Ask fML Advisers: What Are The Common Misconceptions About Integrated Shield Plans?

Financial advisers of fundMyLife share some common misconceptions about integrated shield plans

[5 min read]

According to the Ministry of Health, the MediShield Life is a national health insurance scheme that provides lifelong protection against large hospital bills. On top of MediShield Life, locals and PRs can purchase Integrated Shield Plans from six insurance companies, which provides additional coverage for higher hospital class wards. While MediShield Life is relatively straightforward, Integrated Shield Plans can be quite a tricky matter.

In the past, we wrote about the considerations to make before purchasing Integrated Shield Plans. However, we also realize that there might be clarification required before embarking on buying these plans. Who better to clarify possible misconceptions, but our very own financial advisers of fundMyLife? In this article, we ask three of our fundMyLife financial advisers – Winifred Tan, Jonathon Han from Prudential, and Ryan Teo from AXA – about the common misconceptions about Integrated Shield Plans.

Winifred Tan

Winifred Tan, Great Eastern
Winifred Tan

#1 “IP plans are the same as CPF Medishield Life plans”

Firstly, Medishield Life (MSHL) and IP plans are not exactly the same although they have some overlapping similarities. Both MSHL policies and IP policies are payable by CPF. MSHL is a compulsory hospital/surgical insurance for all Singaporeans and PRs which covers only basic hospital stays, e.g., daily room and board benefits, and basic surgeries, but with limitations on claim amount and also on type of hospital that the user can stay in (up to only public B2 ward, 6-bedder ward).

IP plans are composed of MSHL as its foundation and an additional private insurance on top of it from either of the six insurers in SG to remove all the category limits and allow users to even insure themselves for better types of hospital services e.g. Private hospital, or Public A ward (1-bedder). It is thus essential to get an Integrated Shield Plan if one has enough CPF-Medisave to afford it as it would really help when bills incurred are large, as in most cases MSHL only covers 10-20% of a bill!

#2 “Why must I get the rider? I’m still young and don’t want to waste my own cash to buy a rider which I would probably wouldn’t claim anyway”

Whether you are young or not, every hospital/surgical bill incurred will first subtract off the Deductibles and 10% co-insurance – essentially you have to co-pay this part – before you can claim using the main IP plan paid by CPF. It’s not an easy part to explain, so you can either ask me directly or drop me a message on my Facebook page. In terms of probability of going into hospitals, perhaps things like critical illnesses are rarer among younger people but what about the possibility of being active in sports or at work that you injure yourself and require a say, surgery e.g. ACL tear/burns/fractures? How about Congenital illnesses that may out of a sudden, strike in a young adult? These are the probabilities we need to guard against and having the entire package (basic main IP plan + rider) would really help you mitigate such financial risks

#3 “I have a hospital-cash/hospital-income benefit rider in my whole life plan! It’s so much cheaper than the rider of the IP plan so why should I waste money to get this when I can claim through the whole life rider?”

Firstly, the coverage is entirely different in the hospital-cash rider of the whole life plan vs a full IP package. The former only gives a small payout, i.e. $30 a day when you’re hospitalized and warded to help replace your possible income loss during the time you’re hospitalized. They do not normally pay for surgeries/outpatient treatments/followups as well. The latter really covers all of your hospital bills as well as surgery/outpatient/followups/pre-admission tests from the first dollar onwards. The latter is also more of a reimbursement of bill instead of extra payout for income-loss. Bills often can be as high as $1,000 even for minor surgeries or hospital stays. Thus, what we have to focus on, is to ensure the bills are covered for, and then work on getting the extra hospital-cash for some income replacement during the time that you’re unfit for work!

Jonathon Han, Prudential

Jonathon Han's picture
Jonathon Han, Prudential

#1 Buying an ISP means anything to do with hospitals can be claimed

ISP are hospitalization plans. What this means is that the customer must be HOSPITALIZED in order for the plan to take effect. Should the client see a specialist – even with a referral letter – without staying in the hospital, they will not be covered for the medical bills. However, if their specialist check-up requires them to be warded for observation or medical treatment, then yes the bills will be covered.

