Types of insurance plans

As you know, there are many insurance plans out there in the market. Sometimes, it make people confuse. Here I will explain to you in brief many of the insurance plans that you need to know. I will not explain all, because there are too many. So we will just stick with the core plans that you should know and may consider. There are only 5 plans that I think are important.

Remember! Even if the type of insurance plan is the same, each company have their own definitions and their own terms and conditions. So even if you are looking at the same insurance plan, the way the plan work and the way you can claim will be different for each insurance company.

So let's start.

1. Life insurance.
This insurance mainly will be divided into 2 categories, which are TERM plans and WHOLE life plans.

-Term plans are insurance that provide protections with NO cash value. This will be the cheapest life insurance that you can get in the market. You have to pay the premium as long as you want to get covered.

-Whole life plans are insurance that provide protections and at the same time giving you cash value (savings), so that you can accumulate for the long term. Which means, in the future if you think that you don't need the coverage anymore, you can surrender the plan and get the cash value that have been accumulated. The premium for whole life plan are more expensive than term plan. But now there are many whole life plans which you can choose the premium terms, example you can choose to pay just 10 years and cover for whole life.

Life insurance mainly will cover: death, terminal illness, major critical illnesses and total permanent disability.


2. Health insurance.
This insurance will take care mainly your medical expenses if you are sick. There are a lot of health insurance in the market and they varies a lot in terms of benefits and premiums.

The most basic health insurance is the plan where it covers you when you are hospitalised (to me, this is most important because when you are hospitalised, it can cost you a big hole in your pocket). But there are health insurance which are very comprehensive where it even covers outpatient benefit, e.g. to see a GP or a specialists (you don't need to be hospitalised to claim), covers pregnancy, covers dental/optical, annual check up, etc.

This insurance is payable as long as you want to be covered. There are no cash value.

3. Accident insurance.
This insurance is like a combination of health and life insurance, BUT you can only claim if it is due to accident. This plan is good to complement your life and health insurance, because this plan will boost your overall coverage and the premium is very affordable and remain the same throughout your life, unlike life and health insurance whereby the premium increases as you get older.

So accident insurance mainly will cover death, total permanent disability and also give medical reimbursement.

This plan is also popular to those people whose health is not good anymore and they cannot buy life and health insurance. But since this is an accident plan, they still can buy and at least have some coverage.

This insurance is payable as long as you want to be covered. There are no cash value.

4. Comprehensive critical illness insurance.
This insurance will give you a lump sum payout in case you are diagnosed with one of the critical illness listed. Usually the plan will cover about 30 or more critical illnesses. The most common critical illnesses are cancer, stroke and heart attack.

Now, maybe you are a bit confused. Because if you have been reading carefully, a life insurance plan can also cover critical illness. So why should I get this plan?

It is because in life insurance plan, the critical illness coverage only pays when the insured is diagnosed with major stages of the illness. For example, cancer stage 3 or 4.

But in this comprehensive critical illness insurance, it will cover every stage. So for example, it will even pay for cancer stage 1.

This insurance is payable as long as you want to be covered. There are no cash value.


5. Disability income insurance.
This insurance will give you a monthly payout, usually up to 75% of your monthly income, if you cannot work due to disability or illness. Monthly payout will be payable until you are age 65, which is the retirement age.

I believe your income is important and if it is important, I believe it is worth protecting. This plan will ensure that you can meet your monthly expenses even if you cannot work.

A lump sum cash from your life insurance is a good payout if you are disabled. But many people tend to underestimate their worth when they buy life insurance. For example, people in their 30s who are earning $4500 a month usually only have life insurance maybe $500,000. They think it is already a lot coverage. But if you calculate it, by the time you are 65 years old, you will accumulate about $4 million. So there is a gap of $3.5 million there that you would have earn if you can work.

So this plan will definitely complement your life insurance as the monthly payout will make sure that you get your true net worth.

This insurance is payable as long as you want to be covered. There are no cash value.



So there you are, the top 5 insurance plans that everyone should know about and consider in their insurance planning. I can guarantee you that the above plans will help you in your financial planning.

Again, remember! Even if the type of insurance plan is the same, each company have their own definitions and their own terms and conditions. So even if you are looking at the same insurance plan, the way the plan work and the way you can claim will be different for each insurance company.

Read and understand the above 5 plans. See what you have and see if you have any gaps in your planning. Because all the 5 plans really complement and help each other. If you see any gaps, make sure you cover it. You will not want to fall into the gap and suddenly you cannot claim from your existing insurance plans.

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Cheers! Have a great day.