Careshield Life New Updates

Why you shouldn’t pay $200 for your Careshield Life

In 02 Sept 2019, The Singapore Parliament approved Careshield Life. This is the 3rd Shield that Singapore has to prepare our population in this aging economy. We will be covering how will Careshield Life be part of our Wealth Management journey and whether it will be enough.

Careshield Life New Updates

Careshield Life New Updates: My Letter

 

What is Careshield Life?

CareShield Life provides Singapore a Lifetime* payout of $600/month up to $1200/month** in the event of severe disability. The premiums can be fully paid by Medisave. The government ensures that no one will lose their coverage due to financial difficulties. The claim will be eligible if a person is unable to perform at least 3 out of 6 activities of daily living.

Careshield Life New Updates Activities of Daily Living

Careshield Life New Updates Activities of Daily Living

*As long as the insured remain severely disabled
**Estimated payout if increase at 2% a year

 

Why will you need it?

I hope you can agree with me that once a person is unable to perform 3 out of 6 activities of daily living, he/she probably will need help to maintain and sustain his/her life. In the 3 Lessons I Learnt From Critical Illness Survivors and Family Members, I learnt that a family member typically have to help the survivor for at least 6 months or until the treatment is over. If the disability is prolonged, most of them will choose to employ a maid to take care of them.

In recent years, the monthly recurring cost of hiring a maid (excluding the one time cost such as plane tickets, etc) is easily more than $800. This does not include other options like nursing homes, home and community care, transport, consumables and so on.

Based on AVIVA’s Long Term Care Study 2011 showed that claimants on average required about $2,150 per month to pay for a domestic helper or nursing home, transportation to and from the hospital for treatments or physiotherapy, mobility aids, as well as daily expenses and bills.

A Department of Statistics Singapore paper published in 2011 showed that, in Singapore, more than a third of caregivers had been providing care to their recipients for over a decade.

In the Eldershield Review Committee Report in 2018, 1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime.

With the statistics stacked against you, I personally think that the $600/month from Careshield life will not be enough.

 

Careshield Life New Updates Cost

Careshield Life New Updates Cost: Photo Source

 

I already have insurance that covers for TPD. Why make me buy this?

TPD or total permanent disability will only have a payout when it is permanent (As the name suggest. For the avoidance of doubt, please check your individual policies for the definition). If the condition is not serious enough, there may not be a claim from TPD. Careshield Life provides monthly pay outs as long as you are unable to fulfill 3/6 Activities of Daily Living either temporary or permanent. Other common severe disabilities includes the following:

  1. What if there is an amputation that is because of diabetes?
  2. What if there is an accident or degeneration of muscle?
  3. Progression of illnesses such as dementia?

 

What should you do?

If you are age 30 – 40 now, welcome to Careshield Life. It is compulsory. Those that are in eldershield (1979 and before), you can get incentive when you switch over to Careshield Life by by 31 Dec 2023. You can find out more here.

 

Final Thoughts

Personally, I think this is a great initiative by the government to address the needs of the aging population in the years to come. Those who are between 30 to 40 will probably be shocked (or pleasantly surprised) to receive this letter in the next few days.

You shouldn’t be paying only $200 for careshield. I think we should pay more for more benefits.

Long Term Care is part of your Wealth Management, speak to your financial advisors for future clarification.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about Wealth Management, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to join my Telegram Channel! Or subscribe to our newsletter now!

OCBC Great Eastern Cashflo Credit Card

OCBC Cashflo Credit Card to affect Great Eastern Insurance Premiums Payment

From 1st October 2020, OCBC Cashflo Credit Card will now impose a 1% processing fee for Great Eastern premiums charged under a 12-month installment plan. If you are using your Cashflo Credit Card to pay for your Great Eastern premiums, this is something that you will want to take note of.

OCBC Great Eastern Cashflo Credit Card

OCBC Great Eastern Cashflo Credit Card

OCBC Cashflo Credit Card Pre-October 2020

To be honest, the OCBC Cashflo credit card has great advantage for Great Eastern policy holders. To summarize, these are the 3 greatest advantage they offer.