Special circumstances can be made for customers to claim their ISP without being hospitalized, and these include A&E treatment and follow-up specialist treatment from previous hospitalization stays.

#2 Having a company insurance means I don’t need to buy an ISP

Not true. Why?

Firstly, a majority of company insurance is not as comprehensive as personal insurance. Personal health insurance can protect individuals from medical bills of up to $1.5 million a year, whereas a lot of company insurance barely crosses the $20k of medical coverage per individual per a year.

Secondly, company insurance is non-transferable. What this means is that the moment you leave the company, your coverage will stop. Some of my clients had to leave the company due to their inability to work, and leaving the company means that they no longer are covered under the corporate insurance. At this point of time, if we don’t have an ISP, we are left exposed to the mercy of the bills.

Ryan Teo, AXA

Ryan Teo's picture
Ryan Teo, AXA

 

#1 Integrated Shield Plans payment is separate from MediShield.

When you sign up for an Integrated Shield Plan, you’re still paying for the MediShield component as well. This is because Integrated Shield Plans are not separate coverage, as it is an additional top up coverage to MediShield.

#2 It is a minor matter to switch Integrated Shield Plans

Before you switch providers, you need to weigh the options that the other provider gives, especially if there was a previous surgery or pre-existing illness. Cost-wise or benefits may seem better, especially as plans improve; however, you may not enjoy the same protection you previously enjoyed for existing medical conditions. In fact, under your old plan, you may potentially pay more for the same level of coverage.

#3 No need to pay a single cent if I have full rider coverage by Integrated Shield Plans

Actually, it is not really true. You may still need to pay a cash deposit if it’s required by the hospital. Therefore, it’s useful if possible to have a letter of guarantee (LOG) as an assurance of payment offered by insurers before any hospital admission.  It can help to waive any cash deposit required by the hospital or bill payment. However, it’s still up to the discretion of the hospital to accept the letter. You may still need to fork out your own money first before applying for a claim.

fundMyLife Summary

Winifred clarified the differences and similarities between Medishield and Integrated Shield Plans. Ryan also expressed similar sentiments – it seems that consumers do mistake MediShield and Integrated Shield Plans as separate kinds of plans, when the former is a sub-component of the latter. No wonder this necessitates clarification on the MOH website. Winifred also emphasized the importance of riders, and explained the differences between hospital-cash rider of the whole life plan and the rider of a full IP package. Jonathon cautioned that not everything hospital related is claimable using Integrated Shield Plans and stressed the importance of not relying on company insurance. Ryan also debunked the myth that it is a small matter to switch insurers for Integrated Shield Plans, and talked about cash deposits during hospitalization and how Letter of Guarantees can alleviate the financial pressure.

Conclusion

We hope this article was helpful in addressing the common misconceptions about Integrated Shield Plans! If you’ve more questions on the plan or any other insurance plans, head on to our main site and ask our curated pool of financial advisers! Alternatively, if you’d like to connect with either Winifred Tan from Great Eastern, Jonathon from Prudential, or Ryan Teo from AXA, just click on the link in their names and you can ask them questions directly from their profile pages.

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.

Common Misconceptions About Endowment Plans

An image that shows that fundMyLife is addressing common misconceptions about endowment plans

Usually presented as a form of forced savings plans for certain financial goals, endowment can take on several roles be it for investment, insurance, and even a mixture of both. Undoubtedly, given its many facets, it is not surprisingly that there are plenty of misconceptions about endowment plans.

Say endowment plans to anyone, and chances are that you might see the person shudder. After all, endowments are commonly sold by relationship managers in banks and financial advisers – the plan has gained quite a bit of notoriety. That said, we here at fundMyLife believe that each financial product serves a particular purpose.

Earlier on, we asked a few of advisers of fundMyLife about their opinion on endowments and from their stories we observed that there were several consistent misconceptions that consumers have regarding these plans. As such, in this article, we highlight these common misconceptions about endowment plan that people have.

