When can you buy insurance on your own, and when should you engage an agent.
Let’s face it: Buying insurance from an agent isn’t the most fun thing to do. You’ll need to make time for a session filled with awkward and personal questions, tell your hopes and fears to someone you met just five minutes ago, and confront some harsh truths about your financial standing.
It’s completely understandable if you’d rather buy insurance without having to go through an agent. But going at it solo is not without its pitfalls. Also, depending on your circumstances, you may have no choice but to engage the services of an agent after all. Regardless, it is important to have the right amount and type of insurance. Hence, we’ve put together this guide to help you understand how to buy the insurance you need without an agent (if you’re so inclined).
- What insurance can you buy without an agent
- Pros of buying insurance yourself
- Cons of buying insurance yourself
- Cheapest direct purchase plans in Singapore
- Things to note when buying insurance yourself
Can you buy insurance without an agent?
Yes, but only selected plans, and they sometimes come with restrictions.
Insurance policies that you can buy without an agent fall into two categories:
- General insurance (home, travel, maid, car, personal accident, group health)
- Direct purchase insurance (term and life)
This refers to insurance meant to cover risks that may arise from participating in common, everyday activities of life. For example, home insurance assumes the risk of suffering a break-in or losses in the aftermath of a fire.
Travel assumes risks such as falling sick from exposure to unsanitary conditions, material and financial losses from lost luggage or cancelled flights, as well as accidental injuries and death while travelling or in another country.
Car insurance assumes risks of road accidents and other mishaps while driving.
Meanwhile, group health insurance assumes a company’s risks of lost productivity and added costs from employees falling sick, offering benefits such as medical and dental claims.
Of the four, the only general insurance you do not purchase as an individual is group health (you inherit the benefits when you join a company with a group health insurance policy).
However, home, travel and auto insurance are common products available via many popular insurers. You can easily get a quote and purchase these types of insurance plans online.
Direct purchase insurance
Direct Purchase Insurance (DPI) is a type of life insurance policy that comes in whole life or term varieties, and provides a payout upon the death of the insured during the covered period.
Depending on the policy itself, you may also enjoy other features, such as total and permanent disability (TPD) cover, critical illness cover and guaranteed and non-guaranteed returns.
You can identify a DPI plan easily – the product needs to have the word DIRECT somewhere in its name.
Unlike other life insurance policies, you may purchase DPI plans without an agent. However, there are limits in coverage levels, as follows:
- Term DPI: Up to $400,000 per insurer
- Whole Life DPI: Up to $200,000 per insurer
In total, the maximum sum assured for DPI is $400,000 across all insurers. This means that no matter how many DPI policies you buy, the maximum lifetime claim is $400,000 per individual.
Why DPI policies have these restrictions is because life insurance is a major financial commitment. The higher your sum assured, the more costly your premiums will be. By capping the maximum sum assured, premiums are similarly controlled.
As those buying their own insurance may not have a complete understanding of the plans, restricting maximum sum assured (and therefore, premium levels) helps lighten the financial consequences in case of mistakes.
Why you might want to buy insurance without an agent
Be it general insurance or DPI, buying insurance on your own is attractive for the following reasons.
#1 Lower premiums
Insurance agents earn a cut when you buy a policy from them, which means that part of the premiums you pay go directly into their pockets.
Hence, buying your policies directly from the insurer will let you avoid the agent’s commission, translating to cheaper premiums.
The magnitude of this savings can be significant, as the insurer would not need to pay agent fees and other labour costs when they sell directly to you.
#2 Convenience and speed
You can simply go online to an insurer’s website, input your details such as personal data, sum assured, duration and more, and get a quote in seconds. Then, if you decide the price is right, you can go on to make a payment for your plan and – boom! You’re insured.
(Depending on the type of plan or insurer, a medical checkup or waiting period may be required.)
#3 No sales presentations and awkward questions
You’ll avoid sitting through a tedious presentation, answer awkward and sometimes very private questions, and fend off attempts to upsell you other plans or add-ons. You may be asked a few questions and have to sign a health declaration, but that’s about it.
#4 Easier to digest
The most common way to buy insurance on your own is via the website of an insurer or through a comparison website like ours.
A well-designed website will present things in the simplest way possible, highlight only the most important clauses, and give you just enough information to make a decision. This makes it easier for you (especially if you’re unfamiliar with insurance policies) to understand and digest the policy before buying.