  1. Allow the policy owners to be charged annually to get cheaper premiums. (to be explained below)
  2. Allow policy holder to better manage their cashflow / wealth management. (as they will be paying monthly)
  3. Get cash rebates (0.3% cash rebate on your premiums for selected Great Eastern Life and Great Eastern General insurance plans)

To set the context, paying annual premiums for (non-ILP) insurance policy typically gives around 3% discount. Imagine this, the annual premiums for the policy is $12,000. The same insurance policy will cost $1030/month ($12,360/annually) if you decide to pay by monthly mode.

The client saves $360/year by being charged annually using the Cashflo Card. He is able to pay monthly $1000 to manage his cashflow better and get $3/month cash rebate (assuming that the card is only used for this policy.)

Net Benefit: $396 per year ($360 + $36)

OCBC Cashflo Credit Card Pre-October 2020

OCBC Cashflo Credit Card Pre-October 2020

OCBC Cashflo Credit Card Pre-October 2020 Cash Rebates

OCBC Cashflo Credit Card Pre-October 2020 Cash Rebates

OCBC Cashflo Credit Card Post-October 2020

From 1st October 2020, there will now be a 1% processing fee if the policy holder decides to take the option to be charged annually AND cash rebates will no longer be awarded for Great Eastern premiums.

OCBC Cashflo Credit Card Post October 2020 Processing Fee

OCBC Cashflo Credit Card Post October 2020 Processing Fee

OCBC Cashflo Credit Card Post October 2020 Cash Rebates

OCBC Cashflo Credit Card Post October 2020 Cash Rebates

 

What should you do?

Let’s take the above situation again where the policy holder is paying $12,000 annually.

The client saves $360/year by being charged annually using the Cashflo Card. Customer wants to have it via installment and have to pay $120/year for the processing fee. There is no longer any cash rebates.

Net Benefit: $240 per year ($360 – $120)

There is still net saving if you use this method of paying for the premiums.

 

Final Thoughts

It is no fun having your net benefits being slashed especially if you have been reaping the benefits from this for years. However, this is not the first time that credit card’s benefit is being updated to reflect the current market situation.

I believe that this will happen in future as well. Do keep yourself updated on these changes.

Speak to your financial advisors for future clarification.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about Wealth Management, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to join my Telegram Channel! Or subscribe to our newsletter now!

The hidden cost of retirement

The Hidden Cost Of Retirement: Healthcare

Many of us look forward to retirement. It is the time when we can finally enjoy our lives and the fruits of our labor. We envision that we can use the hard-earned money that we have save and invest in our wealth management journey to spend on the finer things in life.

The hidden cost of retirement

The hidden cost of retirement: I wonder why are retirement photos all at the beach.

However, as we grow older, there is this cost that keeps creeping up. If uncareful, may derail our retirement.

(This is a joint-post together with Life Finance. Do check them out. I think the quality of their article are great. They are certainly one of the better writers out there and I’m happy that there is someone like them writing on these important topics)

 

Healthcare costs in retirement

Healthcare costs will form a significant part of retirement spending. In Life Finance previous article, he documented that healthcare costs will shoot up from a bit less than 7% of household spending for a typical household before retirement to more than 12% after retirement. This is on top of health insurance spending. This 12% of overall spending is made up of the deductibles, co-payments and other outpatient expenses tat actually comes out of the retirees’ pockets (or Medisave account).

The hidden cost of retirement healthcare cost

The hidden cost of retirement healthcare cost

The higher percentage does not mean that a retired household spends less on everything else. In fact, once household size and inflation are accounted for, retired households actually spend the same amount after retirement as they do before. Hence planning for higher healthcare costs is crucial as part of retirement planning.

 

Why does healthcare costs go up in retirement?

It is no secret that while inflation has moderated for most goods and services in the past few years with slowing economic growth, healthcare inflation has continued unabated. But the rate at it is going up is not well known. Let’s look at some data.

From the data.gov website, we can see that healthcare inflation has outpaced general inflation, in the last few years.

The hidden cost of retirement healthcare inflation

The hidden cost of retirement healthcare: Inflation

But this chart gives a relatively benign view of healthcare cost inflation, showing that it is still manageable. This is however, not true at the patient level, especially for retirees. As life expectancy increases, Singaporeans are also seeing an increase in the number of years spent in ill health to more than 10 years out of a lifespan of 84 years. This means that the corresponding bills for healthcare will increase, as hospital stays becomes longer, and procedures become more complex.

