Since you are on this website, you have recognized the need to protect yourself life’s most unexpected horrors such as cancer, stroke, accidents, etc. That is why you are here, enriching your knowledge about life insurance.

However, have you thought about protecting your insurance policies?

The biggest danger to your policy is the one who issues it.

Insurance is basically a bet between you and your insurance company on whether a certain situation will occur in the future. Since you have already staked your wager by paying your premium, you are simply the one who will be at the losing end if the insurance company refuses to pay your premium. Since insurance is a legally-binding contract, you can take the insurer to Court if they wilfully decline payment.

What if the insurer goes bankrupt?

The scary B word

If you think that it is impossible for an insurance company in Singapore to go into such a dire financial situation, you would be surprised to hear that it had occurred before.
Just merely 17 years ago.

In 2002, MAS directed Cosmic Insurance to cease taking in new business due to serious operational difficulties. Cosmic Insurance was unable to meet the solvency margin imposed by MAS and thus, had to wind down its business. Solvency margin is basically an asset buffer to cater to the insurance company’s liability. In short, this is a MAS requirement to ensure that all insurance companies in Singapore have sufficient resource to pay its policyholders.

Our insurance policies might not be really safe then.
So now how, brown cow?

Get insurance for your insurance – FREE!

Not to be alarmed, the authorities have arranged an insurance policy to protect your insurance policies. If an insurance company fails one way or another, SDIC (Singapore Deposit Insurance Corporation) shall pay those who have claim matters with the estranged insurer.

The role of MAS is to protect the financial system in Singapore by imposing a solvency margin and auditing the financial institution stringently. However, it cannot protect each policy – that is the job of the Policy Owners’ Protection (PPF) Scheme that is administered by SDIC.

SDIC also safeguards your bank savings but that is the story for another day.
In short, the PPF scheme protects policy owners of life and general insurance policies covered under the Scheme and issued by direct life and direct general insurers which are PPF Scheme members.

The short and long of it is that if you own life (and some general) insurance policy that is issued by an insurance company that is incorporated in Singapore, you are likely to be insured under the PPF scheme.

There’s a catch. As always.

Life is not perfect.
Unfortunately, there are limitations to PPF.
If you exceed a certain threshold, you are no longer protected.
The caps for insurance policies are as follows:

1) Individual life and voluntary group life policies (with the exception of annuities): Cap of S$500,000 for the aggregated guaranteed sum assured and S$100,000 for aggregated guaranteed surrender value per life assured per insurer.

2) Non-voluntary group term life policies: Cap of S$100,000 for guaranteed sum assured per policy.

3) Non-voluntary group whole life or endowment policies: Cap of S$100,000 for guaranteed sum assured and S$50,000 for guaranteed surrender value per policy.

Exactly.

It sounds rather complicated but we can simplify it.
If you have a policy or multiple policies with one insurance company, the cash value must not exceed $100,000 and the sum assured must not surpass $500,000. Otherwise, you shall not be covered beyond those limits if your insurer fails.

That is tip number 1.
Please purchase your insurance policies up to the respective caps.
If you need more, it may be better to go with another insurance company.

Tip no 2 – be aware of the life assured

You purchase a policy for yourself with company A.
Happily you purchase another few for your wife with the same company.

Here comes the kinda-fine print – the cap is per life insured.
That is to say the maximum amount of $500,000 for sum assured and $100,000 for surrender value applies individually, i.e. the total payable amount for two of you are a cool million in sum assured and $200,000 in cash value.

Look beyond just SDIC

The truth of the matter is that when picking your life policies, there are many factors involved. These two factors to ensure that SDIC always covers your policy should not be the overriding reason. The value and the services rendered are two factors we can easily value over SDIC’s complete coverage. After all, it is not every day that an insurer goes bust in Singapore.

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.