ElderShield – How Much Should You Upgrade To?

Client: Can refresh my memory?  What’s this ElderShield insurance that you mentioned to me the other time?

Me: It’s for long term care planning.  Do you remember me explaining what activities of daily living are?

Client: Oh yes, this sounds familiar.  The 3 out of 6 thing?  What is it really for?

Me: Hmm…ok, let me try to explain it this way.  Have you had the nursing home conversation with your wife?

Client: I don’t think so.  What is this nursing home conversation?

Me: It is the conversation that you let your wife know that if in the future you are disabled and is in need of constant attention, do you want to stay at home at all cost or if you are agreeable to stay in a nursing home.

Client: Now that you mention it…

What is ElderShield?

From the Ministry of Health Website, Eldershield is introduced as:

“ElderShield is an affordable severe disability insurance scheme which provides basic financial protection to those who need long-term care, especially during old age. It provides a monthly cash payout to help pay the out-of-pocket expenses for the care of a severely-disabled person.”

The details of the ElderShield scheme including FAQs are on the MOH website and from there, you can get a good understanding of the scheme.

How does ElderShield fit in with my financial plan?

ElderShield is an insurance plan and it’s made auto-enrollment when Singaporeans and Permanent Residents with Medisave accounts reaches the grand young age of 40 (about “half way there” as the average Singaporean lives until age 82).  In SMRT (i.e. “Singapore Mortality Terms”) language, when we reach City Hall if we are travelling on the East-West line from Pasir Ris to Joo Koon.  Right in the middle, no longer young but not too old.

One way to think about the scheme is that it’s a plan to help you prepare for the possibility where sometimes in the future, due to aging, illness, accidents or whatever personal “black swan” that might happen, you are unable to take care of yourself by yourself.  Thus, the plan provides a cash payout every month to help you buy “assistance”.  It may come in the form of an extra helper at home, daily 9 to 5 caregiver service, enrollment into assisted living facilities or any other support structure to maintain a sense of dignity and self-independence.

What can ElderShield be used for?

Aviva’s Long-Term Care Study in 2011 showed that claimants on average required about S$2,150 per month to pay for domestic helper or nursing home, transportation to and from the hospital for treatments or physiotherapy, mobility aids, as well as daily expenses and bills.

Let’s look at the respective cost in the various aspects.

a. Community Hospital

You may be discharged from the hospital but that doesn’t mean you have fully recovered. You will need additional inpatient care such as therapy and rehabilitation, nursing care and the need of caregiver to provide help with daily living. The estimated cost is around $8,000 – $9,000 a month. There are government subsidies between $1,800 to $7,000 a month which you can apply for.

b. Nursing Home

These are for patients who cannot take care of themselves in their own home and need significant assistance in daily assistance. It costs around $1,200 – $3,500 a month. You can tap into government subsidies and Medifund for selected homes only.

c. Respite Care

Those that require temporary help can apply for respite care costing around $100-$150 a day.

d. Inpatient Hospice Care

Patients who suffered from advanced and progressive diseases, and require highly-skills, multidisciplinary medical and nursing care to relieve symptoms at the end-of-life (e.g. pain, breathlessness, nausea and vomiting etc)

It costs around $7,000 a month payable via Medisave (selected hospices only).

e. Day Rehabilitation Centre

For patients who undergoing therapy to regain ability to perform daily activities. Estimated cost: $700-$1,000

f. Dementia Day Care Centre

Estimated cost: $700-$850

g. Hospice Day Care Centre

For patients with cancer and life-limiting disease. Estimated cost $700-$850

h. Home Medical Service:

For patients with mobility issues, home medical service is an option and cost around $130-$200 per visit

i. Home Nursing:

For housebound or bedridden patients who require nursing care. Estimated cost: From $80 per visit

j. Home Therapy:

For housebound or bedridden patients who are unable to visit a day rehabilitation center. Estimated cost: $100-$150 per visit

k. Home Help:                                                                      

For housebound patients who live alone and require assistance with daily living. Estimated cost around $100-$150 per visit

l. Hospice Medical / Nursing Home Care:

For patients with cancer and life-limiting illnesses. Estimated cost: $150-$220 per visit

Source: What is ElderShield – 7 questions with answers on this ndr 2016 topic

How to plan your ElderShield upgrade

It is true that on a monthly payout of $400 a month, you can barely afford to hire a helper.  It is also true that based on a total payout of $28,800, it is probably an amount you already have in savings or investments so it makes little sense to buy an insurance when you already can self-insure.

What is not true, however, is that you should opt-out or do nothing with the ElderShield scheme because the monthly or total payout is not attractive.  The reason – you can make it attractive.

