CareShield Life, a gleaming new policy, has appeared in your inbox. There’s no getting out of it, whether you like it or not since it’s required. So now we can see how it can be integrated into and improved upon our present financial planning. One key factor to examine is whether or not upgrading to CareShield Life supplements is worthwhile.
CareShield Life is a national health insurance programme that protects against serious disability. When the unthinkable happens, it’s a sort of insurance that pays out a monthly payment to cover long-term care expenses.
The majority of you would already be familiar with the essentials of this policy. However, for those who don’t know or are still undecided, take a look at the benefits.
- If you are a Singapore Citizen or a Permanent Resident (PR), CareShield Life will automatically enrol you once you reach the age of 30.
- There was also a transition time because CareShield Life was supposed to replace ElderShield. As a result, those born between 1980 and 1990 will be automatically included in the 2020 census.
- CareShield is required for anyone born in the 1980s or after.
However, people born between 1970 and 1979 will be automatically enrolled in CareShield Life at the end of 2021, with the opportunity to opt out by December 31, 2023, with a full refund.
To be eligible for CareShield, you must meet the threshold of a serious handicap. This is the definition: unable to execute at least three of the six basic activities of daily living (ADLs), which include:
- Washing Dressing
- Walking or Moving Around
Among the different explanations, only one emphasises the limitations of what the basic CareShield can achieve. It all comes down to the fact that money is insufficient.
To emphasise the argument about it being basic, CareShield Life is meant to provide minimum financial protection for long-term care requirements. For the plan to be made mandatory for all Singaporeans (including the lower-income group), the coverage level must ultimately be reduced (or “basic”) for premiums to be affordable for everyone.
But what one might require can be more than the bare minimum. You are limited to a set monthly payout based on your current age. Moreover, it is to be noted that if you file a claim at a younger age, your monthly compensation will be reduced.
This also emphasises the fact that there is a potential gap, given how much should be covered and how much it is.
You may upgrade now if you want a bigger coverage amount and even more perks. The major reason to upgrade your CareShield Life is that you don’t have to pay in cash to receive more coverage.
You or your immediate family members including your Spouse, Parents, Children,
Siblings and Grandchildren can make the payments. Premiums can be paid from your CPF MediSave account, subject to a limit of $600/calendar year/insured. If the premium exceeds that amount, a cash top-up is required.
There are just three insurance carriers that provide CareShield Life supplements, and they have already gone live.
The following are the firms and their plans:
- MyLongTermCare Plus
- Care Secure
- GREAT CareShield
- GREAT CareShield Advantage
It is possibly the most apparent and significant aspect. Given that CareShield Life only covers the most basic needs, a bigger monthly payout will allow you to access superior care facilities and cover additional expenditures if the need arises. You can increase your monthly payout up to $5,000, although cash premiums are normally required at that point.
Assuming you wish to continue with a set premium of $600/year (the limit you can utilise from MediSave), upgrading now will result in a bigger monthly payment (or at a cheaper premium) than upgrading later.
The standard CareShield Life policy only pays out when at least three out of six Activities of Daily Living (ADLs) are unable to be performed. There will be additional alternatives with CareShield supplements. You can remain with the conventional 3 out of 6 ADLs, or choose claim eligibility of 2 out of 6 ADLs, and so on.
When compared to the 3 out of 6 ADLs option, the 2 out of 6 ADLs option is more expensive, which will lower your monthly payout if you want to stay to the $600/year MediSave limit. The second factor to evaluate is whether you believe two out of six ADLs are likely to occur.
Choices for premium terms of supplements become available as well. You do not need to adhere to the standard – pay until the age of 67. There are numerous alternatives available according to the firm, such as paying till age 67, 84, 97, and so on. Just keep in mind that, everything else being equal, the shorter the premium-paying time, the higher the rates.
The only advantage of getting the basic CareShield Life plan is that you get a monthly disability payout — that’s about it. There are additional perks that come with CareShield enhancements.
These are some examples:
- Even if one or two ADLs occur, the premium is waived.
- Payouts can be fixed or increased.
- Payouts are increased if you have dependents.
- Even if you recover to 2 ADLs, you will still receive a reduced reward.
However, such advantages are secondary. The key advantage is the increased monthly payout.
To reiterate, you may use your MediSave to pay for the supplement charges. The maximum is $600 each year, so if the premiums are greater, you’ll need to pay the difference in cash.
Most Singaporeans would just use at least up to the $600 limit as the CPF MediSave balances earn 4% interest per year.
Assuming you now have $40,000 in your MediSave, the 4% interest equals $1,600. So, even if you cease working immediately and no more CPF contributions are received, the interest can meet the premiums (not considering other factors).
Furthermore, there are several limits to utilising MediSave:
- Your MediSave funds are not part of your Retirement Account and hence cannot be withdrawn.
- Although you may use MediSave for a variety of medical bills, there are certain restrictions. Aside from that, it can only be used to pay for certain national schemes, such as MediShield Life, CareShield Life, and ElderShield Life.
Only if you die will your MediSave balance be distributed to your beneficiaries.
However, having a pre-capped MediSave balance provides additional benefits, such as an overflow to the Special Account.
Although the standard CareShield policy covers pre-existing diseases, the insurance providers’ CareShield Life extras may not.
If you have pre-existing medical issues, you may be required to pay a higher premium, be excluded, or be refused.
As a result, if you’re in good health right now, you might want to take advantage of this opportunity to apply for greater coverage.
You “pay as you go,” as with the Integrated Shield Plan (the MediShield Life upgrade).
It will be unlike endowment savings plans or whole life plans, which encourage you to commit since the consequences of leaving will be severe.
Because the CareShield Life enhancements do not accrue financial value, you can cancel them at any time with no penalty (other than the premiums you’ve already paid).
So, if you’re unable to continue paying the premiums after 5 years, you may choose to cancel the upgrade. However, you will lose the extra coverage that comes with the supplement. So, before you do something like that, talk with your financial advisor.
We hope this article on should you upgrade to careshield life is important.