Important Financial To-Dos Before You Start To Invest

The journey to begin to invest is a difficult path on its own. Most people are attracted by the high returns that investments could potentially provide but fail to understand the risks of investing. Many investors jump into the sea of investments and end up drowning. Fear strikes me when my peers get overly excited about “investment opportunities” and when they are too eager to begin investing before laying the foundations.

As with everything in life, we prioritise and take care of what is important first.

Debts, Emergency Savings & Essential Expenses

Debts: In our financial plans, we know that we first have to take care of our Debts. Do you know that many credit cards effective interest rate are at 24.9% and above per annum now? It would not be logical for us to invest before clearing these debts, loans and cash lines with high interest rates. It is not possible to achieve 24.9% investment returns per annum consistently.

Emergency Savings: An Emergency Savings of at least 6 months of our monthly expenses is recommended because this take cares in an event of a stoppage of our income such as an unexpected retrenchment. The emergency savings is also critical to cover unexpected expenses such as medical expenses for our loved ones, household, vehicle repairs and other unfortunate events.

Important expenses: If we expect expenses coming up such as hosting a wedding banquet, a house renovation or the birth of a child, we should save up for these expenses in cash. (These expenses could easily add up to S$60,000 and more in cash requirement for a couple) We cannot afford to invest and be forced to sell off our investments at a low when the bills are due.

Protection from Financial Risk

Insurance: To protect ourselves from financial risk means to “insure”. There are a few events which can impact our accumulation for retirement or financial independence.

  1. Medical bills: In the case where we have insufficient savings to cover for our own medical bills, we would be loaded with a mountain of medical bills if we fall ill.
  2. Loss of income due to medical crisis or death: Another risk of not having sufficient insurance coverage is that we are not able to provide for our dependents due to our loss of income (Eg. Spouse, children and parents) in our unfortunate death or disability.

The state of the insurance industry is that financial planners are mostly remunerated by commissions based on product sales. The amount of premiums we pay may not necessarily translate to the amount of insurance coverage we are covered for and need. The truth is that it is easy and possible for us to be adequately insured at a reasonable cost if we purchase the right insurance products.

Purpose & Type of Insurance Products



Type of Insurance

Death & Permanent Disability

Outstanding Loans

Children’s Education

Living expenses for Dependents

Term Life Insurance & Total Permanent Disability (TPD) Insurance


Monthly payout for Loss of Income due to disability/illness

Disability Income Insurance

Long-term Disability

Monthly payout for Care-giving cost

Long-term Care Insurance (Eldershield)
*For age 40 & above

Critical Illness

Alternative Treatment cost

Critical Illness Term Insurance


Hospital bills

Private Integrated Shield Plan

It is possible for one aged 35 years old with average income and moderate needs to be adequately insured for S$200+ a month.

You can easily find out how much insurance coverage you need here: Click here to find out your life insurance needs and Click here to find out your critical illness needs.

Have you done the above must-dos?

If you have not, please do so now. We do not want to risk having our hard-earned savings and investment gains wiped out due to our own greed and carelessness by not prioritising. We have to protect our existing assets and plan ahead for any unexpected events first. The journey before investing could take years and it is important to be patient before diving into the markets.

Let’s encourage one another to clear our debts, build our emergency savings, plan for our important expenses and insure ourselves adequately now. We are not only doing ourselves a favour but a very important favour for our loved ones as well.

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DIYInsurance (Do It Your-way Insurance) is Singapore’s First Life Insurance Comparison Web Portal started in June 2014 by Providend Ltd to empower people to make informed decisions about their own insurance purchases. In addition to ongoing promotions, we rebate 50% of the agent’s commissions back to our clients so that they enjoy greater cost savings.

The Trusted Place to be Insured
MAS-licensed since 2003 | Expert advisers to assist you | Advisers not commission-based | Dedicated after-sales service | Secure and easy process

Disability Income Policies: The Most Overlooked Insurance?

When it comes to insurance, most people are familiar with the standard benefits like death, critical illnesses (e.g. cancer, heart attack) and hospitalisation. Yes, these are indeed important life risks that we ought to insure against. The financial impact can be disastrous if we die too early, not leaving enough for dependants’ living expenses or be saddled with huge medical bills from treatment of serious illnesses. However, most people seem to have missed out one other important risk factor: disability.

If an accident or illness happens, resulting in our being unable to work, we would have lost one of our biggest assets – our income earning capacity.

