Last Updated on by Tree of Wealth
With the proposed launch of CareShield Life in 2020, conversations surrounding disability insurance policies have been growing in Singapore. More people are aware of what disability income protection does, but some may not be entirely clear, or know which insurer to go to.
To clarify, there is a difference between Long-term Care coverage plans like CareShield Life and the Supplement plans, and Disability Income plans listed here in this article. CareShield Life (Previously ElderShield) as well as the Supplement plans, fundamentally attempt to solve the concern of the growing trend of severe disability due to stroke, cancer or degenerative disease.
Disability Income plans however, work hand in hand with Early Stage Critical Illness (especially) plans as a form of Income Protection coverage.
If you are above the age of 30 and have regular financial commitments (e.g. a mortgage, a young child, or elderly to support), disability income is especially important to you as it protects your ability to earn in the event of partial disability.
In this article, we provide all you need to know about disability income and compare two top disability income insurance plans by Aviva and AIA.
What do disability insurance policies offer?
Disability income insurance provides a monthly fixed sum to replace loss of income in the event that you are unable to work due to partial disability.
If you are physically healthy and well today, imagine for a moment that tomorrow, you become partially disabled for one reason or another. You become unable to work for an extended period of time. Worse still, you might lose your job.
If you’re one of the key financial contributors of your household, such a situation is very scary. Even if you might have some savings to tide things over for several months, things like utilities bills, mortgage payments and childcare fees don’t go away.
Without an income, other family members might be burdened with the task of making up the shortfall. An accident can quickly spiral into a financial situation.
This is where a disability insurance policy really helps.
Extensive disability insurance policies pay up to 75% of your average monthly salary. Even though it’s not the same as bringing in your full take-home pay, it can at least help to cover some essential costs in the meantime.
3 things to note about disability insurance policies
1. Coverage usually does not last for life
Disability income usually covers typical employment years, so it isn’t for life. Most policies provide payouts until a certain age (e.g. 65 years old) or until you fully recover, whichever is earlier.
2. payouts are stopped or reduced when you resume work
You may be receiving payouts due to a severe injury that renders you partially disabled, but once you are back on your feet and are able to perform essential actions of daily living, your payouts will stop.
3. Coverage applies only if you are employed at the time of disability
A disability income insurance plan covers the unfortunate situation when you get partially disabled as an employed person. It replaces a percentage of income that you were getting. If you are unemployed at the point of disability, which means you were not receiving an income, you may not be able to claim.
Disability income insurance singapore comparison 2020
Let’s compare two top disability income plans in Singapore right now: Aviva IdealIncome and AIA Premier Disability. Premiums and benefit amounts are based on the profile of a female who was born in April 1971 and a non-smoker.
|Plan Name||Aviva IdealIncome||AIA Premier Disability Cover|
|Till Age||55 / 60 / 65||65|
|Waiting (Deferment) period options for claim||3 months / 6 months||2 months|
|Annual Premium||$2, 337.30 (Choice of until age 65, 3 months deferment)||$2,556.00|
|Death Benefit||$5,000||12 times the Insured Amount upon death of the Insured.|
|Rehabilitation Benefit1||3 times monthly total or partial disability benefit||Up to 6 times the insured amount per disability for reasonable expenses|
|Claim criteria during working period
|Unable to perform duties of own occupation or profession for the first 24 months of total disability2 and after this period, if unable to perform duties of any occupation or profession that the insured is suited by reason of training, education or experience.
Not performing any work or profession to earn remuneration.
|60 days deferment period where the insured is totally unable to perform duties of their own occupation.
For the first 24 months of disability, unable to perform duties of own occupation. After 24 months, unable to perform any occupation to which he is reasonably suited by reason of his training, experience or education.
|Claim criteria during non-working period||Policy will continue for 2 years from the date that insured stops working, or until benefit cessation date, whichever is earlier.
Unable to perform at least 3 out of 6 ADLs without the continual physical assistance of another person.
|Pay a benefit at the end of each calendar month as long as
1. Within 60 days of deferment, totally unable to perform at least 1 out of 5 ADL3, even with the aid of equipment.
2. AND, for the 1st 24 months of benefit payment, the Insured is totally unable to perform at least 1 out of 5 ADLs. Thereafter, to continue to receive the benefit payment if the Insured is totally unable to perform at least 2 out of 6 ADLs.
|Payout limit in the event of non-working period claim||The Total Disability Benefit payable is S$500.
The benefit will increase at a rate of 3% per annum compounded at each Policy Anniversary, starting from the first Policy Anniversary of this Policy but shall not exceed 100% of the monthly benefit in the plan.
|The insured amount (if not receiving remuneration) or the insured amount less present earnings (if the insured is receiving remuneration).
