Early stage critical illness insurance worries

Why do you need early stage critical illness insurance in Singapore?

Why do you need early stage critical illness coverage in Singapore?

Generally, critical illness insurance typically pays a lump sum in an event of a diagnosis of the critical illness. This amount of money is typically used to replace a person’s income and sustain their lifestyle. This is because it will not be easy to work straightaway after suffering from a critical illness.

One of my client recently asked me this question.

“Do I need an early stage critical illness since I have a critical illness insurance already?”

To answer this, we first have to ask ourselves this question.

 

What is early stage critical illness?

An early stage critical illness (to put simply) is an illness that is discovered at the very beginning. I will be giving 2 examples that are common in Singapore.

Why do you need early stage critical illness insurance in Singapore.

Why do you need early stage critical illness insurance in Singapore.

While it is true that an early stage critical illness is “less serious” that a major stage critical illness, a person might also need to be away from work for a short period of time (probably a year). This will lead to the second question.

Why do I need an early stage critical illness coverage?

While we take time away from work to recover to be well again, our lifestyle still carry on. Our utilities bills, our mobile bills, our daily commute and our daily food consumption still continues. The sudden lost of income from resting may start to DIG HEAVILY into your savings (that is meant for retirement). Worrying about money usually creates more stress and it may kill you more than the illness itself.

Early stage critical illness insurance worries

Early stage critical illness insurance worries

How much early stage critical illness coverage should I need?

Everyone is different. For Wealthdojo readers, we recommend your early stage critical illness coverage to be at least 1 year of your annual income. This means that if you are earning $100,000 a year, a recommended coverage you should have is at least $100,000. Premiums for early stage critical illness is usually higher as compared to the other protection plans in the market. This coverage was made popular in 2010 (The New Paper. 31 August 2010. She has 3 policies but no coverage) after a lady was unable to claim from her critical illness coverage even though she was paying high premiums ($600/month). Those were the times early stage critical illness coverage was not widely available.

Nowadays, insurance companies covers for early stage critical illness.

Early stage critical illness insurance claims

Early stage critical illness insurance claims. Source: The New Paper. 31 August 2010

While critical illness definition has been standardized in Singapore (Read: Life Insurers to change definition of Critical Illness), there is no standardized definition for early critical illness.

In Wealthdojo, we strongly encourage you to talk to your Insurance Financial Planner once a year for a review so that your protection needs can be taken care of adequately. (Click here to contact us to help you with your Insurance Financial Planning).

We believe in bespoke financial planning. Whether it is money maximization, insurance or investing, we believe that everyone is different and the planning should be suited for you.

All opinions above are my own. Please view our disclaimer page to understand more.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page!

Now that you’ve read about learnt about how to benefit from What you can do about price hikes for public transport in Singapore. I challenge you to read this article (Careshield Life: Disability Insurance Singapore )to push your understanding further!

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Enhanced CPF Housing Grant

How to Benefit from the Enhanced CPF Housing Grant

When the government announced the Enhanced CPF Housing Grant, it was a mixed reaction. Those in the sandwich generation cheered, some were disappointed. The question is, how do you benefit from the Enhanced CPF Housing Grant?

Enhanced CPF Housing Grant

Enhanced CPF Housing Grant

Let’s first start by asking ourselves, what is the Enhanced CPF Housing Grant all about? (Read more: Make The Most Of Your CPF)

HDB Eligibility

The Enhanced CPF Housing Grant that is going to streamline current Additional and Special CPF Housing Grants as an attempt to make public housing affordable and available for everyone.

Firstly, the income ceiling for buying the HDB has increase to $14,000. This means that HDB will be available for more people to buy. Currently, those that are “earning too much” is not eligible to buy a HDB. To put it really simply, if your average gross monthly household income is less than $14,000, you are eligible to buy a HDB.

Enhanced CPF Housing Grant Income Ceiling

Source: HDB Website

Enhanced CPF Housing Grant Eligibility

Now that you know you are eligible to buy a HDB, the question is how much grant are you entitled to for the new Enhanced CPF Housing Grant. The answer is, it depends. It will depend on the followings.