To get a better sense of the increase in healthcare costs at the patient level, we can look at the Ministry of Health’s Fee Benchmarks Committee Report from 2018. While Class A public hospital bills grew by 4.9% per year between 2007 and 2017, private hospital bills grew by 9% a year in that same period!

The hidden cost of retirement healthcare bills

The hidden cost of retirement healthcare bills

Beyond that, healthcare costs have kept increasing. Mercer in 2019 indicated that in 2018, Singapore healthcare cost inflation was 10% and the same is projected for 2019 and 2020

In addition to hospital bills and healthcare costs going up, retirees are faced with the fact that the frequency of their hospital stays will also increase. The likelihood of hospitalization in any year will go up from between 20% – 27% for retirees in their late 60’s and early 70’s, to a staggering 70% – 80% when they reach their mid 80’s, or a three-fold increase at a minimum.

The hidden cost of retirement healthcare hospitalisation episodes

The hidden cost of retirement healthcare hospitalisation episodes

A three-fold increase over 20 years corresponds to a growth rate of hospitalization of 7% per year.

Hence, to get the true rate of healthcare cost increase in the retirement years, we need to consider both:
a) The higher frequency of hospitalization and healthcare needs
b) The growing rate of healthcare inflation

Putting both these figures together:

• Retiree patients in Class A wards in public hospitals will be faced with a 12% increase in healthcare costs per year (4.9% and 7%)
• Retiree patients using Private hospitals will be faced with a 18% rise in healthcare costs on a year-on-year basis

While it is true that with healthcare insurance, such as Medishield Life or an Integrated Shield plan, much of these rising costs can be transferred to the insurer, the retiree patient is still faced with the prospect of rising co-payments and other out of pocket costs. Furthermore, rising healthcare costs will ultimately be reflected in higher insurance premiums as well, which is what we discuss next.

 

Rising healthcare insurance premiums

As healthcare cost increase as explained above, premiums from medical insurance will go up due to the risk pooling nature of insurance policies. From 2015 to 2020, Singapore’s medical insurance premium began its steep incline. The Ministry of Health has stepped in on many initiatives such as co-payment, the use of preferred doctors and also pre-authorisation to help cope the medical inflation rates in Singapore.

The Medishield Life Committee gave their recommendation in 2014 with the proposal of the upgrade from Medishield to Medishield Life. In a nutshell, it means that the scope of coverage will increase and at the same time, the premiums will increase. There were a series of government subsidies over the last 5 years to help Singaporeans cope with the rising cost of medical insurance.

As the Integrated Shield (IP) plan is made up of Medishield (Now Life) and Additional Insurance Coverage from Insurance company, this directly increase the overall premiums that consumers have to pay.

The hidden cost of retirement healthcare medishield life

The hidden cost of retirement healthcare Medishield life

To the same time, insurance companies were making underwriting loses as net claims faced by the insurers outpaced premiums earned, particularly for plans covering private hospitals. Net claims are made up of the absolute cost of healthcare and the frequency of healthcare. The absolute cost of healthcare has gone up over the years as written above. At the same time, with medical advancement, it is more common for people now to seek medical treatment as compared to the past. These has made premiums unsustainable in the long run.

Between the years 2016 and 2019, the premiums of riders and the private insurance component of IP increase on average of 24% and 10% respectively each year. These trends are largely reflective of increases in private hospital insurance claims.

The raise in questionable claims also push up the claims experience of the insurance companies. (Quoted from source almost fully to retain the meaning of the article)

In one example, A 37-year-old woman stayed seven days in hospital for abdominal hernia repair. Of the $46,000 bill, the surgeon’s share was $31,900, or five times the norm. It transpired that while in hospital, she also had her breast augmented, and a tummy tuck with the fat transferred to her buttocks, but since these are not covered by insurance, none of this was stated in the bill.

A second example is for a woman was warded for 42 days for cervical sprain and strain (or pain in the neck) but received treatment only on seven days. She was given physiotherapy and painkillers for the other 35 days, something that could have been done as outpatient treatment. The bill was $84,000.

