Recently, I’ve had the opportunity to plan for clients with pre-existing conditions, and boy-oh-boy, the experience that we had while trying to apply for insurance was what motivated me to write this article.

I’m sure you’ve heard the saying that you should get your insurance done up when you are young but many of you are not fully aware of the “WHY” part of the equation. In this article, I’ll be focusing on 2 key reasons why you should get your insurance planning done when you are young.

1. The risk of having a pre-existing condition.

Have you heard of the phrase: “The more you want it, the less you will get it?” This applies to the area of insurances as well. A lot of people that seem to be under the illusion that they can get insured when they need it regardless of age but that is simply not the case.

If you’re lucky enough to have a clean medical record, then yes, perhaps getting insurance may not be of an issue regardless of age. But the moment you have a pre-existing medical record, even the tiniest speck of dust or medical trail, that’s where a whole lot of complications will come in.

As consumers, I think it is good that we understand the perspective of the insurer when we are applying for insurance. The whole business model of an insurance company is to be able to receive a higher total premium (inflow) than the total claims paid (outflow).

In that case, what do you think is going to happen, when someone with a pre-existing condition proposes to an insurer a contract that transfers the risk – and financial consequences – of critical illness/disability/death in an exchange for a yearly premium cost?

Put yourself in the shoes of an insurer, will you want to accept someone that poses a higher risk and probability of claiming on the policy in exchange for a negligible premium in the grand scale of things? The answer is no.

To make up for the additional risk that the insurer will be exposing themselves to, the easiest way is to exclude the pre-existing condition completely. If you are lucky, the insurer will include the pre-existing condition but charge you a higher premium in exchange for the higher risk borne. In the case of health insurance – where all of the insurers are bleeding out millions of dollars a year – you can be very sure that they are extremely selective of who they accept into the policy.

Every insurance company, at the end of the day, are a profit-driven organization, why would they expose themselves to higher risk when the reward is clearly not present. If you are the insurer yourself, I’m sure you would do the same without any hesitation.

So long story short, getting your insurance when you are young and free of any medical condition would enable you to lock in the scope of insurance coverage and transfer the risk and financial consequence of death, disability, and critical illness to the insurer WHILE YOU STILL CAN.

Now, some of you may ask, what if my pre-existing condition is negligible, would it be okay if I do not declare it in the application form?

The answer is NO, for your own interest – especially when claims arise, you should declare everything that was being asked in the form itself, regardless of the severity, and let then underwriters decide what they want to do with it. You wouldn’t want to land yourself in a situation whereby the claims are being affected because of your non-disclosure when you are applying for the insurance.

Long story short, don’t make things difficult for yourself, insurance is a contract and as all contract goes, you should declare everything and let the other party decide what they would like to do before both parties finalize on the contract.

2. The younger you are, the cheaper it is

Now, this is only applicable for policies that calculate the premiums based on the age of entry (i.e. whole-life insurance) rather than based on age-band (i.e health insurance).

Having said that, here’s the breakdown of how much your insurance cost will increase over the years. A base age of 25 years will be used for the calculation of $100,000 sum-assured in death, disability, and critical illness for both term (Till age 99) and whole-life policies.

Long story short

Purchasing your insurances early enables you to lock in the

• scope of coverage and insurability while you are still healthy

• cost of insurance at your age of entry while you are still young and while the cost is still low

Now, the next question you will need to ask yourself would be: “How much coverage will I need to have, and am I paying too much for my insurances?”

If you do not have the time to plan for your own insurance portfolio and compare the products among the different insurance companies, you can leverage on my services to help you shortcut your insurance planning process. Reach out to me and we'll work something out together:

To read up more on insurance planning you can refer to the following articles that I have previously written:

• Insurance Planning: The 5 Questions you should be answering

• The numbers you never knew about ILP, Whole-Life and Term Insurance

• Things you didn’t know about Aviva Mindef Group Insurance v.s. term insurance

• Why you may be overpaying for your life insurances

• How to get the most coverage out of your term insurance premiums

• Things agent don’t tell you about their whole-life insurance plans

• How I helped my client save over $4,000 yearly in insurance premiums

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I have been uploading weekly articles and analyses since the start of 2020 and will continue to do so in the future.

Stay safe and I look forward to hearing from you soon!

Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner that provides advice in the following areas:

• for investment and portfolio management advice - find out more here

• for insurance planning and portfolio optimization advice – find out more here

• for retirement planning advice– find out more here

Disclaimer:

This article is meant to be the opinion of the author and is for information purposes only.

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore