| Insurance is the most common risk transfer | | | | coverage. Some insurers even cover the deductibles |
| technique in risk management. | | | | and co-insurance if a rider is purchased on top of the |
| There are 3 layers of insurance protection. | | | | basic plan. The MOH website provides a |
| Firstly, the social layer, provided by national schemes. | | | | comprehensive comparison of all the available private |
| For Singapore, it will be the insurance from CPF like | | | | shield plans. The plan is most suitable for covering |
| DPS, HPS, Medishield, Eldershild, CPF Life. They are | | | | medical and ongoing treatments. With rising medical |
| usually the most basic required and premiums are | | | | cost, this insurance is most necessary to avoid cost |
| most affordable. Secondly, the group layer. This is | | | | being an issue to seek the proper medical treatment. |
| coverage provided by employers, unions or | | | | (2) Critical illness |
| associations. Their premiums are also relatively | | | | It provides a lump sum benefit if the insured is |
| affordable. However, they will no longer cover when | | | | diagnosed to be suffering from one of the 30 |
| leaving the organization and there is usually a age | | | | selected illness or surgical procedure. The 30 illness |
| limit, resulting in a drop in coverage when it is most | | | | are chosen from a list of illnesses by the Life |
| needed. Thirdly, the individual layer. This is purchased | | | | Insurance Association of Singapore (LIA). Their |
| from insurers at the personal level to supplement the | | | | definitions have all been standardized by the LIA. The |
| first two layers. Enhancing the coverage in scope and | | | | 2 types of coverage are the acceleration and |
| depth. | | | | additional. The acceleration coverage shares the sum |
| Classes of insurance: | | | | assured with the death/TPD benefit. The additional |
| - Life Insurance | | | | coverage is a separate cover on top of the basic |
| - Investment-Linked Policy (ILP) | | | | sum assured, hence it can be higher than the basic |
| - Health Insurance | | | | sum. Variations include being issued as a stand-alone |
| - Personal General Insurance | | | | policy or a rider, having an early payout for the initial |
| Life Insurance | | | | stages of the illness, and providing specific coverage |
| The 3 main types of traditional life insurance are | | | | for only one illness like cancer. It is most suitable to |
| term, whole life and endowments. The most basic | | | | provide for treatment cost that may not be included |
| term policy is the Dependent Protection Scheme | | | | in the HealthShield like expensive overseas or |
| (DPS) by CPF. The premiums are the lowest in | | | | alternative/experimental treatment as well as |
| Singapore and can be paid by CPF OA. However, the | | | | additional care giving expenses incurred when critical |
| limitation is that coverage is up to $46,000 and age | | | | illness is diagnosed. |
| 60. Another decreasing term policy by CPF is the | | | | (3) Disability income |
| Home Protection Scheme (HPS). A compulsory | | | | It provides monthly income in the event the insured |
| mortgage insurance for those using CPF to purchase | | | | is unable to work as a result of an accident or illness. |
| their properties. | | | | The definition of disability varies in that the inability to |
| Investment-Linked Policy (ILP) | | | | work is confined to the insured's own occupation, |
| ILPs are mainly yearly renewable term insurance | | | | similar occupation or any occupation. It is most |
| coupled with investment in unit trusts and the | | | | suitable to protect against the loss of income so as |
| addition of more charges. They are subject to a | | | | to maintain the living expenses in the event of |
| different set of rulings, do not need trustees and | | | | disability and differs from TPD in that the definition is |
| fund selection is restricted to those within the insurer | | | | less stringent. |
| umbrella of funds. One advantage is the charges are | | | | (4) Hospital cash |
| transparent. However, they are numerous, tedious to | | | | It provides a daily cash benefit for each day of |
| compute and allows so much variation that it aims to | | | | hospitalization. It is usually limited to a specified |
| confuse. They include: | | | | number of days and a life time limit. It is most |
| (1) Initial sales charge - This is a one off charge | | | | suitable for the self employed who will suffer income |
| factored into the bid-offer spread of the fund. Usually | | | | loss as a result of hospitalization. |
| about 3 to 5% of the investment amount. | | | | (5) ElderShield and private plans |
| (2) Fund management fee - This is paid to the fund | | | | It provides a monthly benefit if the insured is unable |
