fML Case Study: Shield Plan Riders At Old Age – Yay Or Nay?

fundMyLife Case Study - Is it worth it to get shield plan riders at old age?

While we’re a question-and-answer platform that connects questions to the right advisers, once in a while the fundMyLife team receives questions directly. We get them via email, our contact page, or even Facebook itself. One day, fundMyLife had the opportunity to correspond with Karen*, who dropped one of the team members a message about personal finance.

Here’s a little bit about her – she is 50 years old, currently unemployed, and has three children who are still in school. They are aged between 17-21. She presented a total of four different questions for us, which we thought were worth discussing. In this article, fundMyLife explores her questions and shares our thoughts in this case study, on whether it’s worth it to get Shield Plan and Shield Plan riders at old age.

Karen’s questions

Karen started the conversation by sharing that she and her children had a Shield Plan A from NTUC Income without any riders. She was wondering if it was worth it for her to firstly switch to Enhanced Shield Plan (presumably from NTUC Income as well) (Question #1).

She also expressed concern whether it was worth attaching a rider since there will be a co-payment of 5% in a few years’ time (Question#2).

The next question she had was if it was a good idea to upgrade her children’s plans to the enhanced private hospital shield plan without riders first (Question #3). Her children can obtain riders when they start working.

Finally, she asked if it was easier to downgrade plans later in her children’s lives when they purchase the private hospital plan now while they are still young and healthy (Question #4).

fundMyLife’s opinion**

#1 To upgrade or not to upgrade

An easy answer to that is “it depends”, but that would be a cop-out.

The Integrated Shield Plan from NTUC Income comes in two variations: IncomeShield and Enhanced IncomeShield. The main difference between these two plans are that the Enhanced version has less limits when it comes to compensation. For example, the equivalent of IncomeShield Plan A is Enhanced IncomeShield Advantage where the limit of compensation is $1,200/day for the former as opposed to as charged for the latter, i.e. as much as the hospital charges.

Let’s see how much she has to pay to switch to an enhanced plan equivalent for her age. IncomeShield Plan A vs Enhanced IncomeShield Advantage, at 50 years old: from annual premium of $178 to $224. That is pretty affordable! How about after 50 years old?

We plotted a table for her perusal, from 50 until 85 years old.

A table showing the premiums for age ranges
Before we ask whether it’s worth it to get shield plan riders at old age, we must see how much it costs to maintain ISPs into old age. Information found here and here.

We discuss this from a premium point of view. At first, between 51 to 60 years old, the premiums remain manageable for both kinds of ISP, with around $100 difference between the two. Two observations on what happens after 60 years old:

  1. Within the same plan, the premium almost doubles from the previous age bracket, i.e. $257 vs $413 for IncomeShield
  2. The difference in premiums for the same age bracket between IncomeShield and Enhanced IncomeShield increases drastically

The increase in amount reflects the higher risk of hospitalization when a person gets older, which is normal. However, for Enhanced IncomeShield, the cash outlay, i.e. amount required to pay in cash, increases a lot as well. In addition, the cash outlay for Enhanced IncomeShield is twice that of IncomeShield in each age bracket. Hospitalization plans are important, and Karen will have to consider whether she’s okay with the expenditure and whether she will be able to maintain the cash outlay for the years to come.

#2 Is it worth getting a rider?

Her concern comes from the fact that there will be at least a 5% co-payment for the hospital bills in the near future, in 2021. To address the first concern, hospital bill sizes range between $970 – $13,1490, depending on the ward class and location of the hospital. In addition, NTUC declared there are maximum co-payment of $2,500 for both Plan A and Advantage with the Assist Rider.

A secondary concern that she should address is the fact that she has to cough up additional cash to pay for the riders. How much does need to pay? We plotted a table for her convenience.

Table that helps Karen decide whether to get shield plan riders at old age
Rider premiums for Plan A and Advantage riders. Plus Rider is no longer offered for Plan A policyholders.

Judging from the the table, the premium for the riders jump at she’s 60. It’s relatively affordable, and if she has the cash for it, why not?

#3 A family that upgrades together, stays together

…in the same ward, that is. However, as mentioned it’s important to consider the costs involved. More so if she and her children are not working yet so that presents additional  risks and may use too much of her MediSave funds.

That said, because her children are not working, this reduces the household expenditure per person. This is advantageous to Karen because this will qualify her and her children for substantial subsidies for MediShield Life.

Table of MediShield Life subsidies based on income per person
Subsidies for MediShield based on household monthly income per person. Source: https://www.moh.gov.sg/content/moh_web/medishield-life/premiums—subsidies/types-of-premium-subsidies.html

With lowered MediShield Life premiums, she can channel her funds to paying for her and her children’s Shield Plans.

#4 It’s always easier to downgrade

Have you ever thought of why you need medical checkups/underwriting when purchasing life or health insurance? The insurance company is taking on a risk to insure you, and as such requires as much information as possible.

When her children downgrade from Integrated Shield Plans to MediShield, there’s no need for any health assessment or medical underwriting. However, if any of her children decides to upgrade again after downgrading, they’ll have to undergo medical underwriting again.

fundMyLife opinion

We don’t have the entire picture which includes household income. This is important because households below a certain level qualify for premium subsidies for MediShield Life (more details here). Whether we assume that there is a breadwinner in the family or otherwise, the household monthly income per person should be at a sufficient level to qualify for subsidies.

One thing to note is that, when she is older, her MediSave will not cover everything for either the IncomeShield or Enhanced IncomeShield. In her later years, cash is required to cover the rest. Without a job, the burden falls on her children. The amount of cash required for the plan is not trivial from 66 years onwards.

It’s important that she engages a financial adviser, preferably one who can advise not just herself but also her children. We recommended her to approach on of the awesome financial advisers of fundMyLife.

Ask fundMyLife financial questions today!

That’s all folks! We hope the case study useful to understand whether it’s worth it to get shield plan riders at old age. If you see anyone who’s like Karen, just show them this article and let them know it’s good to reconsider.

If you’re still unsure about what you need, why not head on over to fundMyLife and ask our curated pool of financial advisers? Alternatively, you can check out our curated pool of individual advisers and ask them questions directly.

*name was changed for anonymity

**the following article is a opinion, and does not constitute financial advice whatsoever. Please do your own due diligence and speak to a professional financial adviser

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

Follow us on our fundMyLife Facebook page to get exciting updates and your dose of finance knowledge! Alternatively, the Insurance Discussion SG Facebook group is a good place to discuss insurance-related topics with fellow Singaporeans.

Leave a Reply

Your email address will not be published. Required fields are marked *