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?