Should you upgrade Eldershield?

Introduction

Recently on Consultwho.sg we received a question on Eldershield. A user shared that upon turning 40, he started to receive many calls and letters asking him to upgrade Eldershield. He wanted to know if upgrading Eldershield would be a good choice. In this article, we’ll explore the pros and cons of upgrading Eldershield.

What Is Eldershield

Eldershield is a severe disability insurance scheme that provides a monthly benefit to a person who is unable perform any 3 of 6 acts of daily living. These activities of daily living are washing, dressing, feeding, tolieting, mobility, and transferring.

When this happens, Eldershield benefits will start to pay out, and the insured will receive $400 every month for the next 72 months (for the ElderShield400 plan). Under the ElderShield300 plan, a severely disabled person will receive $300 every month for the next 60 months.

Singaporeans and Permanent Residents are automatically enrolled in Eldershield once they turn 40 years of age, unless they choose to opt-out. Premiums are paid out of the Medisave account of the policyholder, or the policyholder’s spouse, parents, children, or grandchildren.

Eldershield premiums are locked upon entry - this means that policyholders will pay the same premium from the age they enter, to age 65, the end of the premium paying period. The later an individual starts the higher the premium charged.

According to Daniel Tay, Master Money Management Director, the purpose of the plan is to compensate someone to help you with your daily life when you are no longer able to do so yourself. This someone may be a family member who may need to take a pay cut or even give up their job to take care of you. It can also be a maid you hire to take care of you. If your condition is so severe that you require care around the clock, the payout can be used to pay for nursing home fees.

Eldershield Upgrade

Eldershield can be upgraded to increase the monthly payout, and/or extend the payout period. Upgrading will result in higher premiums, although up to $600 annually can be paid through Medisave. All three Eldershield insurers, Aviva, NTUC Insurance, and Great Eastern Life Assurance, offer upgrades.

Why you should upgrade Eldershield

Increased coverage and payout duration

If a person becomes severely disabled, Eldershield400 pays $400 every month for the next 72 months. This works out to about $13.30 a day, a small amount that is usually insufficient to cover the costs associated with severe disability. The monthly cost of a maid employed to care for a severely disabled person is about $765 - the maid’s monthly wages is about $500, and $265 is payable to the Ministry of Manpower as a monthly levy.

Otherwise, a family member may have to take a pay cut or stop work to take care of the severely disabled person. In that case, the monthly Eldershield payment of $400 can be seen as compensation for wages lost.

Other costs that can be attributed to severe disability include medical costs, costs of mobility enhancing equipment, and transportation costs.

Another point to consider is that Eldershield400 only pays for a period of 72 months, which may be insufficient to span a severely disabled person’s lifetime or recovery period.

Upgraded Eldershield plans can pay more than $3500 monthly, for a period of up to the lifetime of the severely disabled person. In addition, some plans offer an initial lump sum benefit of up to three times monthly benefits, which can help defray the initial costs incurred when an individual first becomes severely disabled.

Use Medisave

Medisave is a compulsory savings scheme where you are required to set aside between 8 to 10.5% of your monthly income, depending on age, for medical expenses. Medisave funds can only be used to pay for approved medical bills. If you choose to upgrade Eldershield, you can tap into your locked Medisave funds, by paying up to $600 annually from the account.

Why you should not upgrade Eldershield

1. Cost

Some Eldershield upgrade plans, such as the Aviva MyCare Plus, can pay out a monthly benefit of $5000 if the insured becomes severely disabled. However, the annual premium for this level of monthly benefit is not cheap, at $2162 for a male aged 41 years old. If monthly benefits are to be paid for the lifetime of the insured, the annual premium rises to almost $2500.

2. Activities of Daily Living

To start receiving a monthly benefit, the insured person needs to be classified as severely disabled. This means that he or she must be unable to perform at least three out of 6 activities of daily living. This requirement is quite specific and can result in some cases of disability not being ‘upgraded’ to severe disability. For example, a person who is wheelchair bound and incontinent is only unable to perform two acts of daily living, and will not be considered severely disabled.

3. Mortality

Upgrading Eldershield allows severely disabled individuals to receive monthly benefits for up to their entire lifetime. But depending on the cause of disability, some insured individuals may not survive long enough to reap the benefits of an Eldershield upgrade. Some causes of severe disability, such as stroke, can dramatically lower an individual’s life expectancy. According to research conducted by the University of Maryland, about 50% of stroke patients do not survive beyond the 5th year.

Consultwho.sg is a platform that aims to help users with their personal finance issues – ask a question anonymously, or connect with our financial consultants.

Like us on Facebook to receive updates on interesting answers and content from our platform.