How CareShield Life Will Affect My Insurance Coverage

From 1 Oct onwards, CareShield Life will be launched and made compulsory for all Singapore residents born between 1980 to 1990. It is a national long-term care insurance scheme that provides basic financial support should Singaporeans become severely disabled. Despite his refusal to accept how old he is, he cannot escape the fact that he falls within this age band. Therefore, he will automatically be included and start paying for its premiums. Since he belongs to the affected group, he had a quick chat with his insurance agent to comprehensively understand how CareShield Life will affect his insurance coverage.

What Is CareShield Life

CareShield Life is the latest iteration of ElderShield. It provides a payout upon the diagnosis of severe disability. Severe disability is defined as being unable to perform 3 out of the 6 activities of daily living (‘ADL’) as shown in Diagram 1.

Diagram 1: The 6 Activities of Daily Living (Source: Ministry of Health)

This national insurance scheme provides universal coverage and hence does not discriminate anyone with pre-existing severe disability who wants to come on board. More explanation on how CareShield Life works in terms of payouts and premiums below.

CareShield Life Payouts

CareShield Life payouts start from $600 a month and last for a lifetime. The payouts will help to partially finance the heavy and prolonged costs of long-term care services often required for people diagnosed with severe disabilities.

For the first 5 years, both premiums and payouts will go up by 2% p.a. This escalation benefit is designed to help mitigate any inflationary effects. However, do note that once the insured starts collecting the payout, the amount becomes locked in for life and will not increase annually.

CareShield Life Premiums

Singaporeans turning 30 will start paying annual premiums for CareShield Life and stop paying at the age of 67. Even though the insured stops paying after age 67, coverage remains for life.

Premiums can be paid from their CPF MediSave accounts (‘MA’). There will be transitional subsidies of up to $250 for everyone joining the scheme during the first 5 years. If insured does not have enough money in their MA, he/she may use spouse’s MA or that of an approved family member.

Should the insured develop severe disability and make a successful claim, they stop paying premiums thereafter. This is commonly known as the waiver of premium rider. Since CareShield Life provides universal coverage, anyone with severe disability at the joining age of 30 years need to pay only the first premium to qualify for lifetime payouts. Thereafter, the insured need not pay any further premiums.

How CareShield Life Affects My Insurance Coverage

When his daughter was born, Heartland Boy bought a term policy to enhance his death/TPD coverage as well as a disability income policy. As he had outlined in this article on disability income insurance, it is critical in protecting against the event of losing income as a result of some form of disabilities. With the introduction of CareShield Life, it adds an extra layer of cover for long-term care.

CareShield Life protects against events of SEVERE disabilities while disability income insurance protects against the risk that an illness/injury (or disability) creates a barrier for a worker to complete the core functions of their work. Therefore, it should not be confused with disability income insurance and it certainly should not be seen as an adequate replacement for it either.

Diagram 2: Timeline of coverage provided by CareShield Life and Disability Income Insurance as explained by his financial advisor

As shown in Diagram 2, the length and type of coverage differ significantly. Arguably, there is some form of overlapping coverage which is small in Heartland Boy’s opinion. Therefore, he sees CareShield Life as complementary to his disability income policy instead. Since the need for him to have disability income insurance still exists, he shall continue to service the premiums in cash and maintain this very critical policy. Therefore, the discussion with his financial advisor, who also assisted with the illustration of Diagram 2, concluded with him not having to take any further actions.

Since the premiums can be funded from his CPF MA, this gives him further reason to prioritise topping up his MA to enjoy tax relief. He hopes to eventually reach the enviable position of using the interest earned from his MA to pay for the premiums of his Integrated Shield Plan and CareShield Life!

Heartland Boy’s Parents

Details of how older residents may join CareShield Life will only be released from 2021 onwards. This provides Heartland Boy sufficient time to explain the mechanism to them. Since it is not compulsory for their cohort, he would try to convince them of the merits of opting in. That shouldn’t be difficult since CareShield Life is certainly an upgrade to the existing Eldershield plan that his mum is already on. (She even unknowingly bought 2 private Eldershield Supplements!)

Conclusion 

Given that CareShield Life is compulsory, it certainly highlights its importance and the massive undertaking required to service this national long-term care insurance scheme. Heartland Boy thinks this is a massive step in the right direction as Singapore progressively slides towards an ageing society. By starting it earlier at age 30 (as compared to Eldershield) and making it compulsory, it allows more time for the insurance pool to grow and widen its coverage. By pooling our risks together, it ensures the insured protection against potentially catastrophic long-term care costs.