How Much Money Is Advised To Leave for Insurance Premiums?

Short Term Loan Singapore

Insurance is a useful form of protection that will help us take care of unexpected situations. There are all sorts of insurance plans available on the market, and it may be hard to select what best suits your needs.

When selecting insurance premiums, it may be challenging to decide what is necessary. As it seems better to be safe than sorry, you would like to sign up for as many plans as possible to protect yourself and your loved ones. However, you can only spend so much on an insurance premium, and it is always wise to budget accordingly and streamline your expenses.

When it comes to insurance premiums, how much is too much?

There is no universal rule that applies to everyone’s spending and budget for insurance premiums. Financial advisors generally advise most people to spend anywhere from 3% to 10% of their monthly salary on insurance policies. The overall income does not include CPF deductions.

It is hard to determine the exact amount or proportion of your money to spend on insurance. In general, your savings may be the best form of insurance. However, without an insurance plan, you would risk losing a lot of money during an emergency or accident. The financial burden will be especially heavy if you are the breadwinner of the family.

Insurance plans are not limited to medical emergencies. Sometimes, you may lose your job unexpectedly. Without a stable source of income, it might be difficult to pay for day-to-day expenses and support your dependents.

For such a scenario, you can consider whole or term life insurance. Such insurance plans will provide death benefits and also include a portion dedicated to savings. Savings under whole life insurance plans will accumulate interest and accumulate more value over time.

If you are currently on a monthly instalment loan in Singapore, you can also consider signing up for a loan protection insurance policy. These insurance policies help you cover part of your monthly debt payments during unexpected events and may help you repay them faster with greater convenience.

Ideally, you should have sufficient savings and set aside enough money for investment. This way, you will have two sources of funds for a rainy day. While it is not easy, budgeting wisely can help you work towards this goal.

What should I do if I am spending too much money on insurance premiums?

After calculating your monthly expenditures, you may think you are spending too much on insurance premiums. In such a scenario, it would be helpful to speak to your insurance agent or a financial planner. Seek their help: ask if you can customise your insurance plan and remove unnecessary coverage so you can lower the overall premium.

However, certain policies may also come in handy in the future. Most people would have health and disability insurance policies to cover any unexpected circumstances. If you are in a labour-intensive industry or physical profession, it’s best to consider a disability insurance policy. The policy ought to cover at least 70% of your income if you are unable to work.

On the other hand, loan protection insurance policies may not always be helpful. If you do not need such a policy, consider contacting a licensed moneylender. This way, you can pay off your debt quickly without unnecessary funds that come with an insurance policy. Sometimes, licensed moneylenders may be a better option than an insurance policy. You can look up the list of moneylenders on the Ministry of Law’s website to find one that best suits your needs and financial situation.

Conclusion

Insurance policies can be a good option to cover unexpected events and are a safety net to fall back on. But, it is also recommended to be financially prudent and have sufficient savings to avoid overreliance on insurance. In the event you are unable to cover an emergency with an insurance policy or savings, you can consider contacting a licensed moneylender.

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