The Business Times, Monday 29 July, 2002
ElderShield is a cheap and good scheme
ACCORDING to a recent study in the New England Journal
of Medicine, men and women over the age of 65 have, respectively,
a 33 per cent and 50 per cent chance of being unable to perform
the basic activities of daily living such as washing, dressing,
feeding, toileting and moving about. The financial burden of such
severe disability can be onerous. For example, in Singapore, private
nursing homes can cost between $900 and $2,400 per month. Even if
one chooses to nurse at home with the help of a foreign domestic
worker, the minimum cost will still be in the range of $800 to $1,000.
Indeed, some are now fully bearing this cost as they did not insure
themselves against such an outcome. Therefore, there is a need to
make provisions for long-term care so as to minimise the drain on
our personal wealth should we, too, one day require such care.
Recognising this, the Singapore government introduced
ElderShield as a form of basic protection against such severe disability.
It provides a $300 cash payout every month (for up to 60 months)
to those unable to perform three or more of the above-mentioned
activities of daily living. Singaporeans and permanent residents
aged between 40 and 69 will be automatically covered under the scheme
(the 'auto-coverage cohort') unless they opt out of it. ElderShield
is a good deal for the following reasons:
Easy qualifying criteria: Most insurers assess a person's
state of health when one applies for long-term care insurance. In
particular, they assess whether the person has any existing symptoms
which warrant diagnosis, care or treatment from a qualified doctor.
However, under ElderShield, the qualifying criteria are very much
more lenient. The automatic coverage is extended even to individuals
with pre-existing conditions such as diabetes or hypertension for
more than a year, and those who are already unable to perform two
of six basic activities like feeding or walking, thus ensuring that
these individuals are not left out of the scheme. Indeed, some who
were rejected for long-term care insurance are now automatically
covered under ElderShield.
Subsidised premiums: To encourage Singaporeans aged 56
to 69 to participate in the programme, the government is subsidising
up to 51 per cent of their premiums.
Some benefits even if your policy lapses: As long-term
care insurance is a term policy, it does not have any cash value
to pay for outstanding premiums. Generally, the policy is terminated
if the policyholder fails to pay the premiums after the grace period.
All the premiums already paid would then be forfeited to the insurance
company. Under ElderShield, there is a minimum payout amount even
if the policyholder lapses on the policy (subject to a minimum number
of payments). For example, an individual aged 50 would only need
to service the policy up to the seventh year in order to get a monthly
benefit of $100 upon claim.
Freeze, Cap and Rebate on Premiums: The two ElderShield
insurers, NTUC Income and Great Eastern Life, have made a commitment
to freeze the level of premiums for regular premiums and 10-year
premiums for the next five years. After this period, the hike in
premiums will also be capped at 20 per cent of the existing costs.
Compared to the market practice of being able to increase premiums
within 30 days, you can be assured that the cost of keeping ElderShield
in force is contained. What's more, ElderShield may even give a
premium rebate, depending on the number of claims - an uncommon
practice in the industry.
No waiting period: Most insurers have a waiting period
of at least six months from the policy inception date before a policy
can be in force. This is to prevent a potential situation where
the policyholder, being aware of his adverse health condition, seeks
to benefit from it by insuring himself and making a claim within
a short period of time. Under ElderShield, this waiting coverage
is waived for the auto-coverage cohort. Besides the above benefits,
the scheme recognises that ElderShield should not be a financial
strain upon an individual's retirement and is therefore structured
such that affordable premiums are payable yearly up to age 65 or
in a lump sum. An individual would then enjoy lifetime coverage
in the event of severe disabilities in old age. It is also not advisable
to opt out of ElderShield even though you might have the intention
of possibly opting in later. This is because:
Underwriting will be required upon reapplication, and you may not qualify;
The government subsidies will be withdrawn.
There will be a waiting period of 90 days from policy reinstatement date, exposing you to higher risks.
We would strongly urge anyone not to opt out of ElderShield. It may not be a free lunch but it certainly is a cheap and good one.
Chong Kok Peng and Joseph Chong
New Independent Pte Ltd
Singapore
