Have you been receiving calls from insurance agents trying to get you to use your CPF MediSave to upgrade your CareShield Life Plan? I received a call from a random agent and she started by saying that she is not trying to sell me anything. By doing that, I believe the number of people willing to continue to listen would be greatly increased.
She then asked me if I know about the new CareShield Life scheme. I then knew what was coming. She then tried to get me to sign up for the private insurance upgrade by using CPF MediSave by saying that there is
1) no cash upfront and all can be paid by MediSave
2) we can’t withdraw even after 65 and
3) the CPF interest can cover it anyway
When I told her that since I don’t have an income and my balance won’t be increasing except for interest, she pivoted to asking me if I am interested to join the financial advisory industry.
The argument made is incomplete and is used to persuade you to upgrade. We will take a closer look below.
Disclaimer: All comments on this blog site are an expression of opinion. You are recommended to consult with a licensed, qualified financial advisor before making any financial decisions.
What Is CareShield Life?
CareShield Life is an insurance scheme administered by the Singapore Government that starts at age 30 that pays out monthly if you become severely disabled. 100% of the CareShield Life premiums can be paid using your or your family’s MediSave. In order to qualify for the payouts, you will need to be unable to perform 3 of the Activities of Daily Living (ADLs) without assistance. The 6 ADLs are
- Walking/Moving Around
Source: CareShield Life
CareShield Life was launched on 1 October 2020 to replace ElderShield. It is basically an upgrade by providing a higher coverage over the entire time you are severely disabled. Of course, it comes with an increase in premiums. Below is a simple table comparing CareShield Life with ElderShield.
|Premium period||Pay premium until 67||Pay premium until 65|
|Total premiums paid||11k – 14k over 47 years||4.5k – 5.6k over 25 years|
|Premiums increment||Increase by 2% annually**||Premiums stay constant|
|Payouts||S$600 / month**||S$400 / month|
|Payout period||As long as you are disabled or till death||72 months or till death|
|Payouts increment||Increase by 2% annually**||Payouts stay constant|
**Premiums and payouts increase by 2% for the first 6 years. They will review the increments based on claims, life expectancy and disability trends. The adjustments stop at 67 years old or when you submit a claim.
What Are CareShield Life Supplements?
They are add-ons to CareShield Life underwritten by private insurers like Great Eastern, Aviva and Income. They are used to supplement the CareShield Life payouts as it can be insufficient if you are severely disabled.
By subscribing to the supplements, you can increase the monthly payouts when you get severely disabled. They also have additional benefits like letting you claim certain benefits when you cannot perform 1 or 2 ADLs.
The premiums are paid using MediSave up to S$600 a year. You are able to increase the monthly payouts by choosing to increase the premiums paid. If your premiums are above S$600 or if your MediSave run out of money, you will need to top up with cash.
You can find out more here on the comparison between different supplements done by Seedly.
So Should You Upgrade Your CareShield Life With Supplements?
It depends. You should take a look at your personal circumstances and the whole picture before making a decision. You should not just get the upgrade just because there is no cash upfront and everything can be paid via MediSave.
There is also the more important question of how much should you upgrade. We can use PAIR framework to make a decision.
The purpose of getting the CareShield Supplements would be to
- Increase the probability of claiming as you will only need to meet 1-2 ADLs instead of 3 ADLs
- Increase monthly payouts as the basic option of S$600 a month is insufficient
Probability Of Claiming
Here are some indirect statistics of us potentially needing long-term care from suffering from severe disability. 50% of healthy Singaporeans aged 65 could become severely disabled in their lifetime and may need long-term care. It is further estimated around 30% could remain in severe disability for at least 10 years.
For stroke, there are 257.6 episodes (0.2%) per 100,000 population in 2019, according to the Singapore Stroke Registry. 75.1% of patients are 60 and above while 92.3% of patients are 50 and above.
For cancer, there are 5,169 and 5,478 incidences (5%) in males and females respectively per 100,000 population in 2014 – 2018, according to the Singapore Cancer Registry. 73% of males and 56% of female patients are above 60.
Do also take note that not every cancer or stroke patient will fulfil the 3 ADL requirements.
As the claiming criterion is the same as ElderShield, we can take a look at some of the statistics.
Out of the 1.3 million people that is covered in 2017, 15,600 (1.2%) had claimed since 2002. Out of the S$3.3 billion collected in premiums by 2017, S$133 million (4%) has been paid out.
In my opinion, the CareShield plans (both default and supplement) are mainly targeted at elderly folks. The paying of premiums starting at an earlier age helps lower the average monthly premium and start coverage at an earlier age. If we are young and suffer from severe disability, we can still receive the payouts but we should be the minority.