How much is the loss

Suppose a young professional, John Tan, age 30, earning $4,000 per month as an Accountant is now unable to work because of a car accident. He would have lost $1,680,000 that he could have earned had he worked till age 65. If we assume a pay rise of 3% every year, the loss of earnings would be as much as $2,600,000!

In insurance jargon, it is called the human capital – your biggest financial asset.

What is Disability Income Insurance

Disability income insurance is the only insurance that insures against your income earning capacity. For simplicity in understanding, the following are the benefits of this insurance:

  1. If Insured is unable to perform material duties of own occupation, monthly income will be payable for the first 2 years.Let’s assume John (above example) has bought a Disability Income insurance with a monthly benefit of $3,000. After the car accident, he is unable to work as expected of an Accountant. His insurance will pay him a monthly income of $3,000 after a waiting period of, say 3 months, for the first 2 years.
  2. Subsequently, the monthly income continues to be payable if insured is still unable to work in a reasonable occupation by virtue of his/her training, education or experience.After the first 2 years, if John’s disability still prevents him from working in any reasonable occupation, he will continue to receive the $3,000 monthly benefits for up to age 65.Some disability income policies provide a 3% annual increase in monthly benefits to take care of inflation. If John’s policy has such a benefit, his subsequent year’s payout would be $3,090 per month (year 2), $3,182 per month (year 2), $3,278 per month (year 3) and so on.
  3. If insured is able to return to work but suffers a pay drop, a partial monthly income benefit is payable to supplement the income.3 years on, John is able to return to work but at a lower capacity and could only earn $2,000 per month. His insurance will pay him a partial benefit of $1,500 per month (benefit is computed based on proportional drop in his income before suffering disability). In total, John’s income is now $3,500 ($2,000 + $1,500). The partial income benefit serves as an incentive for John to return to work as he would receive more income than not working.There are other benefits included in the disability income policy, such as rehabilitation benefit (3-6 months of income benefit) and death benefit.

Why this insurance often is overlooked

Disability income policy has been around for more a decade but consumer awareness is still low. The reasons I observe are as follows:

  • Not easy for insurance advisors to explain to consumers. Indeed Disability Income policies are more complex than the standard death and critical illness policies. It is not easy to explain, in definite terms, to what extent the disability must be before the income benefit continues to be payable after 2 years (see point b).What is meant by a reasonable occupation by virtue of ‘training, education or experience?’ It is too general and subjective to accept. In assessing claims, insurance companies rely on their in-house objective judgement together with medical and other professionals’ opinions.Unfortunately, that is the nature of such insurance. Important but difficult to explain. As such, many advisors may prefer to avoid this insurance and go for those easier to market.
  • Consumers are confused.Most people associate disability income insurance with Total and Permanent Disability (TPD). It is not. TPD benefit is found in most Whole Life and Term policies and the cost of such benefit is quite cheap. However, TPD has very stringent claim criteria. It requires one to lose any 2 of 6 limbs; namely eyes, hands (above wrist) and legs (above ankle) – or unable to perform 3 out of 6 Activities of Daily Living (feeding, dressing, toileting, washing, mobility and transferring).Disability Income insurance, however, has a more lenient form of disability definition. It is based on one’s occupation and easier to qualify than TPD.
  • Only 3 companies are offering it. GE and Aviva are the pioneers with AIA joining the list in recent years. Why are there so few providers? Firstly, the forces of demand and supply. The market size for disability income is not big enough for many insurers to be excited about.Secondly, the risk to insurer is quite high. Consider our example John. If he is disabled for 30 years, the insurer has to pay up to $1,080,000 ($3,000 pm x 12 mth x 30 years). Yet, the premium for his Disability Income insurance policy only costs around $574 pa.


If earning an income is very important to you and your dependants, you need to insure it. Disability Income insurance is the only policy that is able to do that. To find out more about this product, click here.

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DIYInsurance (Do It Your-way Insurance) is Singapore’s First Life Insurance Comparison Web Portal started in June 2014 by Providend Ltd to empower people to make informed decisions about their own insurance purchases. In addition to ongoing promotions, we rebate 50% of the agent’s commissions back to our clients so that they enjoy greater cost savings.

The Trusted Place to be Insured
MAS-licensed since 2003 | Expert advisers to assist you | Advisers not commission-based | Dedicated after-sales service | Secure and easy process