Personal accident vs life & medical insurance: What you need to know

Do you need both personal accident and medical insurance? What about life insurance? We know — it can get confusing! We help clear things up in this article.

Here’s the problem with insurance: there’s a huge gap between people’s understanding of insurance as a concept and their knowledge of the specific characteristics of individual insurance products.

This results in many people being aware of the importance of having insurance; at the same time, they’re paralysed by the number of choices available.

At SingSaver, our goal is to help our audience bridge that gap. In this article, we will be clearing up any and all confusion between three types of insurance: Personal accident, life, and medical.

Only when you understand the differences (and similarities) between them can you then make the most informed choice for yourself.

Definitions and coverage

What is personal accident insurance and what does it cover?

The name is self-explanatory. Personal accident insurance covers the cost of treatments related to personal accidents, including lump-sum payouts for death or total permanent disability (TPD).

Many plans also cover the fringe costs like physiotherapy expenses, necessary home modifications (as a result of the accident), and personal liability.

What is less known is that many personal accident insurance plans also cover infectious diseases. One example is FWD’s Personal Accident and Infectious Disease plan, which also includes Covid-19 coverage and offers daily hospital benefits.

What is medical insurance and what does it cover?

Also known as health or hospitalisation insurance, medical insurance covers, well, all things medical. If you are a Singaporean citizen or permanent resident, you are automatically covered by MediShield Life, which is administered by the CPF.

Premiums for this plan are automatically paid from your MediSave account.

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However, MediShield Life is merely a basic plan. If you rely solely on this as your only form of health insurance, your payouts will be based on the cost of B2 and C-type wards at public hospitals.

That’s why many Singaporeans opt for Integrated Shield Plans (IP), which is a combination of the MediShield Life plus a private insurance component.

You can also purchase additional riders for your IPs, such as extra hospital beds, outpatient treatments, and ambulance/taxi coverage.

Keep in mind, however, that since 2018, the government has disallowed IPs with riders that can pay for your entire hospital bill.

Now, all IPs mandate you pay at least 5 per cent of the total cost. This was done to encourage more personal responsibility surrounding healthcare.

What is life insurance and what does it cover?

Life insurance is probably the easiest-to-understand form of insurance. It pays out upon either death or total and permanent disability (TPD). But there are variations, such as whole life and term insurance.

Term life insurance is the most straightforward. Keep paying your premiums, and you’ll stay covered—that’s it. It also only lasts for a set amount of time, usually 20 to 30 years.

Premiums are low and the policy itself does not accumulate any cash value.

Whole life insurance is a little more complex. It lasts your entire life, but there is often an endowment or investment portion to the policy.

This means the policy does accumulate value, but premiums are also higher.  

Here’s a summary table to distinguish between personal accident, life and medical insurance at a glance:

Mixing and matching

How much overlap is there between these three types of insurance?

From the above, you can already see that there is overlap between the three types of insurance. For instance, both life and personal accident insurance payout death or TPD benefits, although the latter is limited to only accident-related causes.

Both health and personal accident insurance can reimburse you for medical expenses — including paying out daily hospitalisation benefits — although again the latter only covers expenses caused by accidents (or infectious diseases, in some cases).

Do I need all three types of insurance, and if so, what coverage should I get for each?

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The truth is that there is no ‘one size fits all’ answer to these sort of questions — it all depends on your individual circumstances and needs.

For example, if you are such a careful person that you can’t even remember the last time you accidentally injured yourself, perhaps you don’t need personal accident insurance.

But if you are one of the five types of people described here, then personal accident insurance may be a good idea.

Another thing to keep in mind is that personal accident insurance typically does not require any medical underwriting — the assessment of your premiums is based on a simplified set of questions or declarations, with some being:

1. You are aged 65 and below
2. You have never been tested positive for Covid-19
3. You have never been refused when purchasing a personal accident insurance policy

This means that getting private health insurance might be impossible for some people. This might create a situation where the best option is only basic medical insurance (MediShield) and more comprehensive personal accident insurance.

The right questions matter more than the right answers

Because everybody’s insurance needs are so different, what matters is asking the right questions (rather than getting the right answers).

Questions such as “how much will private health insurance cost me?” and “how much can I afford to pay for insurance each year?” will help you make the best decision for you. 

This article was first published in SingSaver.com.sg.