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Eldershield defies logic?

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In a couple of years, I am turning 40 and would be automatically enrolled in Eldershield. Launched in 2002, this national scheme is aimed at providing basic financial protection to Singaporeans who need long-term care. My late father was one of the beneficiaries of Eldershield payouts. Henceforth, in this article, I will share my views on this insurance policy.

According to the Ministry of Health’s website, it is estimated that 1 in 2 Singaporeans who are healthy at the age of 65 is at risk of having a long-term disability over their lifetime. However, not many Singaporeans are prepared for such a scenario. To meet this gap, ElderShield provides eligible policyholders a monthly cash payout for a period of time, in the event of suffering from severe disability.

ElderShield policyholders can choose to enrol in Eldershield 300 or 400. The former is for policyholders who joined between 2002 and 2007. The payout amount is $300 per month and duration is 5 years. My dad qualified for this plan back in 2005. Eldershield 400 is for policyholders who joined after 2007 and the payout amount is $400 with duration up to six years.

Eldershield

Enrolling in Eldershield is easy because by default you are automatically enrolled into the scheme unless you choose to opt out. However, qualifying for the payout is incredibly difficult. You need to be assessed by an appointed assessor to be “severely disabled”.  This means that an individual must be unable to perform at least three of the six Activities of Daily Living (ADLs) independently, with or without mobility aids (e.g. walking aids, wheelchair).

Eldershield

To be frank, I have no issue with the qualifying criteria for permanent disability because this is the standard criteria used by private insurers offering disability insurance schemes. But what I find it hard to accept is the benefits of Eldershield, especially the payout amount and duration.

From a common-sense point of view, those who qualified for the monthly payouts need long-term care. It is not difficult to imagine that after five or six years, their conditions would remain the same or perhaps even worsen. After all, when a person is certified to be “severely disabled” by a doctor, chances of him recovering after six years and able to perform the six ADLs are probably remotely low. Under such circumstances, how would Eldershield continue to serve to meet its policy intent of providing basic financial protection after the payout ends? Is it reasonable to have a payout duration of only 5 to 6 years for those suffering from permanent severe disabilities?

Supplement Plans

If the argument is that the Eldershield plans are meant to provide only a basic form of financial protection and that policyholders should have the hindsight to purchase supplement plans for enhanced protection, then shouldn’t the benefits be made more attractive in the first place?

For the Eldershield 400, the annual premium for a male at entry age of 40 is $174.96 and the premium is $2380.17 at age of 64. The premiums are based on the age at which you join the scheme, and payable until age 65. The premium amount is the same throughout the premium term, and does not increase as you grow older. Premiums can be fully paid by Medisave.

The premium is quite substantial for a term insurance policy. Given that the premiums are pooled at the national level, the monthly payouts should at least be for lifetime and the amount doubled or even tripled.

Currently, three insurers (Aviva, Great Eastern and Income) provide supplement plans to Eldershield. They offer severe disability payouts of higher amount and also longer durations. There is also offer of lifetime payout coverage. The various plans in the market only serve to confuse people and most may not know which plan best suit their needs.

Make no mistake, the policy intent is sound but the framework should be enhanced to meet the changing socio-economic needs. Although Eldershield is a national scheme for all Singaporeans, the policy is primarily targeted at providing affordable financial protection for those from the lower-income bracket. However, with the cost of living so high in Singapore, it is extremely difficult for the lower-income group to sustain with monthly payouts of only $300 – 400. Furthermore, the payout duration lasts only 5 to 6 years.

My family’s experience

My late father qualified for the Eldershield payouts in 2005. Although he was diagnosed with stroke in 1993, he was still able to carry out the ADLs. Henceforth, he was initially not eligible for the monthly payouts. However, by 2005, his condition worsened and needed the assistance of wheelchair for mobility and required help for bathing and changing. After being assessed by an appointed doctor, we got the monthly payouts of $300 which lasted for 5 years.

The Eldershield payouts had been very useful for my family because Dad used the money to pay for his visits at a day care centre for the elderly in Tampines. At that time, my mom was the only caregiver and was struggling to take care of Dad. So the visits helped to relieve some stress from my Mom as well.

But sadly, all good things must come to an end. The payouts ended in 2010 and coincidentally, the day care centre increased the fees citing surging foreign labour costs. Due to these reasons, Dad decided not to carry on with the rehabilitation visits anymore. In early 2013, he passed away at home.

Conclusion

When Eldershield was rolled out in 2002, my family was among the first to sign up for Dad. Back then it was an opt-in scheme. My father had a lot of regrets when it comes to insurance. When he was young and healthy, he did not believe in insurance and financial protection. After he suffered from the devastating stroke, he was considered high risk and many insurers would not want to insure him. Eldershield was our only hope and my family was certainly grateful that the insurer, Great Eastern, honoured their promise and made the monthly payouts.

Does Eldershield need to be enhanced and improved? In my opinion, changes are certainly needed. Now that the government is reviewing the policy, I hope the basic plan would provide lifetime payouts and the quantum of payouts should increase to reflect the cost of living in Singapore.

There are many financial bloggers who dismissed the relevance Eldershield but I feel that this national scheme still has merits because there are many lower-income families out there who don’t have financial protection. For many of them, they are just one illness away from financial disaster.

Read my other articles on CPF:

  1. What will happen to your CPF monies upon death?
  2. CPF nomination and making a Will
  3. Devastating HDB Loan and CPF Accrued Interest
  4. CPF’s Home Protection Scheme (HPS)
  5. The Dark Side of CPF Housing Withdrawal Limit

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2 Comments

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  1. For the Eldershield 400, the $2,380.17 is the annual premium for a male at entry age of 64. Which means over 2 years from age 64 to 65, he will pay $4,760.34 premium for a payout coverage of $28,800.

    The sentence you wrote may mislead readers to think the Eldershield premiums increases as one gets older, which is NOT the case.

    If one joins at the default age of 40, he only has to pay an annual premium of $174.96 till he is 65, for a total outlay of $4,374 premium for the $28,800 coverage.

  2. Hi LateBloomer,

    I agree with your statements and have amended my article.
    Thank you for pointing out.
    Nonetheless, I still feel Eldershield needs to be revamped to provide lifetime payouts instead of lifetime coverage.

    Regards,
    Gerald
    http://www.sgwealthbuilder.com

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