03/06/2018
Careshield Life - An enhancement to the current Eldershield scheme.
While there are numerous articles and infographics on roughly how the new implementation on Careshield Life will look like (refer attached pictures), I would like to share on several angles of Careshield Life
1. How is Eldershield (Upcoming Careshield Life) different from other private disability insurance products?
There are other private insurance products like disability income protection insurance which replaces a portion of the policyholder's missing income, in an event of disability which cause the person unable to work temporarily or permanently.
Another type will be the Total and Permanent disability coverage which provides a lump sum benefit for immediate to longer-term financial security, in event that the person is unable to work.
The different benefit structures in these different products will have different premium ratings, most of these products only provide coverage till age of 70. Hence they do not offer protection for individuals against the risk long term care (Severely disabled). Eldershield (Upcoming Careshield Life) will address protection needs for disability beyond age of 70, so long as you live.
2. Why Medishield Life premiums are gender-neutral and Eldershield premiums gender-differentiated?
Medishield Life is a hospitalization scheme that is designed to give lifetime coverage and policyholders needs to pay premiums for life. It does not need to insurance against the different life expectancy of each gender, as premiums are payable for every of coverage. Woman may make more claims since they have longer life expectancy and they would also have paid more years of premiums compared to men.
On the other hand, Eldershield (Upcoming Careshield Life) is a insurance scheme for severely disabled that is to provide lifetime coverage, but only requires policyholders to pay premiums from age 40-65 (Current), 30-67 (Proposed recommendations). Given that Eldershield premiums are paid by men and women for same number of years, and yet the life expectancy of each gender is different. Hence, it has to be gender differentiated to reflect the difference in risks.
3. What does pre-funding of Eldershield premiums mean?
Premiums are paid by each generation of policyholders during their working years are used to cover the generation's claims when they grows old.
When policyholders are younger, premiums collected are expected to be higher than claims disbursed since the likelihood of severe disability is low at younger ages. As the generation grows older, premium payment will stop at age 65 and as these policyholders grows older, they start to make claims and drawing down on the premiums that they contributed during their working years.
Pre-funding ensures each generation saves when they are young and working, to pay for their own long term care needs during old age. This helps minimize the need for intergenerational transfers which wont be sustainable with an ageing population.
More updates will be revealed when government agrees and implements the recommendations proposed. Stay tuned.
Source:
The ElderShield Review Committee has been studying ways to enhance the ElderShield scheme to better address the needs of Singaporeans who become disabled during their old age and has since concluded its review. The enhanced scheme will be called CareShield Life.