The purpose of getting the CareShield supplements now is to spread our premiums over a longer period and hopefully it will be under the S$600 limit of MediSave deduction.
Increase Monthly Payouts
Healthcare costs are increasing due to factors like an ageing population, medical advancements and higher operating costs. It is estimated that we need about S$1,900 a month for long term care in 2030. There is a shortfall of more than S$1,000 if we only rely on the basic CareShield Life. Take note that this additional increase in expenses is on top of your normal daily expenses when you are healthy. Some examples of additional long-term care expenses are
- Doctor’s visits
- Rehab equipment
- Modification to an elderly-friendly house
- Nursing home
Although you can pay the premiums using MediSave, you need to check whether you can afford the upgrades and what quantum should you upgrade to. Here are some questions you can ask yourself.
- How much is your MediSave balance?
- How much CPF interest is credited annually?
- Will your MediSave balance increase via employment or top-ups?
- What else is paid using MediSave?
- If upgraded above the S$600 limit, how much cash do you need to pay?
- What if the premiums increase?
Since the limit is S$600 CPF MediSave deduction for the supplement plans, the agents might just ask you to grab the plan with the S$600 premium. They will give you reasons like there is no cash upfront, interest can cover it anyways and you cannot withdraw your MediSave.
Decide whether it is worth it and whether you need it before just grabbing the most MediSave can pay. As ASSI say, don’t ask a barber if you need a haircut.
Aviva’s supplement has an option where you can choose to have an escalating payout while paying an escalating premium. Income’s and Great Eastern’s model is just a flat monthly premium with a flat monthly payout.
Although technically Income’s and Great Eastern’s premiums won’t increase, however, looking at their terms, there is still a possibility of a premium increase due to a higher number of claims etc. If you just choose the premium amount that is at the limit of CPF MediSave deduction, should the premiums increase, you will need to start paying cash.
Will my premiums increase with age? No, your premiums are level throughout the premium payment term chosen and do not increase as you get older. However, the premiums rates are not guaranteed and may be adjusted based on future experience of the plan.
The premium that you pay for your policy can change. If we change the premium for your policy, we will write to you at your last-known address. We will do this at least 30 days before the change is to take place. We will tell you what your new premium will be.
The increase in prices and change of terms for the Integrated Shield Plans have also happened before so don’t assume the premiums for the CareShield Life Supplements won’t increase.
Increasing Of Coverage
If you have decided to purchase a CareShield Supplement product, we should consider the next question of how much coverage do we need. The monthly cost of long-term care is about S$2,000 so the default CareShield payouts will not be enough. We will be able to tweak the premium amount to get the payouts quantum we want. We should see if our MediSave balances can afford the deductions. If we think that the S$600 deduction limit does not provide enough payouts, should we then increase the premium by including a cash portion?
As mentioned above, there is a possibility of a premium increment so this should also be taken into consideration.
This will be done periodically when more information is available. Here are some of the questions that can be asked.
- Has the trend of long-term care costs increased more than expected?
- What are the updated statistics of people claiming or suffering from severe disability?
- Are there any changes to the default CareShield Life?
- Is there any new public or private programs covering the same issue?
- Are there any changes to the premiums?
Based on the information available, we need to review if we need to decrease/increase or even cancel our coverage.
Your MediSave Balance Is Still Money
Just because the CareShield Supplement plans are paid using MediSave, you should not ignore the fact that your MediSave balance is still money and has other uses.
You can use your MediSave for the following medical expenses for yourself and your family members.
- Outpatient treatments
- Management of chronic diseases
- Health screenings
- ST/MRI scans
- Maternity costs
- Long-term care
- Palliative care
- Disability care
- Insurance premiums
- Medishield Life
- Integrated Shield Plans
- CareShield Life
For more details, you can visit this page.
Although the primary use for your MediSave balance is to pay for healthcare needs, remember that besides your OA, SA and RA, your MediSave balance is also passed on to your CPF nomination when you pass away. Your MediSave balance is still money and you should treat it as such.
Prevention Is Better Than Cure
Besides relying on long-term care insurance, we should also try to lower our chances of disability. We can do this by leading a healthy lifestyle by doing the following things.
- Physically active
- Balanced diet
- Sufficient rest
- Stop or cut down on smoking and drinking
CareShield Life Supplements are essentially a good product but I disagree with how the insurance agents try to sell the product. Although there is no cash upfront and premiums can be fully paid using MediSave, there are multiple other factors you should consider. Additionally, MediSave can also be used for multiple medical expenses and it will be passed on to your CPF nominations when you pass away. MediSave is still money so don’t let insurance agents tell you otherwise.
If you are a current or ex-agent that is reading this, if you can share the commission amounts an agent get from different products, please reach out to me at firstname.lastname@example.org. I would like to share this on my website to promote transparency.
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