  • Average Monthly Household Income (The higher your Household Income, the lower the grant)
  • Lease Coverage (To get full grant amount, the flat must have enough lease life until you and your spouse is 95)
Enhanced CPF Housing Grant Table

Source: HDB Website

Typically, the average monthly household income in Singapore for First-Timer Families (Assuming a couple who graduated from an University and working now) will be around $5000, this brings the grant amount to $40,000.

There are many permutations as to how this new Enhanced CPF Housing Grant will affect people. There will definitely be people who will compare between the old scheme and the new one. For Wealthdojo, we believe that it is better to well understand your own situation rather than compare your grant to everyone else. You could always consult the HDB Board to better understand your situation.

How will this affect Property Prices?

In Wealthdojo, we are a platform for people to make informed financial decisions. We want to understand how this Enhanced CPF Housing Grant will impact our financial journey as a whole. The below are my personal opinions and strictly my own.

  • There will be an increase in property prices. A grant makes buying the property affordable for a selected group of people. It doesn’t mean the price has dropped. Loosely speaking, we are not taking into account location and various other consideration for buying a property. An isolated trend table for Punggol shows that over the years, there has been an increase in price for BTO flats.
    Enhanced CPF Housing Grant BTO Price Changes

    Enhanced CPF Housing Grant BTO Price Changes

  • Private Property Prices will increase. A simple chart like this show that there a simple positive correlation between private and HDB prices. Logically, if we compare a similar size HDB and a Private Property in the same area, the price of a private property will be higher.
    Correlation HDB Private Properties

    Correlation HDB Private Properties

Insurance for Properties

Buying a property might be the biggest purchase for most people, it is also important to plan for insurance for your properties. (Read more: Insurance for Investors). In a simple nutshell, these are the 3 insurance that you have to get for your property.

  • Fire Insurance

If you are living in a HDB, it is compulsory to get a fire insurance. As the name suggest, it covers for fire BUT the scope of the coverage is very small. HDB fire insurance compensates for damage to the building (ONLY). As a general rule of thumb: If it wasn’t already there when you got your house keys, then it’s not covered by HDB fire insurance. That’s why we need to have content insurance.

  • Home Content Insurance

In a fire, naturally the items in the house will get damaged. This will include items like Air-Con, the fridge, the television, the sofa, the bed, etc. Not only do you need to purchase these items again, you will need to renovate the house again to bring it back to living conditions. Most home content insurance covers for renovation and also home content.

  • Mortgage Interest Insurance

Most people will get a loan from a bank to finance their property. For banks, they will need an assurance that you will be able to pay for the loan. That’s why they assess the loan amount from your salary. The biggest risk a bank (and yourself) will take is if a person is unable to finance the loan. What happens in an event of a critical illness (Read More: Life Insurers to change definition of Critical Illness) such as heart attack and it robs away the ability for a person to earn money? Would this be extra burden on your partner? The bank has the right to claim back the property leaving your family on the streets. Would you want that to happen?

In summary, there will be new changes in the future too. Some things will change while others will remain the same.

In Wealthdojo, we believe in bespoke financial planning. Whether it is money maximization, insurance or investing, we believe that everyone is different and the planning should be suited for you.

All opinions above are my own. Please view our disclaimer page to understand more. 

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page

Now that you’ve read about learnt about how to benefit from the Enhanced CPF Housing Grant , I challenge you to read this article (Careshield Life: Disability Insurance Singapore) to push your understanding further!

Learn more by following us

Careshield Life Disability Insurance Singapore

Careshield Life: Disability Insurance Singapore

Careshield Life is a long term disability insurance in Singapore. Somehow, it is not receiving much publicity. It is a layer of protection that the government has set in place to help Singaporeans for long term disability needs. The 3 shields that Singaporeans have are the Medishield, Eldershield and Careshield. (Read More: Insurance for investors)

Careshield Life Disability Insurance Singapore

Careshield Life Disability Insurance Singapore

What is Careshield?

CareShield Life is a national long-term care insurance scheme designed to provide basic protection against long-term care costs, from 2020. CareShield Life will feature higher payouts that increase over time with no cap on payout duration, to provide better protection against the uncertainty of long-term care costs if you become severely disabled.

(Source: Careshield Life)

How does it benefit me?

Careshield Life has these 4 properties

  1. Lifetime Cash Payouts: As long as the person is severely disabled.
  2. Payouts will increase over time. It will start from $600 in 2020.
  3. Premiums are fully payable by Medisave.
  4. There will be government subsidies to help defray some of the cost.

