When you’re young, it’s easy to think that nothing can take you down. But the fact is accidents do happen and no one really knows if or when you’ll suffer a debilitating sickness.
Seemingly harmless events like dancing at a party or a bout of flu can occasionally end up in a life-altering injury or even partial blindness. Similarly, a serious illness like arthritis or stroke could result in some other disabilities, preventing you from working for a long period.
Rather than borrow money or dig into your retirement fund prematurely to help tide you over during a disability, wouldn’t you want to be able to transfer any future disability costs to an insurer?
First, what is disability insurance?
Essentially, disability insurance assures you of a payout in the event that you’re no longer able to earn an income (or the level of income you used to earn); or you become unable to do daily tasks you used to do independently, like feeding and dressing yourself.
The disability can be as a result of an illness, accident, injury or even old age. Examples of disability include the loss of use of both feet, loss of hearing, inability to walk and loss of speech. Aside from the fact that you won’t be able to earn an income, you’ll need to pay for long-term care, which can include one-time costs, like a hospital bed and home modifications to allow the use of a wheelchair, and recurring expenses, like occupational therapy and hiring a caregiver. Average monthly costs vary depending on your needs and whether your condition improves or deteriorates over time. Just a month in a nursing home alone can set you back by S$1,200 to S$3,5001 – a considerable sum when you’re not earning an income and may have dependents to support.
What does disability insurance cover?
The cash payouts from disability insurance can offer you and your loved ones financial support.
Aside from the main benefit of a monthly payout, a disability plan may offer other benefits. For example, Aviva’s MyCare includes an additional rehabilitation benefit that still provides you payout when you recover from a severe disability but is still unable to perform 2 out of 6 Activities of Daily Living (“ADL”); an additional dependant care benefit for up to 36 months if you have a child under the age of 21; and a death benefit (3 times of your last drawn monthly benefit).
What does age have to do with disability?
Since your youth is what enables you to work and earn an income to fund your lifestyle, pay your bills, and provide financial support for your dependants (now or in the future), protecting your income from an unexpected disability helps to ensure you’ll have the money to get on with life at a time when you are unable to continue working.
A brief guide to disability insurance
Get to know the three types of disability insurance:
|Type||Disability income insurance||Government schemes such as ElderShield and CareShield Life||Total and permanent disability insurance|
|What it does||Partially replaces the paycheck if you’re unable to work due to disability resulting from an accident or illness *.||Provides cash payout to help with long-term care costs, such as hiring a helper and life support machines, if you are unable to do at least three of the six ADL.||Gives a lump sum cash payout should you be diagnosed as totally and permanently disabled*, in other words, there’s a very low likelihood of recovery.|
|Payout amount||Your disability income amount is a percentage of your average monthly salary.||ElderShield gives S$300 or S$400 (depending on your enrolment period), but this amount can increase with supplementary coverage. The new CareShield Life that’s set to replace ElderShield will give payouts starting from S$600 in 2020.||Payout amount is known as the policy “sum assured”, the same amount paid out in the event of death during the coverage term.|
|Payout frequency and duration||Monthly payouts for as long as you’re disabled with some policies giving partial payouts as your condition improves.||Monthly payouts for up to 72 months or 60 months (depending on your enrolment period).||One-time lump-sum payout.|
|How to get it||Can be purchased from insurer as a standalone plan, as long as you are earning a salary.||Singapore citizens and permanent residents with Medisave accounts are automatically enrolled in ElderShield when they turn 40 years old. Enrolment for CareShield Life depends on the year that you are born^.||It’s a benefit provided with a life insurance or endowment plan and can’t be bought from insurer as a standalone plan.|
*Please refer to your respective policy documents for the definition of disability and permanent disability as this may vary from insurer to insurer.
^For more information, visit https://www.moh.gov.sg/careshieldlife/about-careshield-life
… both in terms of your income earning potential and the devastating effect long-term care can have on your financial situation, then disability insurance is something you’ll want to think about seriously.
The best time to get it is during your working years, when
· it’s easier to secure coverage because of your age and state of health
· premiums are cheaper when you’re younger
· you have the income to pay premiums
· you have dependents who rely on your income to get by should the unexpected happen
However, don’t just buy a disability plan for the sake of it and don’t just settle for the plan with the lowest premium; understand the benefits of the various options available and pick something that’ll give you a level of coverage that will suit your needs.
1The Sunday Times© Singapore Press Holdings Limited. Extracted with permission. “Singapore nursing home models ‘need to balance benefits, cost’”, 31 July 2016.