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The one that got away – Disability Income Insurance

Posted 24 July, 2016 by Surely
in Educate Yourself

Have you ever discovered a quiet little eatery unknown to most people?
Much overlooked, but it serves the most delicious chow.

I know one such place. Or at least I used to.
Whenever I visited the Amoy Hawker, I would go to this particular stall for crispy yam puffs.

Its (past) lack of popularity drew me to it.
There was no queuing for me to get hold of these yam snacks.
The fluffy pastry was just perfect, along with the fragrant, sweet yam paste.

This stall also serves curry puffs.
It has recently become rather famous due to the Michelin Bib award.
Amoy’s Famous Crispy Curry Puff stall is thriving nowadays.

His name is Bibendum. Betcha didn't know!

His name is Bibendum. Betcha didn’t know!

Are you becoming a food blogger?

Hell no!
The point here is not about the food.
It is about something so good and yet nobody seems to know about.

We are not just talking about your usual insurance products.
They are definitely beneficial but not really out of sight.

Term, wholelife, endowment policies.
Maybe medical and hospitalization plans.
ILPs.
Even Personal Accident (PA) insurance is seldom forgotten.

However, there is one vital life insurance class that is always invisible.
Not many Financial Advisers will recommend it.
Even amongst the insurers, not all have this product.

You want to catch them all, don't you?

You want to catch them all, don’t you?

We are talking about Disability Income Insurance (DII).
The forgotten goodie.

What exactly is DII?

DII is an insurance that protects your income.
In the event that you are disabled, you will be able to claim a monthly payment out of your DII policies.
This payout will continue until the agreed coverage age or when you have recovered, whichever is earlier.

Wait! My life policies cover me for Total Permanent Disability (TPD).
They should suffice.

No, they do not.
There may be differing definitions of TPD by insurers
However, TPD is usually referred to the complete inability to engage in any business or occupation, or total and irrecoverable physical loss, due to accident or sickness.

Meanwhile if you are not disabled, please keep clear of this lot.

Meanwhile if you are not disabled, please keep clear of this lot.

The requirement for TPD is rather stringent.
You may still be able to hold your job at a reduced capacity or lead an alternative career.
Your disability may just be temporary.

When that happens, your TPD benefit is not triggered.
Instead, you will be left struggling with your daily expenses with reduced or no wages.
Thus, it is not wise to rely on TPD only for your disability coverage.

ElderShield – a national DII.

You may already have a DII.
ElderShield is an automatic opt-in DII for those above the age of 40.
It is payable via CPF Medisave.

Just like other national insurances, ElderShield has been outsourced to private insurers for administration.
They are NTUC Income, Aviva and Great Eastern.

There are two basic levels of ElderShield coverage.
ElderShield300 offers a payout of $300 per month for a maximum of 60 months.
Introduced in 2007, ElderShield400 provides an improved coverage with the payouts of $400 every month for a maximum of 72 months.

A quick glance at the benefits will leave you with the conclusion that they are inadequate.
Even if you are covered in full for medical expenses, the monthly payout can hardly cover the expenses of food, water, shelter and other necessities.

Do you want 3 meals in a hawker centre, food court or restaurant?

Do you want 3 meals in a hawker centre, food court or restaurant?

That is why some consider ElderShield as more of a long-term care insurance.
However, the insurers are now offering improved version of Eldershield.
You may check it at the following links.

Great Eastern  (ElderShield Comprehensive or Eldershield ValuePlus)
NTUC Income (PrimeShield)
Aviva (MyCare)

 

DIIs & its benefits

 

Insurers have DIIs of their own.
While the benefits may vary from one insurer to another, most DIIs in Singapore allow you to cover up to 75% of your income.

There is a deferment/pre-benefit period involved.
That is the waiting period before your monthly payout starts.
It is usually 60 days after the disability is diagnosed.

You may choose your choice of retirement age – 55, 60 or 65 years old.
When you are able to work but at a reduced wages, your DII will top up the difference.

Sounds good?
Before you plunge right in, let’s find out more about the exact meaning of disability.

 

To address any potential Critical Illness protection shortfall on your own, check out FWD Insurance. They have a fully online and hassle free purchase experience.

 

The Devil is in the definition

 

Disability in Eldershield is interpreted as the inability to perform at least three of the six activities of daily living (ADL), even with the aid of special equipment and always requiring the assistance of another person.

These ADLs are as follows

  • Washing
  • Dressing
  • Feeding
  • Toileting
  • Mobility
  • Transferring

On another hand, disability in DIIs is usually interpreted as the inability to work in your own occupation or any occupation suited by virtue of training, education or experience as a result of sickness or disability.

In our opinion, the definition of disability is the strictest when it comes to TPD.
ElderShield conditions are less stringent but still hard to meet.
The DIIs sold by private insurers are the easiest to claim and thus most beneficial to consumers.

 

DII keeps your pay cheque rolling.

DII keeps your pay cheque rolling.

Why do you need DII?

 

Your death coverage is meant for your dependents.
If you are hospitalized, your medical plan may indemnify your medical bills.

Critical illness policy will come in handy when a dread disease has fallen upon you.
When you are hurt in an accident, your PA plan responds.

When you are disabled by sickness, you may be vulnerable to its financial impacts.
You may be unable to earn a livelihood while recovering.

During this period, your living expenses do not stop.
You dig deep into your savings and pray hard that they do not run out before you are well again.
If they do, your family will probably have to chip in financially.

For most of us, this is quite a painful situation.
We like to be independent and not rely on others for assistance.
This is in the DNA of most Singaporeans.

Disability should not stop you from being independent.

Sometimes you just want to be alone. Especially when it comes to beach ogling.

A DII will grant you the power to be self-reliant at such times.
In short, it protects your ability to earn an income during disability.
It is a benefit that no other life insurance provides.

 

A final piece to the puzzle

 

Remember how Singapore’s cannons were all pointed to the wrong direction during the WW2?
Not having DII is akin to that.

Blimey! Wrong direction !!

Blimey! They are coming from the rear?!

We keep adding more big guns to our insurance portfolio.
Increasing CI cover, enhancing the Shield plan and upsizing our death benefits.
And yet we may forget to protect our income which is what makes it possible for us to buy all the above coverage in the first place.

Ok, I am in.
Where do I get DII?

Aviva’s IdealIncome, Great Eastern’s PaySecure and AIA’s Premier Disability Cover are all DIIs.
While mostly similar, there are some key differences in their policies.

Rehabilitation and death benefits are available in the AIA and Aviva plans.
AIA’s Premier Disability Cover pays 2x the monthly payout to replace the income you may lose during the deferment period when you may be unable to work due to disability.
Aviva allows you to keep up with inflation by giving a choice of escalating your monthly benefit to 3% per annum in its Ideallncome plan.

Great Eastern’s PaySecure does have its own unique features.
It can function as a stand-alone policy or as a rider to your other insurance plan.

PaySecure also lets you choose your pre-benefit period at 60, 90 or 180 days.
Even if you happen to reside outside of Singapore, it can still cover you.

 

Completing the picture

 

We have known about DII from the start (see our Learn section)
Yet it has completely slipped under our radar.
It is a shame that such a critical benefit has been shunned for so long.

Hopefully, this article will draw your attention to this wonderful income protection tool.
The same way that a Michelin award has brought many more people to my favourite hawker stall.

So, stop waiting and missing out on DII.
Get hold of your calculator and start planning for your income protection.
Share this information with your loved ones too so that they will not miss out on it!

 

www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

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