Disability benefit will be pro-rated if for less than a month.
|In the event of severe disability||N/A||Paid a lump sum of 24 times the Insured Amount (once only)|
|Change of Job||Informing Insurer is required – reduction of monthly payout||No reduction on monthly payout due to quitting or changing of job|
1Rehabilitation benefit: Cost of medical aids, workplace modifications, necessary treatment or programme approved by insurer and certified by physicians.
2Diagnosis of “Total Disability” must be confirmed by a Registered Medical Practitioner appointed by Aviva Ltd.
35 ADLs criteria excludes toileting. The 6 ADLs are: washing, dressing, mobility, transferring, toileting, feeding.
Please take this table as a summary only. For details and more clarification, please contact us here.
Aviva IdealIncome Policy Highlights
For our female profile who is born in april in 1971, (Aviva calculates as 49 years old in 2020 due to age next birthday), Aviva IdealIncome Policy Highlights provides a monthly benefit of $4,500. The annual premium is $2, 337.30.
- More affordable premiums
- Flexibility in choosing coverage period
- No lump sum payment in the event of severe disability
- Lower rehabilitation benefits: 3 times as opposed to AIA’s 6 times
- Less flexible: Claims during non-working period qualify only if unable to do 3 out of 6 ADLs
- Longer deferment period – choose between 3 or 6 months, both of which are longer than AIA’s
- Change of job needs to be informed – reduction of monthly payout will be pro-rated and applied by Insurer
Aviva’s disability income has slightly longer deferment period (shortest of 3 months) and payout criteria is slightly more stringent. But given that the premiums are lower, this plan is great for people who may just want a income protection due to unable to work temporarily or may not have hospitalisation leave under their employment contract. It is also for people with a tighter budget but want to get this area of income protection covered.
The Winner: AIA Premier Disability Cover
For our female profile who is 49 (AIA counts as age last birthday) in 2020, AIA Premier Disability Cover Policy provides a monthly benefit of $4,500. The annual premium is $2,556.
- More lenient. During the non-working period, you qualify if you cannot perform at least 1 out of 5 ADLS (excluding toileting) during the 60 days of deferment and the first 24 days of benefit payment. Thereafter, you continue to receive the benefit if you are totally unable to perform at least 2 out of 6 ADLs.
- Higher rehabilitation benefits: Up to 6 times as opposed to Aviva’s 3 times.
- More flexible: Claims during non-working period can qualify if unable to do 1 out of 6 ADLs without assistance
- Shorter 60 days (2 months) deferment period (Aviva minimum 3 months)
- No reduction on monthly payout due to quitting or changing of job
- Premiums are more expensive
- Provides lump sum payment if you suffer from severe disability
If you have a higher budget to spare, the AIA Premier Disability Cover Policy provides much better peace of mind as it is more flexible and has higher rehabilitation benefits. There is a lump sum payment in the event of severe disability, which Aviva’s does not have.
One more thing
And perhaps the most important factor of it all, there is no reduction on monthly payout due to quitting or changing of job. This is particularly helpful in the event if you need to relocate, change in status (marital, being a parent) requiring to have a step-down role in work or even sabbatical leave.
Frequently asked questions about disability income insurance in Singapore
1. What’s the difference between disability income insurance and Total Permanent Disability (TPD)?
Total Permanent Disability (TPD) is a condition that life insurance or endowment plans cover for. If you have TPD, it means you are permanently disabled, with no chance of recovery. Coverage for TPD is a lump sum payment, usually equivalent to the death benefit payout. Then, the policy stops being in force.
Disability income is distinctly different as it provides monthly payouts for as long as you are not able to earn an income due to a temporary or permanent disability until a certain age (65 years old).
Always check definitions of “disability” with your insurers before you purchase an insurance policy.
2. Isn’t ElderShield or CareShield Life enough?
In Singapore, we have ElderShield and the newer CareShield Life (introduced in Oct 2020). They are both disability insurance plans and provide a payout when an individual is found to be severely disabled.
ElderShield gives you $300 to $400 per month for 5 to 6 years. CareShield Life provides $600 starting from 2020 and increases over time.
Disability income plans like Aviva IdealIncome and AIA Premier Disability provide much higher payouts, up to 75% of your monthly income. These payouts only last until age 65 at the maximum, and not for life. Disability income plans are also known as Income Replacement/Protection coverage. Hence, it’s those years before age 65 that are more crucial for you financially as you may be supporting dependents and various important financial commitments.
Whether or not these plans are enough is ultimately your decision. You have to evaluate based on your current lifestyle and financial commitments.
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