Insurance Myths & Facts

Endowment plans are not insurance. They're long-dated savings contracts dressed up as insurance — typically locking up your money for 10 to 25 years with guaranteed returns of just 2–3% per annum. Projected returns in the brochure look higher, but those are not guaranteed.

Your agent is paid a sizeable commission (often 30–50% of your first year's premium) for selling you one. That cost comes out of your money.

The right order for most people in their 20s and 30s is:

1. Emergency fund — 3 to 6 months of expenses in a high-interest account.

2. Protection insurance — IP plan, Critical Illness, term life if you have dependents.

3. Investing and longer-term savings.

If you buy an endowment plan before getting hospitalisation cover and then end up in hospital, you'll face a real bill while your money sits locked in a contract you can't easily access without losing a chunk to surrender charges.

ILPs bundle insurance with investment funds. The pitch sounds efficient — one product does two jobs. The reality is the fee structure quietly eats your returns.

Typical ILP costs include: a 3–5% annual fund management charge, mortality charges that rise with age, policy fees, and bid-offer spreads. Over 20+ years, these compound badly against you.

For almost everyone, the better split is:

• Buy term insurance separately — cheap, transparent, easy to compare.

• Invest the difference in a low-cost index fund or ETF (e.g. via FSMOne, Endowus, or Syfe).

ILPs aren't inherently bad — but they're frequently mis-sold to young people who don't read the benefit illustration carefully. If you already own one, ask your insurer for a full fee breakdown before deciding what to do next.

Whole life is significantly more expensive than term for the same death benefit — often 5 to 10 times the premium. The pitch is that you get 'cash value' building up, so it's not 'wasted'.

The cash value is real, but it builds slowly, and the projected returns are partly non-guaranteed bonuses that can be reduced (and have been, by major insurers).

For most young Singaporeans with dependents:

• A 25–30 year term plan gives you 5–10× the coverage per dollar.

• You invest the premium difference into broad-market index funds.

• By the time the term ends, your dependents are usually no longer dependent and your invested portfolio is your safety net.

Whole life can still make sense later in life specifically for estate planning, leaving a legacy, or covering estate duties — but rarely as a young adult's first major policy.

On Integrated Shield Plans, the co-payment rider is the one most people should keep. Without it, you're on the hook for a 10% co-payment of your hospital bill (post-2021 rules cap your share at 5% with a $3,000 annual cap if the rider is from 2021 onwards).

On a $50,000 bill, that 10% is $5,000 out of pocket. The rider typically costs $10–$40/month — easily worth it.

Other riders to look at carefully, not blindly buy:

• Early-stage CI riders — useful, but check if your CI cover already includes early-stage payouts.

• Waiver of premium — sometimes built-in, sometimes extra. Ask.

• Personal accident riders — often overlap with standalone PA plans or your employer's group cover.

Rule of thumb: if you can't explain what a rider does in one sentence, don't buy it yet.

More cover isn't always better. Common overlaps that quietly cost you money every month:

• A standalone Personal Accident plan when your CI and IP already cover most realistic scenarios.

• Employer group hospitalisation cover plus a private IP plan with overlapping benefits.

• Multiple small CI plans bought over the years that together cost more than one consolidated plan.

• Whole life plus a separate savings plan plus an ILP — three products doing overlapping work.

Do an insurance review once a year. List every policy you pay for, what it covers, and what the premium is. Cancel or restructure what overlaps. The goal is the right cover at the lowest sensible cost, not a wall of policies.