Advice for disability income

[blurpandasg2014]

Need some advice in DI plans. Presently there are 3 insurers offering DI but due to the large variations in their terms, I don't know which is most suited

Aviva
- Highly affordable premiums
- After 24mths of disability, based on suitable occupation
- Poor benefits for non-working disability

AIA
- After 24mths of disability, based on suitable occupation
- Has other perks such as 24x income for TPD etc
- Non working disability is 1/6ADL

GE
- Throughout term is based on ability to perform current occupation
- During first 6mths of being jobless, still considered as working disability

Any advice what is the most impt feature of DI plan and is the 'non working benefit' a major consideration? Becos I can't think of any scenario where I would be jobless besides getting fired?

 

[kram62]

Hi,

I did a detailed comparison of aviva vs GE in this thread (see second post) https://forums.hardwarezone.com.sg/money-mind-210/disability-income-insurance-5963116.html

In the end I chose GE.

 

[fr33d0m]

You need understand why you need disability income insurance. It is certainly not an unemployment insurance.

For any temporary unemployment, you can try to regain new employment relatively easily. However, for disability, it is more difficult to regain employment and even with new employment, the pay could be significant lower.

Disability income insurance is not for you to retire early. Like most genuine insurance, it is to protect against unrecoverable circumstance.

 

[BBCWatcher]

I think it's quite important not to lose your disability income insurance (DII) coverage due to perfectly ordinary, common events such as being between jobs (e.g. an employer collapses and fires its staff) and working overseas. Thus, like Kram62, I'm not thrilled with DII carriers and policies that reduce or eliminate DII coverage when such ordinary, common events occur.

That said, some DII coverage is better than none.

Another difference between policies is whether they offer a flexible elimination period (waiting period). You should certainly have enough emergency reserve to sustain yourself for at least 6 months. Many people prefer 12 months. Thus I'm quite happy with a 6 month waiting period before a DII payout starts. A longer waiting period helps reduce the premium, and that's a good thing.

Inflation is an important factor to consider. If your DII payout starts when you're age 30 and runs until age 65, that's 35 years of payouts. The purchasing power of S$3,000/month today will be much, much less ~34 years from now. The ideal solution would be a CPI pegged payout, but none of the DII carriers offer that. One of them can offer escalating payouts but only once payouts start. Practically speaking, and if allowed (there's a 70% rule), you'll have to raise the initial payout figure substantially above what you think you'd initially need in order to protect against inflation.

 

[blurpandasg2014]

You need understand why you need disability income insurance. It is certainly not an unemployment insurance.

For any temporary unemployment, you can try to regain new employment relatively easily. However, for disability, it is more difficult to regain employment and even with new employment, the pay could be significant lower.

Disability income insurance is not for you to retire early. Like most genuine insurance, it is to protect against unrecoverable circumstance.

Yes I understand. However, payout is based on your job status (employed / unemployed) when the disability strikes.

If disability is severe enough to last 2yrs, would it be safe to say it is unlikely that the insured would be unable to do any job related to his education

 

[blurpandasg2014]

According to aviva definition it states that a non working period is at least 180days from the start of termination from previous working period.

Like GE, it seems that insurers buffer the Job change effect; ie if one left the previous job last mth but get disabled this mth, he is still eligible for the working benefit

 

[BBCWatcher]

If disability is severe enough to last 2yrs, would it be safe to say it is unlikely that the insured would be unable to do any job related to his education

Yes, but I don't think that detail matters much. Personally, I'm not inclined to be sitting at home (only) for 3, 5, 8, 10, or whatever number of years while able to earn something. And it's a bit silly anyway since fewer and fewer people are working in professions that they were explicitly trained for, or even in the same profession that they started in. Some of us went to plumbing school and became plumbers, but the "School X=Profession X" correspondence is getting less common. Heck, many professions practically didn't exist even a few years ago. (How about "Mobile App Developer"?)

Anyway, I wouldn't get too hung up on that bit. As a tie breaker it might matter, but I think it's one of the less important policy conditions.

For what it's worth, "European-style" disability income insurance typically adopts a 10 year provision, and it's an interesting one: if you've been disabled for 10 years and unable to work, then the insurance company assumes you'll stay that way for life. Upon reaching 10 years of monthly payouts there's a final, lump sum payout, and the insurance company is done. There are pros and cons to that approach, but one advantage is that the insurance company eliminates all paperwork and disability checks after the first 10 years of disability. Some of these cost savings are passed on to the policyholder in the form of lower premiums.

 

[fr33d0m]

Yes I understand. However, payout is based on your job status (employed / unemployed) when the disability strikes.

If disability is severe enough to last 2yrs, would it be safe to say it is unlikely that the insured would be unable to do any job related to his education

For both insuers, if disability prevents the insured from any suitable job after 24 months, they will continue to enjoy the income from the insurance if I am not wrong.

I did not remember it only lasts 24 months.

The other thing about non-working disability. If a person is non-working, there is no income to protect. 6-month is quite long for unemployment in Singapore.

 

[BBCWatcher]

According to aviva definition it states that a non working period is at least 180days from the start of termination from previous working period.