However, this only makes sense if you believe that suffering from some form of disability in the future is a possibility and it is something you want to plan for in advance.

In planning your ElderShield upgrade, these are the following 3 key questions to consider:

1. How long are the Unhealthy Years?

It was mentioned during the National Day Rally 2017 that currently, Singaporeans live on average to 82 years old with 8 of those years experiencing ill health.  These are average numbers and it is possible for the unhealthy years to last beyond 8 years.  Also, unhealthy years are not exclusive only to the seniors or the elderly.  A young person may experience years of ill health requiring long term care after suffering from accidents such as a motor accident or a serious illness such as stroke.

2. How much does Long Term Care cost?

In a recent study, it is estimated that each senior in Singapore will need an average of $51,000 a year to provide for health costs by the year 2030.  If we explore deeper into the study, Singapore is in Group 1 or the “Money-Rich, Time-Poor” Group and the Long Term Care component is estimated to be 45%.  This means that from 2030, long term care will cost $22,950 a year or about $1,900 a month in Singapore.

Source: Asia Pacific Risk Center

3. On average, how much do we need in total?

Here are the simple maths:

  • Each senior in Singapore will need an average of $51,000 a year from 2030
  • 45% is for Long Term Care = $21,950 a year or $1,900 a month
  • Average Years of Disability = 8 years

Total Funds Needed = $1,900 x 12 month x 8 years = $182,400

Even for the affluent, this can potentially be quite a strain especially when this cost is likely to be incurred later on in life when there is no more working income and retirement funds are depleted from the initial retirement years.

Here is my planning suggestion (especially if you are a “GEN-X” like me)

As a Generation-X sandwich population individual in Singapore, I can appreciate the challenges of taking care of elderly parents and ensuring that I will not be a burden to my own children in the future.  On the other hand, being a financial planner allows me to be in a unique position to learn about the mistakes people make by not planning or planning insufficiently.

This has shaped my own personal view about the topic of ElderShield upgrade and my strategy is to plan in such a way that I will likely have enough money to not burden my family and at the same time, have a premium commitment that I can afford while working and in retirement.

Here are the 3 strategies I’ve adopted that perhaps, you can use as a reference for your planning:

1. Make it ElderShield “Life”

The current ElderShield scheme has a benefit payout duration of 6 years but one of the objective of financial planning is to not run out of money. When it comes to old age disability planning, the only way to ensure that the money will not run out is to set up your insurance payout in such a way that it will pay for as long as you live.  Having a lifetime payout is a first step but that alone is not sufficient and this brings me to the next strategy…

2. Cover as much of the $1,500 shortfall using Medisave

The current ElderShield scheme has a benefit payout of $400 a month. The research on the other hand suggests that an average of $1,900 a month is needed.  The gap of $1,500 a month can be covered by upgrading your ElderShield and the premiums can be funded through cash savings and CPF-Medisave.

Between using cash and Medisave, choose medisave as the first option.  This is because even if the premium is ongoing when you retire and stop work, you will not be as affected as compared to using cash which you can use for many other needs besides medical.

3. Manage the premium commitment by choosing a limited premium option

When it comes to premium payment, there are 2 options.  You can either pay premium for a limited number of years and have a lower coverage or choose to pay ongoing premium (or lifetime premium) and enjoy a higher coverage.  You should consider choosing a limited premium option so that that the premium burden in retirement is reduced.

A Resource to Help You Plan Better

I’ve previously written an article on what I believe is the minimum type of planning someone should consider when it comes to ElderShield upgrade.  This article is really for those who don’t want to approach this issue based on the minimum but rather, having enough.

If like me, your primary objective in financial risk management is to ensure you will not be a burden to those around you, you can get started by using this Guide to Planning Your ElderShield Upgrade which includes a premium projection table for upgrading to $1,900 a month in ElderShield benefits.

(NOTE: Get our Guide to Planning Your ElderShield Upgrade to help you understand how you can use ElderShield Supplements to upgrade your ElderShield insurance coverage. Get your guide Here)

At the end of the day, this is an irrevocable planning and if we are ever stuck in our train journey due to a train fault, we will not want to be left with the minimum option of walking or waiting for service buses.  Rather, we still want to get to our destination on time and in comfort through other means such as Uber or Grab – no matter what the dynamic pricing is!

Article by Lee Meng Choe, FChFP

Email: mengchoe.lee@proinvest.com.sg

<strong>Lee Meng Choe</strong> (FChFP)
Lee Meng Choe (FChFP)Financial Services Director

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