The combination of Medishield Life premiums increase, healthcare cost inflation, frequency of healthcare and the raise of questionable claims made the previous premiums charged unsustainable. This led to an inevitable increase in medical insurance inflation and also tightening of the claim procedures in the last 5 years.

 

Cost of Hidden Cost of Retirement

Medical insurance is one cost that people don’t usually take into account during retirement. We generally assume we will be well (why will we not) and plan for our living expenses with occasional holiday or two. However, we have to bring this to you to share with you the cost of medical insurance at your age of retirement.

The hidden cost of retirement healthcare great eastern shield

The hidden cost of retirement healthcare great eastern shield

The hidden cost of retirement healthcare great eastern totalcare

The hidden cost of retirement healthcare great eastern totalcare

Taking Great Eastern medical policy as an example (Disclaimer: We are not advocating any insurance policies from any company. We are using Great Eastern as an example for premium calculation. In my experience, the premiums for the other companies should be around the same).

At age of 65, we will need to annual cash premium of $2,226 ($967+$1259) for a private hospital coverage (with 5% co-payment). This comes out to be around $185/month.

In 5 years time, at the age of 70, we will need to pay an annual cash premium of $3,234 ($1695+$1539) which comes out to be around $269/month.

If this don’t scare you, at age of 75, we will need to pay an annual cash premium of $4,685 ($2650+$2035) which comes out to be around $390/month.

In Singapore, our life expantacy is around 85, I cannot imagine how one can afford those premiums when that time happens. All this is assuming that there is no future medical inflation which does not inflate the current premiums now.

PS: If you thinking that you can self-insure and not have any insurance, I hope that I have to burst your bubble.

 

Final Thoughts

The hard truth is that healthcare cost is going to continue to increase due to the factors explained above. The first thing I get my client to plan for is their paycheck. Remember that during retirement, there is a paycheck and a playcheck. The paycheck consist of items such as healthcare cost, phone bills, utilities, basic food and beverages and so on. Usually, we allocate money from “safer” asset class  to take care of those cost because it will have to be paid at whichever market conditions.

The playcheck is the one we are more familiar with. It consist of items such as exotic holidays, a roadtrip, etc.

Whichever the paycheck or playcheck, it is part of our retirement journey.

Thank you Life Finance for your contributions. If you like this article, do comment before and leave a message for me or Life Finance.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Phew

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?

In Wealth management, one of the major expenditure is on insurance policies to protect your downside. In the recent case for AXA, they are considering to sell of their Singapore’s business unit, this lead to some people questioning what will happen to their insurance policies when they sell away their business.

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Worries

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business: Worries

 

Why do they want to sell away their business?

Before we explore what will happen to our insurance policies after the companies sell that business away, we need to explore why would they even want to sell that business unit away if it is profitable.

It could be any of the following reasons:

  • Business strategy has changed
  • Raise funds to divest for peripheral operations (This is AXA’s cited reason)
  • Concentrate on other business lines
  • Focusing on other geographical markets
  • Being offered a good price / Cashing out on business

The list goes on. Insurance companies also acts like normal businesses and they will probably consider the sale of that business unit when an opportunity arises.

 

Is this the first time it happened?

It happened various times in the past and I believe this will happen again in the future.

In 2003, John Hancock was bought over by Manulife.

in 2007, TM Life Asia was acquired and now known as Tokio Marine Life Insurance Singapore Ltd.

In 2010, UOB Life sold away their life insurance unit to Prudential.

In 2018, Zurich Life was bought over by Singapore Life.

Under going discussion since 2019, AVIVA is considering to sell it’s Singapore/Vietnam business unit.

Under going discussion in 2020, AXA is considering to sell Singapore’s business unit. (Special note: AXA mentioned they will not be selling their Singapore’s business unit in 28 Dec 2017)

You can see that there is a fair amount of transaction that took place in Singapore shores as well.

 

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?

I think that’s the key to the topic today. I have contacted the Life Insurance Association of Singapore (LIA) to confirm above. This is their response. I will bold the information that is relevant to consumers.

