Buy insurance policies you can afford in old age

The Sunday Times
Goh Eng Yeow
6/4/2014

Recently, I visited my 104-year-old aunt in Hong Kong again.

Except for a slight wobble when she walks, she is as fit as a fiddle. She can read the newspapers without reading glasses and still keeps abreast of current affairs by watching the nightly news on TV in the nursing home where she lives.

It is an Olympian feat to live to such a great age. But the big blessing for my aunt is to be able to still undertake the daily activities that we take for granted, such as eating and walking unassisted.

In contrast, my 83-year-old mum - 21 years younger - is confined to a wheelchair after suffering two strokes which left her partly paralysed. There is a maid to attend to her daily needs, but I sense her frustration at not being the active person she once was.

Given the choice, I would like to live the life of my aunt who worked till she was in her late 80s.

But the sad fact is that many of us will suffer the same fate as my mum when we are old and infirm, whether we like it or not.

As such, it is not surprising to find that health care is our top concern as we see our parents ageing before our eyes.

It is with this in mind that I recently took a hard look at my insurance coverage to try to plug the gaps.

But just as with investing where I buy stocks which I'm comfortable holding for the long term, I would buy insurance coverage whose premiums I would have no problems paying years from now.

One shortfall I identified is coverage that offers a steady income if I find myself disabled.

So I called my friend, a Great Eastern Life agent, to sign up for ElderShield - the severe disability insurance package giving basic financial protection to those who need long-term care.

Singaporeans and permanent residents with Medi-save accounts are automatically covered under ElderShield when they turn 40. They get life coverage on ElderShield if they continue to pay their premiums up to the age of 65.

But when ElderShield was launched in 2002, I had opted out because I felt that the monthly payout of $300 for up to five years was too small a sum covering too short a period to be of any use. For long-term invalids like my mum who suffered her first stroke 12 years ago, the monthly payouts would have run out long ago.

That means that if I want a monthly payout of, say, $1,600, I would have to supplement ElderShield with other coverage.

My agent friend suggested adding two other policies - ElderShield Comprehensive which offers a monthly payout of $300 on top of the basic ElderShield plan, and a LifeSecure policy which comes with a monthly payout of $1,000.

The only snag is that premiums for both policies have to be paid till the age of 80 to get life coverage. That means even in my old age, I must have sufficient cash to continue paying for them.

Together, the three policies cost me $1,909 a year - a sum which is still within my means even if I only live off my savings and passive income.

Currently, my company's insurance scheme covers my bills if I am hospitalised, but what happens when I stop working?

To take care of the out-of-pocket hospital expenses, I have a Safra Living Policy which offers a lump sum payout of $100,000 for critical illnesses covering me till I am 65. The premium is only $420 because it covers Singaporeans who served National Service.

What happens after I turn 65? My agent friend tried to sell me another critical illness plan offering a $200,000 lump sum payout, but the yearly premium was a hefty $7,000. That may give me cashflow problem if I stop working. A better option is to set aside the same sum every year while I work.

Like two-thirds of Singaporeans, I am on an Integrated Shield Plan, or IP, which offers higher hospitalisation coverage than the basic MediShield plan run by the Government to help defray the bills for subsidised wards in public hospitals.

But I did not opt for the most expensive IP which would have covered me for treatments in private hospitals. My mum had been treated at Changi General Hospital and the quality of care she received there reinforced my faith in the public health system.

I believe I made the right choice. Last year, my IP premiums went up about 20 per cent after changes were made to MediShield benefits, while older friends on the most expensive IPs found that their premiums had almost doubled.

Worse, the payment on the "rider" to ensure that their medical bills would be paid entirely from insurance had shot up as well.

This makes them worried that once MediShield Life - the universal health insurance coverage for Singaporeans - is implemented, their medical premiums may escalate so much that they will not be able to afford their current coverage.

I empathise with their concerns since my IP premiums are likely to rise too. But even based on the current IP premiums,they may still be forced to downgrade in their old age.

The table from my insurer shows that annual IP premiums for the most expensive plan jump from $1,909 at age 65 to $8,566 past the age of 100. Now, even if I live to 100, I may have a problem paying that kind of premium when I have no income.

So sticking to an IP whose premiums I can afford to pay in my old age will mean big savings which I can then use to cover any expenses arising from an illness.

Some will argue that it is better to trim spending in other areas to foot the premiums for the most expensive IP in case we need it, just to get the best medical help which money can buy.

But I believe that rather than try to insure against every conceivable medical risk, the better option is to eat healthily and exercise regularly. My 104-year-old aunt is living proof of that.

engyeow@sph.com.sg

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Background story

Long-term view

Health care is our top concern as we see our parents ageing before our eyes. It is with this in mind that I recently took a hard look at my insurance coverage to try to plug the gaps. But just as with investing where I buy stocks which I'm comfortable holding for the long term, I would buy insurance coverage whose premiums I would have no problems paying years from now.