| manager regardless of the performance of the fund. | | | | to perform 3 out of the 6 activities of daily living |
| Usually 0.5 to 2% per annum and it is priced into | | | | (ADLs), namely feeding, bathing, toileting, dressing, |
| (deducted from) the unit price. | | | | mobility and transferring. ElderShield is the most basic |
| (3) Benefit charge - The insurance coverage premium | | | | level of coverage, providing $300 or $400 monthly |
| including all the riders are funded by deducting units. | | | | for 60 or 72 months. It can be paid with MediSave. |
| The premium is usually increasing based on the new | | | | The private plans enhances these plans to provide |
| age band. | | | | higher benefits and longer duration of payout. It can |
| (4) Policy fees - A flat monthly fee is charged | | | | be paid with MediSave up to a limit. It is most suitable |
| regardless of the premium amount, to cover | | | | to cover disability for those aged 40 and above. TPD |
| administrative expenses. | | | | coverage usually ends at age 60/65, but this provides |
| (5) Administrative charges - Additional fees paid for | | | | life time coverage. And it is usually limited payment of |
| record keeping, transaction services, bank services, | | | | premiums. |
| trustee services, and miscellaneous fees. Usually | | | | Personal General Insurance |
| about 0.2 to 0.4% per annum and it is priced in as | | | | (1) Packaged household |
| well. | | | | It provides coverage for the building and contents. |
| (6) Fund switching charges - This will be charged | | | | It is usually compulsory when a person takes up a |
| when changing investment funds. Usually free for one | | | | housing loan. |
| switch per year. | | | | (2) Valuable articles |
| (7) Premium holiday charges - This will be charged | | | | It provides coverage for items with high monetary |
| when the premium holiday feature is activated. | | | | value like antiques, fine arts, etc. |
| (8) Surrender charges - Charges imposed when | | | | It can be an itemized or blanket coverage. |
| surrendering the policy. | | | | It is usually for those who keep valuable items in |
| (9) Allocation - Amount of premiums used to | | | | their homes like art or antique collectors. |
| purchase units is usually not 100% for the initial years. | | | | (3) Personal accident |
| Example: 20% for 1st year; 40% for 2nd year; 60% | | | | It provides coverage for bodily injury caused by |
| for 3rd year; 80% for 4th year; before finally 100% | | | | solely, directly, independent, external, violent and |
| from 5th year onwards. | | | | visible means. |
| Suitability of ILPs will be for those who have | | | | It is most suitable for those with a budget constraint |
| sufficient insurance cover and have excess budget | | | | or are involved in blue collar work or are not able to |
| which they would like to use to support their agents | | | | obtain any of the traditional insurance due to medical |
| instead of investing in unit trusts directly. | | | | underwriting restrictions. |
| Healthy Insurance | | | | (4) Motor |
| (1) MediShield and private shield plans | | | | It is a compulsory insurance available as 3 types: |
| MediShield is the social insurance that provides the | | | | Third party, Third party fire and theft (TPFT) and |
| most basic cover. The disadvantages are that it has | | | | Comprehensive. Premiums will vary between insurers |
| many sub limits for each of the covered expenses, | | | | depending on the make, model, age of the car, |
| expires at age 85 and provides coverage mainly for | | | | driver's age, occupation, experience. Note the amount |
| class B2/C wards. It is also subject to deductibles and | | | | of excess applicable and it is advisable to purchase |
| co-insurance. It is paid by MediSave. Some employers | | | | NCD protection if NCD has accumulated to 50%. |
| may provide the second layer of cover. However, | | | | Based on the risk management plan, those low |
| this cover will end when leaving the employer. Medical | | | | frequency, high severity areas should be covered |
| coverage is most needed in retirement, as a result, | | | | with the appropriate insurance. As insurance coverage |
| taking up a plan then will be subject to strict | | | | and premiums vary between insurers, it will be |
| underwriting conditions (i.e. it will not be accepted or | | | | prudent to get quotes from as many as possible. |
| existing medical conditions will be excluded). The | | | | Insurance is usually a life long commitment, it will be |
| private shield plans allow coverage beyond age 85, | | | | wise to ensure the most value and suitable one is |
| but it needs to be taken before age 75. It usually | | | | taken up. |
| does not have sub limits as it is "As Charged" | | | | |