By Philip Loh

Many people believe that they need to have a whole barrage of insurance policies to achieve total protection. In reality, they need just four types of plans.

Yes, it is that simple. So what are they?

Death cover: It provides a sum to your dependants in the event of your untimely death. This will make sure they can continue to live as normally as they previously did.

Nothing can compensate for the death of a loved one, but if the financial aspect is well taken care of, it makes things a little more bearable. Look at this as an income replacement programme for the family when you are gone.

Medical cover: This ensures that a significant part of your medical bills is taken care of in the event of an accident or a severe illness.

Some people think they do not need any medical insurance because they are rich enough to pay their medical bills. But these people may not realise that they may not be liquid enough as their cash could be tied up in assets or investments.

Medical costs in Singapore have been rising more rapidly than the inflation rate. And given that the Government aims to reduce health subsidy in the coming years, medical cover becomes even more crucial.

Critical illness cover: This pays a lump sum when you are diagnosed with one of 30 specific diseases such as invasive cancers.

Some people believe that a critical illness cover is unnecessary if income replacement (for both alive and dead scenarios) and medical needs are fully provided for. However, the fact is that the medical insurance of most Singaporeans - who rely mainly on Central Provident Fund-approved shield plans and their employers' group insurance schemes - is insufficient to take care of all expenditure in the event of a major illness.

The hospital and surgical (H&S) plans reimburse mainly only for 'in-hospital' expenses and perhaps some related chemotherapy costs for cancer treatment and kidney dialysis costs.

A cancer patient is usually not warded in a hospital unless surgery is needed or life support is required towards the terminal stage of the illness.

Most of the medical expenses incurred on specialist consultation and specialised cancer drugs cannot be claimed in H&S plans. Moreover, for working adults, the income lost due to time away from work while undergoing treatment and rehabilitation will not be compensated. Hence, critical illness cover will remain an indispensable part of the insurance portfolio for many.

Disability cover: It is an often ignored protection that most people should be considering. The idea is to insure your earning ability, which is your greatest asset.

For example, almost no insurance plan would pay a teacher if she loses her voice and has to quit because she can no longer teach. Similarly, no insurance plan would pay a pilot if he is grounded because he develops a diabetic condition that affects his eyesight.

But a properly designed disability income programme will ensure a monthly income payout if you cannot perform your primary occupation because of an injury, accident or any illness.

The writer is a chartered financial consultant with Great Eastern Life. The views expressed are his own. Comments are welcome at www.philiploh.com/contact

This article was first published in The Straits Times.