Insurance & Costs of having and raising a child

[yeokiwi]

Using this exercise, it points to me that one should get disability income first, followed by term

The probability of death at income generating age is higher than disability. That probably explains why the disability income premium is not high despite the high payout.

In the case that the insured does not have any dependent, then it is clear that disability insurance is more important than term.

For anyone else that has dependents, term insurance is much more important since the money is required to cover the expenses of the dependents after the death of the insured especially if the insured is the breadwinner of the family.

In short, you are more likely to die than being disabled. But, disability costs more to the dependents if it happens.

[Muck]

Thanks for the explanation. Was reading the AIA policy posted and it mentions that the death benefit is 12x monthly income but it notes that "4 Death Benefit is applicable for standalone policy only". Anyone knows the meaning behind it?

Disability income coverage is also offered as a rider pegged to another main AIA policy. Thus this "death benefit" is only applicable to this policy if purchased on its own as a standalone.

[Drizzt]

actually the underwriting for Disability income is so strict that i sometimes wonder as a desk bound engineer how can i actually claim it (not that i want)

aviva no more DI? how can it be, they were the pioneers in singapore.

[d.o.g.]

The probability of death at income generating age is higher than disability. That probably explains why the disability income premium is not high despite the high payout.
...
In short, you are more likely to die than being disabled. But, disability costs more to the dependents if it happens.

I have a different view.

Dying is a subset of disability (from sickness or physical trauma). Therefore the odds of disability are much higher than death. You can get disabled without dying. It's hard to die without passing through the "disabled" stage, however temporarily.

A simple example: you are involved in a car crash. What the odds of you:

1. Being unharmed?
2. Being injured but alive?
2. Being injured and dying?

That should make it clear that the odds of disability are higher than death.

Disability income premiums are not high because most people are not injured for prolonged periods of time, usually they recover and go back to work. So the insurer usually doesn't pay more than a few months of lost wages.

Back to the car crash example, if you broke an arm or a leg you'd be out of action for a few months, then you go back to work. If the waiting period is 90 days, and you're back at work within 90 days, the insurer doesn't have to pay a cent.

It is not common that you are completely disabled and the insurer has to pay until you are 55 (or whatever age the policy expires). If you suffer such heavy injuries, your odds of survival are not that great, and if you die the insurer is off the hook (once you die the policy expires).

Use the right tool for the right job. Use term policies to help your family take care of your dependents (pay for kids etc). Use disability income to help your family take care of YOU. A good hospitalization and surgical policy (like a maxed-out Shield plan with a rider) can cover a lot of the medical bills. But for outpatient expenses like a wheelchair, a maid, or taxi transport, you are on your own. Regular checkups might or might not be covered, I haven't checked in a while. Seeing a GP is affordable, seeing a specialist is not.

If the disability income plans are unattractive, then self-insure - put aside funds for such purposes. You could probably keep 1-2 years of such expenses in cash, and invest the balance. If something happens, your family can slowly liquidate the investments to pay for your care. If nothing happens, there's extra money for you and your family to enjoy later on.

[yeokiwi]

It is not common that you are completely disabled and the insurer has to pay until you are 55 (or whatever age the policy expires). If you suffer such heavy injuries, your odds of survival are not that great, and if you die the insurer is off the hook (once you die the policy expires).

Technically speaking, we buy disability insurance to take care of the remote possibility of permanent disability since the financial damage is huge. Most of us have enough savings to tide over a few months of temporary disability.

The occurrence of permanent disability for those that are less than 60 years old is not high. In my circle of friends, relatives and colleagues, there is only one case of a young colleague suffering from stroke and was unable to work for more than a year. But subsequently, he passed away due to further strokes.

However, death do occur more common among the young than permanent disability. I have friends and colleagues that passed away before 40. One of my JC friends and one university friend passed away due to accidents before 30.

I suppose there are many ways to die(cancer, stroke, accidents, flu, murder etc) but fewer ways to be permanently disabled.

[d.o.g.]

Technically speaking, we buy disability insurance to take care of the remote possibility of permanent disability since the financial damage is huge. Most of us have enough savings to tide over a few months of temporary disability.

True. I agree - that's why I bought disability insurance myself - to deal with the small but non-zero chance of becoming a vegetable due to whatever cause.

I suppose there are many ways to die(cancer, stroke, accidents, flu, murder etc) but fewer ways to be permanently disabled.

The same things that cause death can cause permanent disability. It's a question of degree. But yes, often it's a fine line between permanent disability and death in the case of serious illness or physical trauma.

The occurrence of permanent disability for those that are less than 60 years old is not high.

It may not be high, but if it hits the financial damage is severe.

The fact that disability income policies have been modified for the worse or completely withdrawn since I first purchased my own policy over 10 years ago suggests that the premiums at that time were too low. So the insurers have had to raise the premiums, lower the coverage or both. Or they have simply left the market altogether.

[CY09]

Just a question with regards to H&S insurance policies.

What is the difference in coverage between private hospitals and restructured hospitals? Are there any specific treatments that can only be sought through private hospitals and not restructured hospitals?

This question popped up to me while comparing the schedule benefits between NTUC income's Enhanced Income shield Preferred and Advantage.

Link: http://www.income.com.sg/insurance/Enhan...verage.asp

[NTL]

Just a question with regards to H&S insurance policies.

What is the difference in coverage between private hospitals and restructured hospitals? Are there any specific treatments that can only be sought through private hospitals and not restructured hospitals?

This question popped up to me while comparing the schedule benefits between NTUC income's Enhanced Income shield Preferred and Advantage.

Link: http://www.income.com.sg/insurance/Enhan...verage.asp

Not sure about the different treatments available Restructured or Private Hospitals. What I know is with Preferred Plan, you can "walk in and out" of Private Hospitals without incurring Pro-Ration Factor, when you don't feel like waiting 3months to see a doctor at a Restructured Hospital...

I think you can also choose the doctor to attend to you in Private Hospital, but not in a Restructured Hospital?

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I have a question to ask too.

Is Early Critical Illness necessary? Happen to come across a plan from an insurer for my kids. Pay for 5years, annual premium of $1400, and cover $62,500 for listed Early CI till he is 70. Understand that most treatment for Critical Illnesses can be covered by Integrated Shield Plan, so what is the need of this $62,500?

[CY09]

Today Sunday Times covers an article on insurance. The writer mentions about AXA Mumcare insurance which helps cover the pregnant mother and her child

Just a thought after reading it, is pregnancy insurance really needed if one has coverage for pregnancy complication and congenital abnormalities under existing H&S (e.g. NTUC enhanced Income shield). Some would argue that AXA and PRu policy has a benefit that "•Covers newborn against selected Congenital Illnesses4 as well as Death, Disability, Terminal Illness, and Critical Illness". But the downside is that the 2 providers bundled an ILP component.

It will be a nice read for those interested. Title of article: The big "I" question by Sunday Times.

[smallcaps]

Didn't buy this type of insurance so end up paying something like 15k more when my kid was warded into icu for a week upon birth. Luckily everything went ok. Remember each dosage of medicine to help the lungs breathe was like 1.5k.