The Business Times, Monday 12 August, 2002

Deferment period in ElderShield necessary

WE refer to the letter 'Baffling provision in ElderShield' by Tow Yin (Mailbag, Aug 5).

Before we explain why there is a deferment period for ElderShield, we would like to highlight the difference between waiting period and deferment period to help clarify the matter.

A waiting period is a time period after which the insurer cannot rescind the contract while a deferment period is a time period for the insurer to determine whether the insured is permanently disabled before a claim is made.

In ElderShield's case, the waiting period is waived for those under the auto-coverage cohort.

It implies that the insurers cannot terminate the contract if the life insured cannot perform three or more of the six basic activities of daily living immediately after the commencement of the policy.

The insured only needs to pass the deferment period before a claim is made - another reason why ElderShield must be taken up.

We think a deferment period is necessary so that the insurers are certain that the life insured cannot perform three or more of the six basic activities of daily living.

This is to avoid the situation where the inability to perform the basic activities is temporary, like for a person who has suffered a minor car accident.

While we share the concern that the deferment period may be lengthy, it prevents floodgates where people with temporary disability seek to benefit from ElderShield. The scheme is only meant for people with permanent and severe disability.

If the floodgates are not stemmed, the escalating costs will eventually be passed on to the consumer.

As such, we would instead advise an individual to accumulate an emergency fund to cope with the 'sudden added financial burden', instead of dispensing with the deferment period requirement.

Chong Kok Peng and Joseph Chong
New Independent Independent Financial Advisers
Singapore