Policy documents are easily available for download in case you want to read the exact terms, but you also don’t have to if you don’t want to.
Why you might not want to buy insurance without an agent
On the flipside, it may be preferable to work with an agent under these circumstances.
#1 You need coverage higher than $400,000
As mentioned above, the maximum sum assured for DPI is capped at $400,000, across all applicable benefits (death, TPD, critical illness etc). This limit applies even if you purchase multiple policies from different insurers.
Hence, if your life insurance needs are higher than $400,000, you’ll need to purchase your life policy from an agent.
#2 You’re unsure about what to buy
While DPI can be much cheaper than agent-serviced policies, don’t let price be the sole deciding factor.
For example, under normal circumstances, term life is much cheaper than whole life, but there are significant differences between the two. Term plans and whole life plans are designed to fulfil different goals and functions, even if they target the same age group.
If you’re unsure about what type of policies to buy, you should engage a qualified agent to answer your questions and clear up any uncertainties. After understanding your needs, preferences and budget, a skilled agent will be able to customise a suitable insurance portfolio for you.
#3 You prefer not to deal with claims yourself
When you engage an insurance agent, their responsibility doesn’t end when you sign the policy documents and make your first premium payment. They are also obligated to help you when you need to submit a claim, make changes to your policy or update changes in personal particulars.
During times of crisis, having a knowledgeable agent to handle all the paperwork and administrations can be a life (and time) saver, allowing you and your family to better focus on navigating the storm.
In contrast, when you need to make a claim under a DPI policy, you’ll need to handle the claims yourself. In most circumstances, this isn’t terribly difficult, but it is still a necessary task that some may find tedious and would rather not deal with.
Cost of Direct Purchase Insurance plans in Singapore
Here’s a sampling of DPI costs in Singapore. All quotes were generated from compareFIRST.sg by MAS, LIA and CASE.
5 Cheapest term DPI policies
|Insurer||Annual premiums||Death benefit|
|China Taiping Insurance||$163||$200,000|
|Tokio Marine Life Insurance Singapore||$173||$200,000|
|China Life Insurance||$186||$200,000|
*Based on a 35-year old female, non-smoker, till age 65, $200,000, no critical illness
5 Cheapest whole life DPI policies
|Insurer||Annual premiums||Death benefits at policy year 30|
|China Taiping Insurance||$2,558||Guaranteed: $200,000
|HSBC-Insurance Singapore||$2,650||Guaranteed: $200,000
|NTUC Income Insurance||$2,746||Guaranteed: $200,000
|Tokio Marine Life Insurance||$2,752||Guaranteed: $200,000
*Based on a 35-year old female, non-smoker, till age 85, $200,000, no critical illness. Non-guaranteed death benefit is calculated based on an illustrated rate of 4.75%.
Things to note when buying insurance on your own
#1 Project your future life insurance needs
Before you decide on a life insurance plan, you should take into account future plans and goals. Do you plan to get married and have children? Would your parents require financial support in their old age? Are you likely to inherit the family home?
Try and project your future needs so you can determine the level of life insurance coverage you will eventually need. If this exceeds $400,000, consider approaching an agent to help you construct a suitable portfolio.
#2 Ensure a good mix of different types of benefits
Don’t just focus solely on death, TPD and critical illness cover when thinking about life insurance. Also consider if you’ll need protection in other areas, such as personal accident, medical and hospitalisation, and income protection.
With DPI plans, you may opt for additional critical illness cover only, so you’ll need to sign up separate plans and riders for other needs.
Remember to compare before you buy
You may have a favourite insurer or two, and that’s ok when it comes to cheaper policies such as car or travel insurance.
However, for costlier, longer-term life insurance, you’ll want to ensure you get the best deal (same premiums, better coverage, or same coverage, lower premiums).
As you can see from our DPI Term and whole life samples above, our search for the five cheapest plans in each policy uncovered some surprising results with lesser-known and unexpected insurers. (HSBC is cheaper than NTUC Income? Who’d have thought?)
Instead of having a preferred insurer, why not have a favourite comparison website? That way, you can easily and quickly compare the best insurance plans for your needs.
Read these next:
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Best Integrated Shield Plans in Singapore (2021)
Guide To Investment-Linked Policies (ILP): What You Need To Know
6 Reasons To Review Your Insurance Portfolio Every Start Of The Year
5 Worthy Financial Goals To Attain By 35
By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.