Should I get Disability Income Insurance?

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How would you get by if u lose your ability to work and earn a paycheck every month?

Financially speaking, working disability is worse than death. Our earning ability is our greatest asset and you are the golden goose that lay the golden eggs. Most insurance policies only pay when the golden goose drops dead or is critically ill, but this is not enough. What we need to do is to insure the golden goose’s “ability” to lay golden eggs.

But you may ask: I am already covered, right?

Some people may believe they are already covered for the risk of disability. Let’s look at the common misconceptions:

I have a policy that covers me for Total & Permanent Disablement (TPD)
This only covers very severe disability, such as losing a pair of limbs before your insurer pays you. What if a teacher loses her voice and has to quit teaching? This does not meet the definition of TPD, but is sufficient to trigger your disability income payouts till your desired retirement age.

I have a Critical Illness policy
Currently, critical illness insurance providers do not cover diabetes as one of the 37 critical illnesses. What if a pilot is grounded because his diabetic condition affects his vision? Critical illness policies work well to provide a lump sum to cover medical expenses. But it falls short of the real paycheck protection need.

I have personal accident coverage

The weekly income payable from personal accident plans is payable only if the cause of disability is accidental, defined as involuntary and violent. Working disability from illnesses is not covered.

My employer will pay me
Most employers define how long you will receive your salary if you are unable to work. In Singapore, this is often between 1 to 3 months, which will not be sufficient in the case of long-term working disability.

Therefore, it is crucial for all working adults to consider a Disability Income policy that provides for replacement of income in all scenarios of working disability. If a sickness or injury (of any severity) prevents you from working for at least 60 days, it can replace 75% of your earned income, by offering a tax-free cash benefit every month.

What Is A “Deductible” or “Excess”?

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A deductible or excess is something you have on your policy when you have either, Hospital & Surgical coverage or Motor coverage. And its a dollar amount – it could be $500, $1000 or $3,000.

Quite simply put, the deductible is what you are responsible for, before the insurance company pays out anything on your behalf to fix your vehicle or seek medical treatment.

The lower your deductible, the higher your premium is going to be. Conversely, the higher the deductible you have, the lower your premium is going to be. 

Reason is this – you, the driver or the patient, are taking on more risk with a higher deductible. When you have a lower deductible, you are putting more risk on the insurance company. As a result, your premiums are effected in this way.

Importance of Overseas Medical Coverage

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There is an essential aspect of Medical Insurance which some of you may not know – having overseas coverage. To illustrate the importance of it, below is the story of my colleagues’ client.

She is a 9 years old girl, who was diagnosed with Brain Cancer in 2014. After 2 weeks of treatment, her doctors gave up as the healthcare industry in Singapore does not have the necessary type of cancer treatment – Proton Chemotherapy.

Her parents sought advice from her doctors as to where their daughter could go internationally, in order to undergo Proton Chemotherapy. Doctors told them the nearest country with this treatment is South Korea, which is also the cheapest. Although she was unable to walk and had to move around in a wheelchair, the girl’s parents decided to bring her to South Korea.

After the treatment was done, she responded well and returned to Singapore, able to walk again. After follow-up Chemotherapy in Singapore, her cancer is now in remission.

Her parents and financial planner filed a claim for the medical bills incurred in South Korea, amounting to $110,000. Thankfully, their insurer paid for it, as the girl’s Hospital & Surgical plan covers overseas hospitalisation and treatment costs.

Many of us may feel that since Singapore is a very developed country, we should have all forms of healthcare. But this little girl’s story shows us that the opposite is true.

There are definitely more cases of patients being advised to seek treatment outside Singapore. So do check if your Hospital & Surgical Plan covers you for overseas treatment.

How Can You Cope With Long Term Care?

Screenshot (259)I would like to share with you the story of two friends of mine, who are in distress because their parents require long term care.

George and Joanne are a married couple in their late 40s. George just put his parents in a nursing home, which costs $2,000 per person every month. At the same time, Joanne’s mum is living with them while receiving in-home medical and nursing care. Such home care services costs $1,100 every month.

All 3 parents are either suffering from dementia or stroke, which hampers daily activities like eating and bathing. In particular, George’s mum has lost control of her bladder due to dementia.

They feel stressed and emotionally drained. Both sets of parents have lost their savings and independence, because they lack long term care insurance.

After struggling with long term care for their parents, George and Joanne want to protect their kids from the financial and emotional burden of having to care for them in their old days. They realised they need a long term care insurance policy.

As George was sharing with me, he felt that if his and Joanne’s parents had a long term care policy, instead of creating this emotional and financial burden for the family, the policy would have paid for the care and help them maintain their independence.

Lesson learnt:
The greatest risk we will face in retirement is requiring long term care. Without long term care insurance, we are playing the wrong odds. What is really worrying George and Joanne is this fast approaching dark cloud of a $100,000 per person risk, for an average 5 years stay. How are they going to pay this amount when they still have to save for their retirement?

If you are 40 years old or older, long term care insurance builds a shield around your nest egg, protecting you and your family from that risk so you can enjoy spending quality time with each other in retirement. Your kids will be grateful they don’t have to worry about changing your diapers or giving you that uncomfortable sponge-bath, because you planned ahead.

If you have parents age 40 or above, long term care insurance will pay for the care of your parents at old age and help them maintain their independence. Most importantly, you don’t have to pay for long term care expenses such as Nursing Home fees and hiring a caregiver on your own.

FAQs on MediShield Life and Private Integrated Shield Plans

MediShield Life (MSHL) has replaced MediShield as of 1 Nov 2015. Like MediShield, MSHL is targeted at Class B2 and C wards coverage but it provides better protection such as:

  • Higher inpatient/day surgery/outpatient cancer treatment limits
  • Higher annual claim limits
  • No lifetime limit
  • Lower co-insurance payable

This brings several questions for people who are already insured with a Private Integrated Shield Plan (IP). Below are some of the questions I have encountered and my answers to each.

If I have an IP plan and MediShield Life, does that mean I am paying for two policies?

MediShield Life is the foundation on which IP plans are built. There is only one plan and there is no duplication of coverage or payment of premiums. If you have an IP plan, you will pay one single premium directly to your private insurer. The MediShield Life portion will be sorted out at the back-end between your insurer and the CPF Board.

How much can I claim under MSHL and how much under my private IP plan?

You can submit your claim to your private insurer. The part of the claim that MSHL can cover will be provided by the CPF Board to your insurer. Your private insurer will then provide the entire payout to you.

How is my IP premium affected?

The MediShield Life portion of your IP premium has increased from what it used to be under MediShield, but is fully payable by Medisave. The additional private insurance portion of IP premiums is payable by Medisave, up to an Additional Withdrawal Limit.

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Additionally, all 5 IP insurers have committed to not changing the additional private insurance coverage component of premiums for IPs in the first year after the launch of MSHL.

You may be eligible for certain premium subsidies. To understand which subsidies you are entitled to and how they work, there is more information on MOH’s website.

What is the Additional Withdrawal Limit (AWL) for my age group?

Here’s the respective AWLs for each age group:

Age Next Birthday 1 to 40: AWL of $300

Age Next Birthday 41 to 70: AWL of $600

Age Next Birthday 71 and above: AWL of $900