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CFP Singapore study materials
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CFP Singapore: Module 2 - Risk Management and Insurance Planning

CFP Singapore · Work through your exam, one topic at a time.

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Module 2 - Risk Management and Insurance Planning

Module 2 - Risk Management and Insurance Planning

Module 2 tests how you identify and quantify pure risk, size the cover, choose between product types, read policy provisions, and place a client inside Singapore's layered health and long-term care system. Expect both calculation questions and definition-sensitive questions on disability and nomination.

Identifying and treating the risk

  • Separate pure risk (loss only) from speculative risk; then apply avoidance, reduction, retention or transfer using frequency and severity.
  • Personal risks: premature death, disability, critical illness, long-term care, hospitalisation, liability, property.
  • Life cover sizing: the needs approach adds income replacement, debts, education and final expenses, then deducts existing resources. Human-life-value and capital-retention methods give different answers for the same client.

Policy mechanics

  • Term versus whole life, endowment and investment-linked; participating versus non-participating.
  • Provisions: free-look period of 14 days, grace period (commonly 30 days), reinstatement, suicide exclusion in the early policy period, contestability, non-forfeiture options.
  • Disclosure duty: material non-disclosure lets the insurer avoid or reduce a claim, so underwriting accuracy matters more than premium shopping.
  • Nomination under the Insurance Act: a trust nomination in favour of spouse or children keeps proceeds outside the estate; a revocable nomination pays the nominee but the policy remains an estate asset. CPF nomination is separate and governed by the CPF Act - without one, CPF savings go to the Public Trustee for distribution under intestacy rules.

Singapore schemes

  • MediShield Life: universal, lifelong basic hospitalisation cover with deductibles and co-insurance, premiums payable from MediSave.
  • Integrated Shield Plans: private insurers layering extra cover above MediShield Life; riders must include co-payment.
  • CareShield Life: compulsory long-term care cover for citizens and PRs born 1980 or later; ElderShield applies to older cohorts.
  • Dependants' Protection Scheme (CPF Board) covers death and total permanent disability; Home Protection Scheme covers the outstanding HDB mortgage.

Worked example

A client earns 72,000 and wants ten years of replacement: 720,000. Add mortgage 400,000, education 200,000 and final expenses 30,000 for a need of 1,350,000. Resources are savings 150,000, group term 200,000 and CPF 180,000, totalling 530,000. Shortfall: 820,000. A term policy to age 65 matching the liability horizon delivers that cover at the lowest premium; whole life would buy permanence the client has not asked for.

Traps that cost marks

  • Using gross income rather than the amount dependants actually need.
  • Treating MediShield Life as comprehensive cover.
  • Forgetting that CPF savings are available to dependants when sizing the shortfall.
  • Quoting own-occupation disability where the policy defines any-occupation.