Sort of. At last check, if the previous research is correct, Aviva drops DII policyholders in two steps:

1. If you're between jobs for less than 180 days, then you get a much lower (minimal, $500/month?) payout if you were to become disabled;

2. If you're between jobs for more than 180 days, you're dropped completely ($0/month payout).

If that's correct, this is not the way to do it. The 180 day limit may be OK, but that should be the limit between jobs at full payout.

 

[fr33d0m]

Sort of. At last check, if the previous research is correct, Aviva drops DII policyholders in two steps:

1. If you're between jobs for less than 180 days, then you get a much lower (minimal, $500/month?) payout if you were to become disabled;

2. If you're between jobs for more than 180 days, you're dropped completely ($0/month payout).

If that's correct, this is not the way to do it. The 180 day limit may be OK, but that should be the limit between jobs at full payout.

That can't be true, or the insurance is fundermentally flawed. It is more likely to be within 6 months of unemployment, you are fully covered. between 6 months and 24 months of unemployment, the insured is subjected to non-working benefit. I am not a financial advisor, so please consult your advisor for advice.

To be dropped completely, the non-working period is 2 years in the section of termination.

 

[BBCWatcher]

That can't be true, or the insurance is fundermentally flawed.

Fundamentally flawed insurance (and "insurance") is often sold in Singapore, I'm afraid.

Aviva's MHA/MINDEF Group DII apparently only pays a benefit when the policyholder is "gainfully employed" at the onset of the disability. In other words, there is no tolerance whatsoever for being between jobs. The tolerance for overseas residence in that policy is a mere 6 months, although Aviva could extend that period at its sole discretion.

 

[fr33d0m]

Fundamentally flawed insurance (and "insurance") is often sold in Singapore, I'm afraid.

Aviva's MHA/MINDEF Group DII apparently only pays a benefit when the policyholder is "gainfully employed" at the onset of the disability. In other words, there is no tolerance whatsoever for being between jobs. The tolerance for overseas residence in that policy is a mere 6 months, although Aviva could extend that period at its sole discretion.

This is an area MAS should exercise its power. In financial sector, Singapore is much more deregulated than other countries, which is not good at all, given the financial literacy here.

 

[kram62]

That can't be true, or the insurance is fundermentally flawed. It is more likely to be within 6 months of unemployment, you are fully covered. between 6 months and 24 months of unemployment, the insured is subjected to non-working benefit. I am not a financial advisor, so please consult your advisor for advice.

To be dropped completely, the non-working period is 2 years in the section of termination.

Sadly that's true for aviva, just a mere $500 in the event you become disabled while being just between jobs (even if it's a few weeks). Read the product summary carefully and you'll see. I discussed it already in more details in the other thread I linked above.

 

[boredboiboi]

Manulife do have lost of income but its is a rider attached to the main term plan. And it pays out in a lump sum and not on a month basis.

 

[fr33d0m]

Sadly that's true for aviva, just a mere $500 in the event you become disabled while being just between jobs (even if it's a few weeks). Read the product summary carefully and you'll see. I discussed it already in more details in the other thread I linked above.

If I have time, I will write to Aviva to clarify about this non-working issue. If confirms as what you said, I will write to LIA/MAS to complain this product.

 

[blurpandasg2014]

Just sharing the definition for aviva ideal income

https://drive.google.com/open?id=1sg8K0Ux4OONM_vZF3ujMqFUJMNLlwwpR

 

[fr33d0m]

Just sharing the definition for aviva ideal income

https://drive.google.com/open?id=1sg8K0Ux4OONM_vZF3ujMqFUJMNLlwwpR

It seems that my assumption of non-working period is correct.

 

[blurpandasg2014]

It seems that my assumption of non-working period is correct.

Seems like what u mention is correct however aviva did not explicitly state that working benefit is inclusive of 'non-work' up to 180days unlike GE

 

[kram62]

Just sharing the definition for aviva ideal income

https://drive.google.com/open?id=1sg8K0Ux4OONM_vZF3ujMqFUJMNLlwwpR

It seems that my assumption of non-working period is correct.

Seems like what u mention is correct however aviva did not explicitly state that working benefit is inclusive of 'non-work' up to 180days unlike GE

Thanks for posting the definitions from the policy letter. Note that in my previous analysis I only had access to the product summary, which doesn't bother to define its terms...

For the benefit of others reading this thread, here is the definition from the policy letter linked above:

Non-working Period: A period of at least one hundred and eighty (180) days, which starts from the date of termination of the previous Working Period, but which does not itself contain any Working Period and which does not result from a Working Total Disability

So for example, being between jobs for 5 months does not count as "Non-working Period" according to that definition.

On the other hand, the Working Period is defined as:

Working Period: A continuous period of at least thirty (30) days during which the Life Assured is performing some form of work or is engaged in an occupation or profession to earn or obtain Remuneration.

But the real clarification comes from clause 5.1:

"Working Total Disability" means a state of incapacity resulting from illness or accident, and which occurs either:-

(i) during a Working Period after thirty (30) days or more from the start of commencement of the relevant Working Period, or

(ii) during a Non-working Period within the first one hundred and eighty (180) days from the commencement of the relevant Non-working Period;

So indeed my original assessment was wrong, because the Product Summary alone does not define things clearly in Aviva's case.

 

[fr33d0m]

Seems like what u mention is correct however aviva did not explicitly state that working benefit is inclusive of 'non-work' up to 180days unlike GE

Read section 5 about working benefit including working period and non-working within 180 days