Should You Rely On Your Company Insurance?
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As an advisor, one of the most common questions that I have received over the years is the question of “do I need to get private insurance if my company already have insurance for me?”
Now my answer to this question is Yes.
In my professional opinion, company insurance should always be viewed as a bonus instead of the core of your insurance portfolio
In this video, I will present two reasons as to why it is not a good idea for you to rely on your company insurance for core areas like your hospitalization and life insurance.
Without further ado, let’s get started.
1. Most company insurance has a low claim limit
When it comes to company insurance, you must understand that the insurance companies in Singapore are not exactly dumb.
As a for-profit company, it doesn’t make sense for them to design their company insurance in a way that would cannibalize their private insurances market.
As a result, you tend to realize that the company insurances are designed in a way that they are complementary to their private insurance products.
Generally, company insurance is designed to provide coverage for the smaller ticket items like GP, Dental and Outpatient specialist treatment all of which are missing in your private insurance.
For bigger ticket items and core coverage like hospitalization and life insurance, company insurance tends to fall short in terms of the claimable limits and coverage amount as these areas are mainly provided for by your private insurances.
To give you an example, for the area of company hospitalization insurance, you will realize that the claimable limit tends to be low and insufficient.
What this means is that there is a high probability that you will still have to make out of pocket expenses if your hospital bill exceeds the claimable limit.
Compare this to private insurance, you can see that for the private hospitalization insurance, the core treatments are claimable based on an as charged basis and the claimable limit is way higher.
The same story can be said for the company’s life insurance, generally, most company’s life insurance only provides a bare minimum life coverage of around $50,000 or 18 times of your monthly income.
Having that type of coverage is by no means sufficient to provide for your expenses in an event of disability or critical illness, let alone to provide for your family or to pay for your housing mortgage in an event where you are unemployable.
From the above two examples, I think it is evident that the design of the company’s hospitalization and life insurance is not meant to replace the private insurances as the coverage is significantly insufficient.
Hence, it is not a good idea to rely on your company insurance for the core coverage.
Even if, say your company’s insurance is very comprehensive and sufficient, I would still advise against relying on your company insurance for a separate reason which brings me to my next point.
2. Company Insurance Is Not A Permanent Solution
The key risk of company insurance that everyone should be aware of is the fact that you are not the policy owner.
What this means is that the company has every right to change or remove the insurance coverage as and when they want. As a result, the company insurance coverage that you are enjoying today may not be the same tomorrow.
In addition, if you decide to change to a different company, you will lose your existing coverage. If your next company’s insurance is not as comprehensive as you would need it to be, then you will have to deal with the risk of being underinsured.
If you were to retire, you will be left with zero coverage in all areas. This is very dangerous as the risk of hospitalization or critical illness will only increase exponentially with age. Losing all your insurance coverage when you need it the most is not the wisest idea.
All it takes is one illness or one hospital bill to wipe out your retirement savings.
I can always get insurance after I change jobs or retire
Now some of you must be thinking that the solution to this problem is just to get your private insurance after you decide to change job or retire.
My answer to you is it would most probably not work out as
1) you run the risk of being uninsurable should your health deteriorates as no insurance company would want to put themselves at risk by insuring someone who is not healthy.
2) even if you are healthy, you will have to pay a heft premium on your insurance as the cost of insurance increases every year and no amount of savings overweigh the increment in cost if you were to purchase your insurance at a later date
So, there you have it, these are the two reasons why it is not a good idea for you to rely on company insurance.
To recap, you should not rely on your company insurance as firstly, chances are the coverage will not be sufficient for you.
Secondly, even if for some reason your company insurance coverage is sufficient, it is not a permanent solution that you should rely on as you are not the policy owner. You will lose your coverage in an event where your company changes their insurer or if you were to change or quit your company.
All things considered; you should treat your company insurance as a bonus rather than relying on it for your core coverage. You should still tailor your insurance portfolio that will provide you with the coverage you need without being at the mercy of your company.
Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides:
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This article is meant to be the opinion of the author
This article is for information purposes only
This article should not be seen as financial advice
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