What is SAF Group Insurance (and the 3 Things to take note of if you are insuring under a group policy like this)
For most guys out there, you’ve probably heard about “Army Insurance”. Many people- myself included- adopt a laissez-faire attitude towards the topic of insurance when I was enlisted into the army. You probably know it is important and you buy it “Just In Case”. But you think you’ll probably never use it so you just buy the cheapest option to satisfy your conscience and put it at the back of your mind.
What most young people may not realise is that insurance can play an important role in helping them to be financially successful. At this stage of your life, it is probably the best time to start finding out and exploring your options. There are many types of insurance plans out there and most can be tailored to suit your needs.
But before we go shopping for the insurance that we don’t have, it would be good to know what insurance we already have. If the words “SAF Group Insurance” is something that sounds familiar to you because you have either heard about this during your National Service days or have been receiving letters telling you that your “SAF Group Insurance is renewed”, keep reading for this may be something that impacts you.
What is SAF Group Insurance?
SAF Group insurance is a Group Term (or temporary) insurance policy offered to all SAF and MINDEF personnel that is renewed automatically every year once you are inside the scheme. It covers for an amount of up to $1,000,000 until the age of 70.
Recently on 1st July 2016, the Ministry of Defence (MINDEF) and the Ministry of Home Affairs(MHA) in conjunction with Aviva, have jointly come up with a new and comprehensive Group insurance called the MINDEF/MHA Group Insurance which replaces the current SAF Group Term Insurance. This insurance is now offering to all Full-time National Servicemen (NSFs), Operationally Ready National Servicemen (NSmen), Regular servicemen and volunteers (SAF Volunteer Corps, NS Volunteers, SPF Voluntary Special Constabulary and Civil Defence Auxiliary Unit).
What is good about the policy is that the coverage can be extended to family members of those who are offered by purchasing coverage in the Voluntary scheme. The plan offers customisation such as add-ons for Critical illnesses, Early Critical Illness, Disability Income and Outpatient Medicare.
What does “Group Insurance” mean?
Group Insurance refers to insurance that you buy as a Group, in this case, the group includes all of the above mentioned personnel. For a small premium each month, you get to have coverage under a blanket policy. The main benefit is because the insurance is purchased as a “group”, the premiums may potentially be lower.
3 Things to Take Note of If You Are Insured Under a Group Policy
However, as with every coin, there is always a flip side. Here are a few of the important things to note as you enjoy the benefits of being covered under a group insurance policy.
1. You don’t own the policy
This is the confusing part but it’s actually quite normal. For example, we use the MRT trains everyday but we don’t own the MRT trains. The only thing we own is the “right to ride” by purchasing a per trip or a monthly concession card. Similarly for a group insurance policy, in this case SAF (or more accurately MINDEF and MHA) owns the policy and if we meet the qualifying criteria such as being an active national serviceman, we can get ourselves insured for as long as we pay the premium.
Not owning the policy brings with it uncertainty and my next point…
2. The premiums are not guaranteed
If you buy your own private insurance, it is common to see terms such as “premium rates are level and guaranteed” especially for insurance policies covering only death. For a Group policy, premiums are based on prevailing rates which means that it can be adjusted either downwards or upwards. This means that over a short period, for example the next 3 years, the premiums quoted may be used as a meaningful estimation. However, over the long term, the premium table may not be a reliable benchmark which brings me to the final point…
3. The coverage is temporary
The maximum age you can get covered under this group policy is up till the age of 70. There are insurance we need before the age of 70 and there are insurance we need after the age of 70. For example, insurance during the earlier stages of life will be essential to protect against loss of income and provide for loans and liabilities. On the other hand, people buy insurance to create money for specific purposes such as ElderCare fund, spousal protection fund or gifts for children and charity. These are financial needs at a later stage of life, typically beyond the age of 70.
The average Singaporean is expected to live till about 80 years old. For the majority of us, the likelihood of claim is low for a policy that covers until age 70. How then can such a policy fit in with our personal financial plan?
Human Life Value
Stop and think for a moment, how much are you worth in Sing dollar terms right now? One reaction might be that it is not right to think of a human life in monetary terms. Yet, when we go for a job interview, we have an expectation of how much salary we are going to ask for.
The fact is, we all have an economic value on our time (and life). It affects what jobs we apply for, what houses we buy and many of the lifestyle choices we make. In fact, for many of us below the age of 35, our Human Life Value can be in the millions.
Don’t believe? Try out this Human Life Value Calculator.
For example, if you are earning $3,000 a month and are able to work for the next 30 years, you will earn $1.08million over your working lifetime. This is not including any pay increments, bonuses and CPF contributions. Protecting your human life value and insuring against the loss of this income is, in my opinion, one of the best use of the MINDEF and MHA Group Insurance.
Start with having a Personal Risk Management Plan
Buying insurance is not a one size fits all solution and planning should be one of the foremost priorities when seeking to get any form of coverage. The important take away is to understand the benefits and coverage between having a group term insurance versus your personal term insurance. Download Guide to Selecting Term Insurance here.
(NOTE: Get our Guide to Selecting Term Insurance to help you differentiate between Group Term Insurance and Personal Term Insurance. Get your Guide here)
Have fun planning and if you have questions, I’ll be most happy to help.
Article by Lee Meng Choe, FChFP