Is this compulsory?

Coverage will begin when you are 30 years old. Thus, if you are born from 1980 to 1990 (aged 30 to 40 in 2020), you will be automatically covered by CareShield Life in 2020. If you are born after 1990 (aged below 30 in 2020), you will be automatically covered by CareShield Life when you turn 30.

If you are born in 1979 or earlier, you can choose to join CareShield Life in 2021, if you are not severely disabled. To make joining CareShield Life more convenient, you will be automatically covered by CareShield Life from 2021 if you are a Singapore Resident born between 1970 and 1979 and are insured under the ElderShield 400 scheme and are not severely disabled. If you are automatically covered and do not wish to participate in the scheme, you have up to 31 Dec 2023 to opt out from the scheme and get your premiums refunded.

In other words, it is compulsory for those born in 1980 and after.

Is this really necessary?

As Singapore population is slowly aging, 1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime, and may need long-term care. We never know whether an disability may happen, but what we can do is always to prepare for it.

In Wealthdojo, we believe in bespoke financial planning. Whether it is money maximization, insurance or investing, we believe that everyone is different and the planning should be suited for you.

All opinions above are my own. Please view our disclaimer page to understand more.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page!

Now that you’ve read about learnt about Careshield Life: Disability Insurance Singapore, I challenge you to read this article (Life Insurers to change definition of Critical Illness) to push your understanding further!

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Life Insurers to change definition of Critical Illness

Life Insurers to change definition of Critical Illness

Life Insurers in Singapore are making the shift in the definition of critical illness next year (Aug 26, 2020). Life Insurance Association Singapore (LIA Singapore) said claims assessment and benefits will follow the definitions, and the terms and conditions stated in their existing policy contracts.

Life Insurers to change definition of Critical Illness

Life Insurers to change definition of Critical Illness

What does all these means?

In Singapore, the definition of Critical Illness have been standardized so that there will be no dispute on why an insurer is able to claim for a Critical Illness and another insurer is unable. The last time the definition of Critical Illness have been updated was in 2014.

If you have bought your Life Insurance with the Critical Illness rider from 2014 until now, you can view the definition of the Critical Illness here (Critical Illness Definitions 2014). Your policy will continue to follow this current definition.

Moving forward, new policies will follow the new definition if you buy your policy after Aug 26, 2020.

How will you be affected?

As mention above, if you buy your life insurance with the critical illness rider before Aug 26, 2020, your policy definition will follow the critical illness definition for Version 2014.

New policies after Aug 26, 2020 will follow the new definition.

For policies from now until Aug 26, 2020 the insurer can adopt either Version 2014 or Version 2019 (Critical Illness Definitions 2019) definitions. If the insurer chooses Version 2014, the CI product must be withdrawn by 26 August 2020.

Why was this done?

The objective of the review exercise was to bring LIA’s 2014 common definitions up to date and aligned with advances made in medical technology and medical practice and also to address areas of ambiguity based on insights gained from the past five years of experience.

The definitions of 21 CIs were revised whilst 16 definitions remained unchanged. The names of 14 CIs were enhanced to better reflect the intent of coverage.

(Source: https://www.lia.org.sg/industry-guidelines/health-insurance/2019/lia-critical-illness-ci-framework-2019/)

Will this be better for me?

This is very subjective and you will not be able to find an absolute answer. Insurers or the LIA will not commit to this answer. Instead of asking this question, perhaps a better question will be whether you are well-insured or not.

A working adult in Singapore has critical illness cover of just $60,000, well under the LIA recommendation of about $316,000 which translates to about 3.9 times the average annual pay of $81,663. These are just ball park figures give a guide on what you should have.

(Source: https://www.straitstimes.com/business/study-sporeans-lack-critical-illness-insurance-cover)

In Wealthdojo, we believe in bespoke financial planning. Whether it is money maximization, insurance or investing, we believe that everyone is different and the planning should be suited for you.

All opinions above are my own. Please view our disclaimer page to understand more.

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page!
Now that you’ve read about learnt about Life Insurers to change definition of Critical Illness, I challenge you to read this article (National Day Rally 2019: Retirement Impact) to push your understanding further!

Don't miss your learning opportunity. Subscribe to us.