So this came in my mail two weeks ago…

What exactly is CareShield Life?

It may sound like a type of nut, but it is our improved national long-term care insurance scheme that replaces the old version – ElderShield.

So why do we need long-term care insurance?

A study has found that Singaporeans are spending a bigger part of our lives in poor health compared to 30 years ago.

According to the Health Promotion Board, 1 in 4 Singaporeans aged 40 years and above has at least 1 chronic disease.

Families have generally become smaller too. This leads to a declining old-age support ratio – the number of working children to provide care for every elderly.

And depending on circumstances, long-term care could cost between $1,000 to $4,000 per month, for services such as home care, day care and nursing home.

This is where long-term care insurance comes in to alleviate the financial burden.

Enhancements to ElderShield scheme

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Some of you might have heard – our national long term care insurance scheme, ElderShield, will be enhanced and renamed as CareShield Life. This is a good move as Singapore’s population is rapidly aging with shrinking family sizes, hence a declining old-age support ratio.

To be launched in 2020, some of its key points are below:

  • CareShield Life will be universal for all future cohorts of Singapore citizens and Permanent Residents, starting from age 30 and including those with pre-existing disability.

 

  • Higher and lifetime payouts, as long as the insured remains severely disabled (i.e. unable to perform 3 out of 6 Activities of Daily Living, also known as ADLs). Payouts start from $600 per month, and will increase overtime as premiums are paid.

 

  • The government will provide premium subsidies and financial support for CareShield Life.

Since the news was announced, here are some FAQs that I have met with and the respective answers:

 

1. What will happen to existing ElderShield (ESH) policyholders before CareShield Life is launched?

They will continue to be covered and enjoy the benefits under the current ESH policy as long as premiums are paid. No action is required in the meantime. Similarly for policyholders of ESH Supplementary Plans, they will continue to be covered.

 

2. Will universal coverage be extended to existing ESH policyholders?

Existing ESH policyholders will be given the option to join CareShield Life from 2021, pending further details form the Government.

 

3. Should I buy the current ESH Supplementary Plans before CareShield Life is launched?

If you have a need for long term care above the current ESH coverage, you should consider enhancing your coverage with ESH Supplementary plans.

 

Long term care, whether in the form of home care or nursing homes, can incur huge expenses in the long run. Such expenses however, are not covered by the usual hospital & surgical insurance most people have. For more information, I have written a separate article on how to cope with long term care.

The Lifecycle Financial Planning Approach

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The lifecycle financial planning approach places all your financial activity into distinct time periods, or stages, with retirement acting as the final phase in the financial lifecycle.

This approach is powerful as it provides you a clear framework for evaluating different decisions. Here are the 5 standard financial life stages encompassed in the lifecycle approach. Keep in mind the stated age ranges are merely guideposts, some of you will pass through stages more quickly or more slowly depending on your circumstances.

1. Early Career
Ranging in age from 25 to 35 years old, early career phase adults are starting to build a foundation for a strong financial future. You may be planning to start a family, if you have not done so already. If you do not yet own a home, you might be saving for one. At this stage, keeping income in step with expenses is a struggle, but it’s important to lay the groundwork for retirement saving now.

2. Career Development
From ages 35 to 50, earnings rise, but so do financial demands. Keeping expenses in line with income is a challenge in this stage. Many families are concerned with covering college costs and paying for ongoing expenses while also increasing the pace of saving for retirement.

3. Peak Accumulation
In this stage, from the early 50s into the early 60s, you typically reach your maximum income level. It may be a time of relative freedom as your children have graduated from college. Without college tuition and with lower expenses, you can accelerate savings rates to position yourself for a more secure retirement.

4. Pre-Retirement
About 3 to 6 years before winding down professionally, you should start restructuring assets to reduce risk and increase income. By this point, mortgages are usually paid and children are independent. This is the time to evaluate retirement income options and the tax consequences of investments.

5. Retirement
The final financial lifecycle phase occurs for people in their mid-60s and beyond. Once you stop working, your focus shifts from wealth accumulation to income preservation. In this stage, the goal is to preserve your purchasing power and enjoy your desired lifestyle. Estate planning and legacy considerations also gain importance as you age.

As we transition through each life stage, we should adjust our focus each step of the way to ensure our financial plan remains appropriate for our risk tolerance, age and goals.

3 things about your employer-provided insurance you may not know

benefitsIt is great if you are working in a company that provides you with benefits such as insurance. However, there are some limitations to employer-provided insurance that you should know. Here are 3 of them:

1. It’s a benefit, not a guarantee.

Fact is, companies are not obligated to offer life or health insurance. Just because your employer is offering it now, doesn’t mean they will in the future. A lot of companies are in cost-cutting mode, and benefits like life insurance can disappear without notice.

2. If you have it, it’s most likely not enough.

Most employer-provided life insurance coverage is one to three times your salary. So if you make $50,000, having up to $150,000 of life insurance sounds like a lot, right? But if you try to put that money to work in today’s interest rate environment, you’ll soon find out it doesn’t go very far. And if your family needs to spend $50,000 each year, what are they going to do after the third year?

3. It doesn’t protect your insurability.

Think about what would happen if your health changes while you only have employer-provided health insurance, but then they drop the coverage and you’re no longer able to get covered? Or what if you lose your job, or change jobs and the new employer doesn’t offer life or health insurance as a benefit?

Typically, employer-offered group insurance is not portable, meaning you can’t take that coverage with you when you leave a job. Buying an individual policy prevents this because it’s something you own.

The bottom line, is that it’s good to have employer-provided life insurance, but don’t ignore the greater need you may have for individual life insurance coverage too.