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My late father’s experience with Eldershield

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One of the readers of AK71 solicited his views on Eldershield in his blog, “A Singapore Stock Market Investor”. In his post, the author wrote that he don’t need the Eldershield protection but nonetheless, had not opted out of the scheme due to his “friend’s persuasion” (Singapore Citizens and Permanent Residents (PRs) with Medisave accounts are automatically covered under ElderShield at the age of 40).

In his article, AK71 also downplayed the importance of Eldershield, stating that he don’t need disability insurance as he is a “Superman” with self-generating assets. After reading the article, I was unimpressed and thought it was ridiculous that a finance blogger could write such warped immature material on Eldershield without even having first-hand experience with the scheme. Such an article only serves to reinforce the ignorance among Singaporeans on insurance.

Make no mistake, I hope that none of my readers would ever suffer the ill fate of being eligible for Eldershield payouts. Neither am I trying to sell insurance policies from this article as I don’t work in the financial sector. But I feel that it is important that Singaporeans have the correct mindset on disability insurance. So today, I am going to share my late father’s experience with Eldershield. Read on to find out if you are keen to know my late father’s destiny.

Like many Singaporeans, my father didn’t believe in the merits of insuring himself and had a typical old-fashion understanding of insurance. He felt that buying insurance was a sheer waste of money, after all, he was young and healthy. So why bother to waste money? Like many Singaporeans, he worked hard. In fact, he worked so hard that every weekend, he had to work at various construction sites. In the early nineties, Singapore’s construction industry was booming and my father’s small truck business was thriving. Because of his single-mindedness to make more money, he often skipped his cholesterol medication.

I remember one night, my father didn’t return home. My family was anxious and could not reach him (in the nineties, cellphones were not common). Then the next day afternoon, we were relieved when my father’s workers carried him home and they said he slept in the lorry overnight. My father had complained of numbness in his left side of his body and was immobile. Yet, he refused to go to hospital because of his fear of being warded. After two days, his condition remained the same, so we called for ambulance to send him to hospital for check-up. It was only then that he was diagnosed with a major stroke.

The stroke changed our lives for the next twenty years. My family suffered a lot of financial hardships because my father was the sole breadwinner. My mom was a full-time housewife with only Primary Three education. My grandmother was staying with us and my elder brother, myself and my younger sister were still schooling. Just imagine, a person who suffered a major stroke and still had to support five dependents. How to survive?

Furthermore, in those days, our Singapore society is much less compassionate. Apply for social welfare? We don’t even know how to read simple government letters, let alone find a social worker to help us. In any cases, it was not so easy to qualify for the social assistance schemes. In those dark days, we practically have no one to turn to and had to fend for ourselves. Most of our relatives distanced themselves from us, thinking that we would borrow monies from them. But we never borrowed a single cent from them at all and I often felt sad that this disaster had to happen to my family. What had we done wrong to go through this? My father was a hardworking and thrifty man, a responsible husband, father and son. He don’t deserve this.

On thinking back, in spite of our ordeal, I am grateful for my father’s business acumen and investing foresight. Credit to him, even though we were poor, we did not have to borrow monies and my parents always ensured that we had enough to eat and received proper education. One of the blessing in disguises was that my father was self-employed. On looking back, if he was working for others, my family would be finished and would never crawled our way out of poverty.

I would never forget those days. One of the biggest mistakes made by my father was not insuring his earning ability. All of us would never appreciate the importance of insurance unless your loved ones or yourself went through the ordeal of being sick and unable to work. This is human nature. After all, when we were young and healthy, we believe that we are invincible from any major illness. But we don’t realize that life is actually unpredictable and is very fragile. In my father case, he was damn fit and healthy when he was in his thirties. But alas, he suffered from a major stroke at the age of 38. After his stroke, we tried to apply for several insurance but was rejected. One of the private insurers even rejected him for the private Medishield coverage.

So when the government rolled out the Eldershield in 2002, we were apprehensive and wondered if my father would qualify for coverage. We decided to try our luck and was happy that his condition was accepted. In 2007, his condition worsened and he was unable to carry all the three daily activities of living. The insurer promptly issued the monthly payouts of $300 after the appointed doctor confirmed his eligibility.  The payouts were handy because it helped us to pay for the elder care fees for my father.

In 2007, the government enhanced the scheme to make Eldershield an opt-out scheme and also enhanced the payout amounts and period. This is a good development because people like my father had benefit from this policy.

From this painful lesson, my views of life changed. I realized that health is important and we should strive to have healthy lifestyle. Making money is important but what can be more important than staying alive to fight another day? But having stated that, it is also naive to assume that we would be free from any major illness or accidental death throughout our life stages. So buying insurance is not an option. To me, it is being responsible to my family and to ensure that my family’s welfare is taken care of in the event of me being disabled or terminally ill. Insurance is a form of contingency plan and should always feature as part of our personal finance strategies.

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14 Comments

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  1. Hi great sage,

    With your first hand experience in eldershield, would you advice a person with say a passive income stream of 7k per month to get a plan that pays 300 per month only upon hitting certain set conditions?

