to keep working, group cover usually ends with the job or shortly after. That is often exactly the moment the household needs it most.
Group cover is also often a fixed multiple of salary or a fixed sum, chosen by the employer for all staff. It was never designed around your mortgage or your children.
So list two things separately for the earning partner: the cover they hold personally, which stays with them if they change or lose their job, and the cover through work, which may not. Plan as if only the first one exists.
If you have an HDB flat and use CPF to pay the monthly instalments, check the Home Protection Scheme cover on the loan. It is mortgage-reducing insurance, run by the CPF Board, for HDB flat owners who pay their housing loan with CPF savings. The CPF website explains how the cover is shared between co-owners and where to check your own share. Other mortgages may have their own insurance, or none.
A common rule of thumb says to buy life cover of some multiple of your salary. It is easy to remember but ignores what your family actually owes and needs. A better starting point is to add up what the household would need if the earner were gone.
Use three building blocks. First, any debt that would have to be paid off or kept up, mainly the outstanding home loan. Second, the household's living costs for the number of years until the children are independent or the surviving partner could support themselves. Third, large known future costs, such as the children's education. Then subtract what is already there: personal cover, mortgage cover and savings that the family could use.
Here is a rough version for Hui Min and Daniel, with every figure made up for the example and leaving out inflation and investment returns. Suppose Hui Min has stopped work to look after a baby and Daniel is the only earner.
The outstanding home loan is S$300,000. The household would need about S$3,500 a month for 15 years without Daniel's income, which is S$630,000. They set aside S$100,000 for the child's education. That is S$1,030,000 in total.
Against that, the Home Protection Scheme covers Daniel's 60% share of the loan, S$180,000. They have S$40,000 in savings. Daniel holds a personal term policy of S$300,000. That is S$520,000, leaving a gap of S$510,000. His group term cover through work of S$150,000 would reduce the gap to S$360,000, but only while he stays in that job.
The answer is rough, and it depends on assumptions you can argue about. It is still far more useful than a multiple of salary, because every line in it is something the family would actually face.
A non-earning partner has no income to replace, but if they died or became seriously ill, the earner might need to pay for childcare or care help, or cut their own hours. That cost is real, and some couples cover it with a smaller amount. Look at it after the earner's cover, not before.
Now gather the earning partner's policies, personal and through work, and set them beside the household's needs on one page to see how large the gap is.
List the cover the earning partner has now and estimate the gap against what the household would need.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).