Forumers believe the MINDEF GROUP TERM PLAN to be the most cost-effective insurance that you can purchase in the market.
Is it true? What are the pros and cons?
I have done a throughout analysis on the plan for you to consider covering yourself and family members with this group plan.
In July 2016, the MINDEF/MHA Group Insurance replaced the current SAF Group Term Insurance. The insurer remains as AVIVA Ltd.
For simplicity of this article, let's refer it as SAF Group Term life plan which most refer to.
With this new grouping (and perhaps some backend negotiation), the insurance premium rates have been further lowered.
Group Term Life Premium Is Cheap But Till Age65 Only
At $4.10/month for $100,000, it's really hard to beat. This is pure death + TPD coverage.
However, at age of 66, premium jumps up by 20x!!
If you forget to chancel by then, you'd be in for a rude shock when the next giro comes along.
This table for the brochure cannot be found now. All applications are online here with this link.
In addition, $250,000 worth of sum assured can be bought without need to provide evidence of insurability.
I've a private client age 30+ who had a minor heart attack. I've recommended him to look for this plan as personal insurance may decline his case.
Do note that no death benefit is payable under if it is caused by any pre-existing condition unless the Insured Person has already been insured continuously for 12 months under this policy. It is an exclusion clause for death due to pre-existing conditions within 12months of policy.
I bought a $100,000 coverage for myself. In the event I am unwell, I will likely increase the coverage amount to $250,000.
Critical illness (CI) coverage (LIVING CARE RIDER) is capped at $350,000 only
Critical illnesses can be covered by purchasing the Living Care Rider.
There is firstly a cap to how much you can buy which is only $350,000.
Using a 5-10x annual salary to cover as a rule of thumb, this sum assured barely fits most working adults.
Let's run through another perspective to insure away your loans and future expenses
- Loans for car or house of $100,000
- $2,000/mth expenses to cover over 25 years
That's possibly $700,000 needed for critical illness coverage.
Hence, it is important to plan critical illness coverage with a personal plan.
Critical illness (CI) coverage (LIVING CARE RIDER) is expensive over time
As shown in the table below, the premiums for living care rider are on an ESCALATING SCALE!
It almost doubles at each age band from ages 31-35 onwards.
More importantly policies are underwritten individually and I feel it gives greater certainty in premium stability.
- Do note that even for personal CI plan, premiums can be level but non-guaranteed.
Critical illness (CI) coverage (LIVING CARE RIDER) VS AVIVA My Multipay CI III
I pulled up MyMultipay CI plan which is also issued by AVIVA as a personal CI plan for comparison.
They are firstly not apple-to-apple because AVIVA My Multipay CI III lets you claim for early critical illness and for multiple claims.
You may read our analysis on AVIVA My Multipay CI III plan here.
Premiums for AVIVA My Multipay CI III is at $98.90/mth for male age 31 covering $100,000 till age70 (Plan pays $300,000 for Critical illness)
This is cheaper on a average premium basis than LIVING CARE RIDER which is $18/m at age31 and then climbs up to $494.70/m at age 70.
Critical illness (CI) wordings for "exclusion" are different from a personal plan CI
I have some further concerns. Personally, the "Living Care rider" policy wordings for exclusions seem broader:
"No benefit shall be payable under this policy in respect of any CI DIRECTLY OR INDIRECTLY, WHOLLY OR PARTLY CASUED by or arising from or contributed to by ANY of the following:-ANY condition or illness which is existing (whether or not the insured person is aware of the same) or the cause or the symptoms of which are existing or are evident or ANY condition or illness which the insured person is suffering...."
I've checked against those from my personal term plans which have more stringent underwriting.
The policy wordings for exclusions only state"pre-existing conditions that is not communicated to us (unless the condition has been declared and accepted by us)"
Early Critical illness (CI) coverage (LIVING CARE RIDER PLUS) is limited in scope!
The living care rider plus only covers 10 early CI conditions. A personal early CI plan with any insurer has around 70 early and intermediate conditions these days.
There is also a cap for the Living Care Plus Rider at $300,000.
Group Personal Accident PA coverage is cheap
The SAF Group PA plan covers for accidental death, TPD due to accident and Total&permanent dismemberment due to accident.
Personal PA plans are more slightly expensive in comparison.
If you are active in sports, consider buying a personal PA plan as it is more holistic in coverage.
It will cover your medical treatment/TCM/scans/MC due to accidental injuries.
Click here to read more: BEST PERSONAL PA PLAN
Premiums for the SAF Group Term plan is non-guaranteed.
Will the policy wordings prevent claims when we need it in future?
Even if it is as claimable as a personal plan, will the loose underwriting result in excessive claims down the years?
These are some questions to perhaps consider the SAF Group term plans to be a complementing part of your portfolio.
Premium rates are non-guaranteed.
Some claims will be from policy holders who were not healthy yet gotten coverage.
AVIVA has the right to easily raise premium rates for the whole group to compensate.
Recommendations and if you would like to do proper insurance planning
This MINDEF plan is a form of group insurance.
The rates are not unique. It is similar to group plans that are offered by big corporations.
If you'd like to do a proper insurance planning, contact me below for a quick discussion. I can show you how to incorporate various plans into your portfolio.
Last updated on June 27th, 2020 at 07:52 am