When the Ministry of Health unveiled CareShield Life in mid-2018, the new national long-term care insurance set to replace ElderShield from 2020 got the attention of young and old alike. Why?
- It’ll be mandatory for anyone born in 1980 or later (ElderShield is an opt-out scheme)
- Premiums start from age 30 (10 years earlier than with ElderShield)
- It gives higher monthly payouts (starting at S$600 a month, compared to S$300-400 a month with ElderShield)
- It gives up to a lifetime of payouts, as long as you remain severely disabled (compared to up to 72 months now with ElderShield)
- Its payouts will increase over time until a claim is made (ElderShield payouts are fixed)
- Its premiums increase with age (ElderShield premiums stay constant)
Months after CareShield Life was announced, people are still talking about the overhaul. One critical question that’s being asked: “Just how does CareShield Life fit into my current long-term care master plan?”
To answer that, let’s examine your current long-term care plan.
Kudos if you’ve actually considered the possibility of severe disability (defined as being unable to perform 3 or more ADL or Activities of Daily Living such as feeding, bathing and going to the toilet) and the need for long-term care. According to the Ministry of Health, 1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime. And about 3 in 10 will live a decade or more after becoming severely disabled1.
If you’re like most folks, your long-term care plan probably comprises three components: ElderShield, personal savings and dependence on relatives.
Once you’ve got an ElderShield cover in place, it’s easy to sit back and go, “Okay, I’m safe”. The current national long-term care plan provides a monthly cash payout of up to S$400 that helps with out-of-pocket expenses for 5 to 6 years. It’s a good start for covering your basic long-term care needs. But if you consider that potential expenses for severe disability can span medical bills to mobility aids and daycare, you’ll realise that on top of the S$400, you may need to tap into your personal savings or turn to family members for financial aid.
That’s why CareShield Life makes a more concrete, practical first line of defence against debt due to long-term care. With CareShield Life, you get:
- higher payouts – starting at S$600 per month, the payout amount increases until age 67, or when a claim is successfully made
- longer payouts – you’ll get payouts for as long as you’re severely disabled
Higher and longer payouts are reassuring… but how much do you really need for long-term care?
Now, let’s go deeper and consider the cost of long-term care.
Say a 42-year-old becomes severely disabled as a result of an accident. Would their ElderShield or CareShield Life payouts be sufficient today? It all depends on the individual, their needs and the standard of living they’re used to.
And how would the payouts meet their needs 25 years down the road – in the face of rising costs, inflation and potential complications due to ageing?
To help put things in perspective, we thought we’d give you a rough idea of the costs of long-term care in Singapore:
Now, remember this is just an estimate – you may need more or less, depending on your needs and the lifestyle you’re accustomed to. Your actual long-term care needs boil down to how you answer these questions:
- Would severe disability and long-term care wipe out all your savings and become a financial burden on your loved ones?
- Are you willing to settle for a simpler lifestyle in order to manage your long-term care costs?
- Does your family history suggest high likelihood for the need of long-term care?
- Does your retirement plan already factor long-term care costs?
Wait… is it a good idea to use your savings for long-term care costs?
If you have a huge surplus of savings (that’s after setting aside enough for an emergency fund and your dream retirement lifestyle), this could be a temporary solution. As long-term care tends to stretch for many years, it’ll quickly deplete funds that you’ve actually set aside for other financial goals.
And while it sounds simple to dip into your savings for long-term care now, in reality, this may be harder to do depending on when disability strikes:
In your 30s & 40s – should disability strike shortly after you’ve settled down and have a young family, a big part of your savings would go towards childcare and your home mortgage
In your 50s & 60s – should disability occur when you’re sandwiched between seeing your kids through university and supporting your elderly parents, you’ll need your savings to provide for them.
Short answer: Your savings are probably best kept for what you intended them for. Tagging on long-term care costs compromises your financial goals.
The missing piece in your long-term care plan
Since tapping your savings and getting financial help from relatives aren’t sustainable ways of managing potential long-term care costs, how do you make your existing coverage work for you?
Whether you’re on ElderShield or CareShield Life, there are ways to ensure you get a monthly payout that closely matches your lifestyle needs should you become disabled. To complete your long-term care plan, you can consider options to grow your savings like investments. A less risky solution is to get additional insurance.
For instance, Aviva’s MyCare and MyCare Plus are designed to supplement your ElderShield plan by giving monthly payouts that you can customise to suit your needs. You can also decide how long you wish to receive the payouts – 12 years or for life. And if your condition improves, the plans also assure you of a payout even if you only have 2 ADLs, which can be just as debilitating as 3 ADLs.
Now that’s thinking long-term!
Need help to create a concrete plan for your long-term care needs? Leave your details below and we’ll be in touch.
1MOH launches new online tool for public to calculate CareShield Life premiums, TODAY, 27 December 2018