  2. Wow, if you switch your career to insurance line i’m sure you’ll do fantastic, I’m an insurance agent though. anyway, I’m a reader of AK71, I’ve read about the post and he was only writing to himself and what he though about eldershield. you have your point and he has his point, no right or wrong, at the end of the day it’s up to the reader to be responsible for themselves. For a person who has a passive income of 10k a month i don’t really think he needs eldershield. it’s a complimentary for him though. It might be a need to a person, it might be a want to other. but for those reader who is not like AK71 i strongly recommend you don’t opt out from this scheme anyway it’s a really cheap scheme, premium is payable until age 65 and it will still continue to covers a person until he’s no longer in this world. total premium for this 25 years is only about 5-6k. There is an enhancement to the basic too, it covers for life and also more payout too. for a person who is age 40 they can get about $1000 for guys and about $800 for ladies on top of the $400 so total monthly payout is about $1200- $1400/month for the first 6 years and at the 7th years the basic eldershield will stop and the supplement will continue paying for lifetime. All this doesn’t required any cash you can use your medisave to pay for the premium of cause if you want higher coverage you will need to top up by cash because medisave limit for eldershield enhancement is only $600. I’m not promoting anything here i’m just bringing awareness to the reader here and to those who are interested you can visit Great Eastern, Aviva or Ntuc for more details. Thank you

  3. I agree it’s a low cost coverage too.

    However, for a person who has more than enough passive income (i.e. above consumption rate during retirement, including accounting for inflation impact) enough to provide the $400 equivalent from the ElderShield, the need has already been fulfilled.

  4. I think you may have misunderstood AK message out of context. I post again the segment “Why? We don’t need disability insurance because we are Superman (and just have to cross our fingers that we do not come into contact with Kryptonite)?”

    there is a “?” ended. This means a world of differences. Also the term “superman” refer to body health not financial powers. Which implied inversely actually. That’s what i read.

  5. I agree with Cory. You have misread AK’s post.

  6. Regardless of the amount of passive income, eldershield is a form of hedging or insurance to insured against the unexpected. So instead of taking up the basic of $400 per month, one should top it up to $1k per month simply using cpf, w/o forking out of pocket, cash. So, yes, eldershield is still applicable, but a higher payout amount, with a higher premium should be the plan.

  7. Hi Numbers,

    Regardless of amt of passive income? Are u sure?

    The pt of having eldershield is to provide a supplement to the financial needs to take care of an elderly with the conditions laid out in the plan. If there’s already a stream or a sum of money to cover this possibility, the need is no longer present. So why buy something that you no longer need?

    Buying an eldershield plan doesn’t shield you from getting hit by the 6 activities of daily living as laid out in the plan. It shields you from the financial cost of caring for such a person. If you can cover that cost, there’s no need to buy the plan. That’s what I think.

    Maybe great sage can enlighten us all.

  8. The question to AK is that with such a large steam of passive income, why is there a need for him to keep 6-12 months of emergency fund in case that he loses his job? (I’m not talking about opportunity fund for investment when market correct)

    M

  9. Emergency funds is like a sort of self insurance for unemployment or things that are unexpected but not covered in other forms of insurance. You can transfer the risk if you can find an insurer to take over the risk by paying a premium. I think there are such insurance but maybe not in singapore. I don’t think he needs a large emergency fund because it’s quickly replenished by passive income each month. But it’s up to his preference to keep exactly how much in the funds. He still needs one because emergency fund is used to pay for emergency, not just unemployment. As for elder shield, I think he won’t need because elder shield is to cover for the cost of taking care of an elderly hit on the conditions laid out on the plan. If he can cover that costs, it’s not needed anymore.

    What do u think?

  10. Hi LP,

    He does not need an emergency fund in case of loss of employment, but he keeps one, probably due to:

    a. preference, but not need.

    b. his passive income though is large, but it is not “certain”, so it is preferable to keep some emergency fund, just to be more certain and play safe.

    c. In case when the passive income is required, e.g. when he loses his jobs, uncontrollable and unexpected situations (or he makes an unexpected big mistake in the market) unfortunately affect his passive income, it is good to keep some fund – just in case. Similarly, when elder-shield payout is required, and passive income is affected at the same time, elder-shield will come in handy.

    d. The opportunity cost of having an emergency fund is low, just like the price of elder shield is low and value for money. Does not cost much to him based on its wealth, but it provides some assurance, when his passive income fails.

    e. When he grows old, due to age and unexpected circumstances (e.g. dementia or other illness), he may lose big chunk of his passive income, and the emergency fund and elder-shield may come in handy.

    In short, his past investment success may not guarantee his future success (e.g. wilmar, yongnam vs successful reits investment), and his current passive income is not certain and guaranteed. But some emergency fund and eldershield will provide some help when he needs them, and both are relatively low cost. It is worth it. Not optimized decision, but one that is rational.

    M

    M

  11. Hi M,

    Very well thought out.

    I like your pt (e). However, unless he put all his eggs in one basket, it’s as good as diversified, so the chances of a series of events hurting his passive income to such an extent that the payout of eldershield becomes significant to him…wow, it must be quite a black swan. But never say never when it comes to life. I just feel that that while it’s certainly possible, it’s quite improbable. But never mind me, I’m not a good estimator of probability.

    Thanks for sharing your thoughts 🙂

  12. I believe the points I would like to make have already been made below by Anonymous M in points (b), (c) and (e).

    As I have highlighted before and would highlight again, insurance or hedging against the unexpected is to cover those events or situations which cannot be foreseen. But if and when the situation happens, the income is certain, and can also be certain for life for the higher premium and coverage.

    Whereas, passive income is to provide income when little or no work is done, but it is no guarantee or certain for life. There is always a need to revise and relook every now and then, to ensure the conditions and expectations are still the same. But this assumes one is able to do that when 3 or 4 daily living criteria are no longer available, and still able to function as per normal. Maybe, maybe not. Maybe it may take longer for normalization to happen again?

    The eldershield is a low cost insurance that can provide a certain form of income (although not very high) for life, till one’s life is expired. This is a certainty.

    Weigh, and understand the difference. Just as it is not a must to buy insurance or have insurance if one strongly believe he/she will not be hit by the unexpected. It is all about probability, and that is where the actuaries come in.

  13. If you put it so, then it’s reasonable. I think the fact that when we’re older and might not have full mental capabilities to invest properly is an important consideration. You’re right.

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