Young Working Adults Buying Insurance: Common Pitfalls & Tips to Get it Right
“Good insurance plans mirror your personal growth while better plans anticipate your trajectory.”
If you were born around the years from 1977 to 1995, you are a millennial. You have a good grasp of the importance of insurance as part of sound financial health. According to a 2019 survey on Millennial attitudes towards Insurance1, 7 in 10 millennials believe in buying insurance. More than half are aware of different insurance products while a good 44% consider themselves knowledgeable on insurance products.
Savvy as you are, young working millennials in Singapore are also showing signs of biting off more than they can chew when it comes to taking on financing and personal loans for commitments such as weddings, buying a car or home. In fact, 20-somethings are among the biggest delinquents in personal debt repayment in our country. Quoting a recent Straits Times2 article, “an average personal loan and overdraft balances for borrowers from 21 to 29 years old shot up to $49,689 in the first quarter of , about 42 per cent higher than the average of $34,941 in the first quarter of .”
While insurance is not often thought of as being immediately relevant to debt management, it has a multifaceted role in the financial health of individuals and families.
Insurance provides financial security during unforeseen events such as illness or accident, and can mitigate financial stresses that may require you to dip into your emergency funds or take out a crisis loan that can add to your debt. Both scenarios can be especially challenging if you are in the early stages of your working life and lack substantial savings.
It is important to get the right insurance product (e.g. hospitalisation, critical illness, term) and quantum (the affordable premium to pay for the right kind protection).
3 common insurance pitfalls to avoid
Being digital natives, millennials ace DIY research. However, you have increasing challenges when it comes to buying insurance. Do any of these sound familiar to you?
Buying out of obligation
Many of us have friends in the financial advisory industry and it’s natural to want to support them. In fact, it’s a win-win as the trust that has built your friendships can be ideal foundation for a long-term client-consultant relationship. However, it is important to avoid purchasing a policy out of sheer obligation. A useful reminder here: do get all your questions answered and keep a level-headed approach. That way, you can still support your friends, while ensuring that whatever policies you buy properly address your needs today and in the future.
Too many choices lead to inaction
An avalanche of options and opinions online can be overwhelming for anyone. Fraught with non-stop comparisons between different providers and products, may ironically lead you to indecision.
Relying on policies bought by parents
Parents mean well because as their offspring, we mean the world to them. But that does not automatically mean that the policies your parents bought for you years ago still provide you the best coverage today. Times and needs change. Those who think they are adequately covered may be lulled into a false sense of security. It’s a good idea to get your legacy policies assessed to ensure they are still adequate for your current needs.
5 steps to build your insurance portfolio
A professional and experienced financial consultant will be in a better position to give your financial health an objective review. Realising our blind spots is the first and most crucial step to positive change.
Here are my 5 steps to guide you in the right direction for your insurance planning.
Treat financial planning as a journey
Meeting your insurance needs is not a single point of transaction that starts and ends once you have bought a policy.
As our personal circumstances change over time, so do our needs and aspirations. Insurance is an integral part of any financial plan. By reviewing our financial plans holistically and regularly, just like a physical health assessment, we ensure our plans are on track to meet our financial goals.
Focus on the adequacy of the insurance product
With so many insurance products in the market, making a decision can be mind-boggling. Find a financial consultant on the same wavelength with you who can help decipher complexities and explain key points so you can make an informed decision with clarity.
Keep your options open
In the market, there are multiple insurance products that target different needs. However, insurance agents who represent a single insurer can only recommend their own company’s insurance products. At SG Alliance, our financial consultants have access to a growing portfolio of industry-leading insurers offering a wide selection of products. This advantage keeps your options open when you are looking for a product that is of better fit, instead of limiting yourself to just what the insurance agent is able to recommend.
Work with a trusted professional
A professional financial consultant does all the homework for you. Tap on their expertise to shortlist and explain the advantages of the products that are right for you without you having to decipher it all yourself. It’s easier to decide when most of the hard work has been done by someone you trust.
Review what you have
If you are fortunate enough to have a policy your parents bought for you,
it’s a good start, but not good enough. Get a financial consultant to review your coverage to ensure it is still relevant for your current needs. Due to the competitive nature of the insurance industry, newer policies with enhanced features or coverage are launched periodically. These may be more advantageous compared to the older policies. Over time, you may wish to update your policy beneficiaries so that’s another reason to get a periodic review.
Tailored for you
Good insurance plans mirror your personal growth while better plans anticipate your trajectory. The best plans are tailor-made and regularly adjusted to grow with you. Adopt a growth mindset and be ready to make the necessary changes to your policies for your long-term benefit.
Do your own research. If you are looking to find a competent and experienced financial consultant you can fact check, bounce ideas and discuss your financial future with, give us a call at SG Alliance today.
Stay tuned for Winston’s second article in this 3-part series entitled: 3 Areas of Insurance Coverage that Millennials Must Have.
1Source: Statista, www.statista.com/statistics/1101354/singapore-millennial-attitudes-towards-insurance/
2Source: Straits Times, www.straitstimes.com/business/companies-markets/personal-debt-soars-among-young-spore-adults-during-pandemic