All insurers are licensed and are regulated by the Monetary Authority of Singapore via the Insurance Act, and its subsidiary legislation, and regulations. Due to the long term nature of life insurance policies, there are provisions* in the Insurance Act which the licensed insurer has to comply with, in an event of a voluntary transfer of business or re-structure of business or business failure, to safeguard the interests of policyholders. Refer to *Part IIIAA on Transfer of Business and Shares, Restructuring of Licensed Insurer and Winding Up.

Business Transfer (Buy-Over)

Depending on the deal agreed between the two parties, the buying insurer will generally become responsible for all policies of the selling insurer. For the individual policyholder, his policy’s terms and benefits will be unchanged, and will continue to be honored by the buying insurer.

In short, suppose you hold a policy issued by Insurer A. Insurer A is sold to Insurer B, Insurer B will become your insurance company. Your policy, now under B, will be untouched and will be made good by B.

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Phew

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business: Phew

 

Conclusion

Your policy will still be in-force and be taken care of the new insurer. The next question will then be who will be taking care of your insurance policy from then on?

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to contact me on my  Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

3 Lessons I Learnt From Critical Illness Survivors and Family Members Being Strong

3 Lessons I Learnt From Critical Illness Survivors and Family Members

In July 2020, I had to honor to interview Critical Illness Survivors and their Family Members. I interviewed a Daughter whose mom suffered from a stroke, a 2-time breast Cancer Survivor and also a Father who’s son had Leukemia (Blood Cancer). After the 3rd interview, I noticed a consistent trend that all 3 exhibit and how they manage the whole journey in their family planning or wealth management.

I want to thank Angie, Grace and also Sean for their selfless sharing so that more people can learn what they went through. We also pray that you won’t need to use this lessons in future.

Thank you.

 

Lesson #1: It starts of with pain

In my interview, I realised that it starts from with some unexplained pain at a particular body part. Most of the time, it was brushed aside or just thought that it was harmless pain. Very commonly, the person will feel more tired than usual.

Pain is an message to your body that something is wrong. Please do not ignore it.

3 Lessons I Learnt From Critical Illness Survivors and Family Members Pain

3 Lessons I Learnt From Critical Illness Survivors and Family Members: Pain

 

Lesson #2: Seek Support

This was the most important when it comes to recovery. The journey of critical illness could be confusing, overwhelming and devastating. The right support could ease the journey where every single step is already well planned out. The Children Cancer Foundation and the Breast Cancer Foundation specifically named in my interview for being very meticulous. These societies impacted their lives so much that they continue to donate or give back till today.

“Please don’t stay in a private ward” 

Even though your hospital entitlement might be a single bedder, staying in hospital with no other people to communicate with and journey together might give the feeling of being alone and that’s the last thing we want. Talk to people, listen to their journey, know that you are not alone.

Seek out your friends, family and GOD.

3 Lessons I Learnt From Critical Illness Survivors and Family Members Support

3 Lessons I Learnt From Critical Illness Survivors and Family Members Support

 

Lesson 3: Be Financial Prepared

Whether you are a parent or a child, a critical illness will rob your time off work and saving. Fortunately, my interviewees bought insurance to protect their livelihood, money and especially time so that their loved one can spend time to journey together with the patient. Grace’s husband was able to step away from work for half a year so that he can accompany Grace during her treatment. Sean was able to spend time with his son during treatment times as well.

The hospital bills will be scary. “It is easily more than $500K a year”.

Be financially prepared even before it happens.

3 Lessons I Learnt From Critical Illness Survivors and Family Members Bills Shock

3 Lessons I Learnt From Critical Illness Survivors and Family Members Bills Shock

 

Bonus Lesson #4: Keep yourself in good condition

As a caretaker, parents or child, keep yourself in good condition. You need to be in the best condition physically and mentally to bring your family out of this. If you want to blame and punish yourself for what has happened, punish yourself by keeping yourself in a good condition and take responsibility to bring your family out of this.

You need to appear strong in front of your child, your spouse or your parents so that you can give them the confidence that everything will be alright.

3 Lessons I Learnt From Critical Illness Survivors and Family Members Being Strong

3 Lessons I Learnt From Critical Illness Survivors and Family Members Being Strong

 

Conclusion

Don’t ignore pain, seek support and be financially prepared.

Thank you Angie, Grace and Sean for the inspiration for me to write this article. You can view the replay below.


No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!