#1 Endowment plans are not liquid

Contrary to what a (possibly) errant adviser or relationship manager in a bank might tell you, endowment plans are not liquid, i.e., you cannot back out in between premium payments and you’re locked in for the stipulated time period in the plan. According to our research, this is a surprisingly common misconception about endowment plans.

While it is a good way to enforce savings for a particular financial goal, the mandatory monthly payments may become a major source of stress when you are unable to make payment due to unforeseen circumstances. As such, it is important to recognize this fact early and consider what’s the best place for your money.

#2 Guaranteed value does not always mean you make more money

In the Benefits Illustration of the plan generated for you by your financial adviser, there are several columns that require your attention.

Credits to Singapore Hardware Zone

With reference to the table above, there are a lot of numbers, but the most important parts are highlighted in the following table.

Arrows drawn to show the guaranteed death benefit (black) and guaranteed returns (red)

Assuming the plan matures in 15 years, the guaranteed amount upon maturity is still less than the basic premiums paid. Thus, it is useful to compare the guaranteed portion of the plan vs the principal paid to see how much you lose in the worst case scenario. In the ultimate worst case scenario where there is no non-guaranteed returns at all (quite unlikely), you might lose quite a bit of the principal that you paid!

Therefore, it is always important to update your Benefit Illustration from time to time so that you know your endowment plan is on the right track.

P.S. If you haven’t noticed, for a lot of Benefit Illustrations, you can see that the column for death benefit will always come first because the value is always higher than premium paid. Your eyes will always land on the higher value first, before going to the lower value. We don’t know if it is intentional, but it’s good to train your eye and tear it away to look at the surrender/maturity value.

#3 Projected returns ≠ your returns

This brings us to the next point about returns. Even if the fund performs at the stipulated level and reaches the projected returns, what you are getting will always be less than advertised. That is because when the fund achieves either 3.25% and 4.75% returns on their investment, it’s the fund that achieves that returns and not your plan. Hence the careful wording: “projected returns of investment”.

#4 Flexibility might not be the best thing

And that brings us to this point on flexibility and returns. In a bid to make endowments more attractive, insurance companies introduced plans with payouts. It is a welcome feature, since the payouts can either be reinvested or be used for other things. However, is the flexibility truly a good thing? Let’s have the math do the talking. We came across an excellent table from Talk Money Lah illustrating the difference in internal rate of returns between reinvesting cashback and withdrawing the cashback (the rest of the article is pretty awesome as well).

Upon closer calculation, having payouts at regular intervals give you lower returns when the plan matures. Even with the same amount of principal, the internal rate of returns can be different at the end of the policy term. You can see that there is a trade-off between flexibility and returns upon maturity.

In our earlier piece, the financial advisers of fundMyLife opined that if liquidity is an issue, you can either do either

  1. a fixed endowment but at lower amount of premium, or to
  2. split the money into both endowment and something safe like Singapore Savings Bond

#5 Endowments are not worse than investments

At the risk of sounding cliched, comparing endowments to investments is the same as comparing apples to oranges. Both are separate asset classes with different levels of risk and structure. Furthermore, both are used for different purposes.

One good thing about endowments is that having guaranteed returns means even at the worst of times you would still have a sum of money, as opposed to investing where your money could potentially vanish if the stock market goes awry.

There is much lower risk in that respect. Furthermore, the timed component of endowment plans also means you can plan years ahead, something which stocks won’t be able to 100% guarantee. Despite the seemingly damning misconceptions, endowment plans do serve a purpose.

Conclusion

Judging from the following misconceptions, can we say that endowment plans are bad? Objectively, no. Endowments instill discipline for those who might otherwise not save for their financial goals. You just have to figure out which plan is the right one for you at your particular life-stage. More so, guided by a trusted financial adviser.

That’s all we have on the common misconceptions about endowment plans! We hope you found this article useful. Still unsure if endowment plans are right for you? Head on to our main site and ask our curated pool of financial advisers!

fundMyLife is a platform that aims to empower Singaporeans to make financial decisions confidently. We also connect consumers to the right financial planners in a private and anonymous manner, based on their financial planning questions.

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.