Every month, full-time employed workers who are Singaporeans or Singaporean PR, together with their employers, contribute Central Provident Fund (CPF) contributions that are then deposited into their Ordinary, Special and MediSave Account. CPF also provides affordable insurance schemes that provide compulsory insurance coverage.
These schemes and accounts ensure that Singaporeans have some level of basic coverage and retirement savings. Having said that, individuals should still evaluable and understand their own needs and secure adequate insurance policies beyond what CPF schemes provide.
Here are 7 areas where CPF’s schemes cover but may not be enough:
1. Health insurance: Higher hospitalisation coverage
MediShield Life is an insurance policy that is fully paid for from your MediSave account. MediShield Life provides some basic coverage when you have to be hospitalised, but does not cover non-medical charges such as ambulance fees as well as pre- and post- hospitalisation charges.
That’s why, some people choose to increase their hospitalisation coverage by purchasing an Integrated Shield Plan by private insurers. Integrated Shield Plan can be paid by MediSave for the additional private insurance component of the premium. The rest must be paid by cash.
Having an Integrated Shield Plan means that you can choose higher wards and claim higher amounts. An IP Shield Plan also covers ambulance fees and pre- and post- hospitalisation as much as up to 13 months, which means you can recover with complete peace of mind.
2. Life insurance: Higher death coverage
CPF also has a mandatory life insurance scheme called the Dependants’ Protection Scheme (DPS). Once you turn 21 and make your first CPF working contribution, you will be automatically included under DPS. If you don’t want to be covered under DPS, you can opt out of it.
But there’s not much reason to opt out. The premiums are very affordable and can be paid via your Ordinary or Special Account. For individuals under 34 years old, the premiums are the cheapest at $36 a year. On the other end of the range, those between 55 and 59 years old pay $260 a year for DPS.
DPS offers a maximum sum assured of $46,000 up to 60 years old. This means that if you pass away, suffer from Terminal Illness or encounter Total Permanent Disability, this death benefit of $46,000 will be paid out to your nominated family members.
So the question you must ask yourself is: Is $46,000 enough for your family members to sustain themselves if they lose your source of income and support? If you are supporting young children or elderly, the answer is no.
As a rough guideline, the minimum coverage you should have is at least 11 times of your annual earnings. So take an entry-level worker who has an annual income of about $30,000. The sum assured should be at least $330,000. You can see that $46,000 is low in comparison, but of course, given the affordable premiums, it’s better than nothing. Here’s some further guidance on how to calculate how much life insurance coverage you require.
3. Critical illness and early critical illness coverage
CPF’s compulsory insurance schemes are Dependants’ Protection Scheme and MediShield Life. But there is a crucial component of insurance coverage that you should not ignore, which is for critical illness and early critical illness.
In 2018, 28.8% of all deaths (Singaporeans and PRs) resulted from cancer. Yes, more than 1 in 5 are dying from cancer. Aside from cancer, diabetes is another critical illness that the government has recognised as a huge problem in Singapore. It is even waging a “War on Diabetes”.
When one suffers from a critical illness, they may have to quit their job or take on less responsibilities, thus receiving a lower income. As a double whammy, treatments for critical illness also cost a lot of money. Thus, it’s important to secure your own critical illness (advanced stages) and early critical illness plans.
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4. Coverage for Pregnancy Complications and Congenital Conditions
Since April 2019, MediShield Life covers pregnancy and childbirth complications up to 24 pregnancy-related conditions. These include gestational diabetes, ectopic pregnancy and uterine rupture. From June, MediShield will also extend subsidised screening under the Screen for Life programme for women with a history of gestational diabetes.
This is a great development for new mums! To go one step further, mums may also want to secure maternity insurance from private insurers. This is because on top of the 24 pregnancy complications, pregnancy insurance provides additional coverage for congenital conditions such as cleft lip and cerebral palsy, which MediShield Life does not cover. Many of the maternity insurance plans can also serve as a savings plan after your pregnancy.
5. Higher retirement payouts
CPF Retirement Sum Scheme provides a monthly income for members during retirement. If you are a Singaporean or PR born after 1958 and your Retirement Account meets the minimum, you will receive monthly payouts from payout eligibility age (currently 65) to the end of your life.
If you are turning 55 after May 2016, you need to have at least $60,000 in your Retirement Account six months before you reach your payout eligibility age. You can be exempted from setting aside a retirement sum in your Retirement Account if you have a private annuity plan that you have bought using cash or under the CPF Investment Scheme or a pension.
6. Short- to mid-term savings
Savings in your Ordinary Account and Special Account cannot be withdrawn until the CPF Retirement Age. And this stipulated age has increased over time historically, due to higher life expectancy among Singaporeans. This is not a bad thing, because it means that your savings can accrue interest and provide a retirement sum for you when you reach Retirement Age.
So, it is important to find savings and investment products to help you maintain short- to mid-term savings. Aside from keeping a sum of emergency funds amounting to six months worth of essential expenses in your regular savings account, you look for endowment plans or retirement annuity plans to supplement your savings.
7. Coverage for mental health conditions
Even though MediSave can be withdrawn to pay for psychiatric treatments, so far there is no insurance scheme that provides coverage for mental health conditions.
To be fair, it is also quite a new arena for private insurers. So far, AIA is the only insurance that includes five critical illnesses under their “AIA Beyond Critical Care”. It provides a lump sum payout when you are diagnosed with major depressive disorder, schizophrenia, bipolar disorder, obsessive compulsive disorder and Tourette Syndrome.
Need to increase your coverage beyond the basic coverage you enjoy with CPF schemes? Speak to an independent financial advisor today for an unbiased policy review.