Thursday, November 23, 2017

Planning For Unfortunate Events In Life

It has been a tough week for me as some unfortunate events happened. I shall not go into the details of what happened but rather focus on the planning aspects before any unfortunate events happen in our lives.

The following is what I think will help at least alleviate some of the problems which we will encounter if something unfortunate happen to us or our loved ones:

Lasting Power of Attorney (LPA)

The lasting power of attorney or LPA in short is a legal document which allows a person to voluntarily appoint one or more persons ('donee(s)') to make decisions and act on his behalf should he lose mental capacity one day. A donee can be appointed to act in the two broad areas of personal welfare and property & affairs matters.

I first heard of LPA a few years back from a colleague but didn't really understand how important it was. A point to note is LPA is only useful if someone is still alive but cannot make decisions himself. If he passes away, only a will drafted by legal representatives can be used.

LPA is getting more and more important that the government actually waived the application fees since 2014. The waiver is stipulated to end next year. If you're interested to find out more about LPA, you can click here. To apply for LPA, click here. I will be doing this for my parents immediately.

If you do not have LPA at that time when something happens, you'll have to apply to the court for a deputy to act on behalf of a family member and it can be a tiring and long process at that time. So its better to get an LPA ready now.

Hospitalisation Insurance - Medishield Life and Integrated Shield Plans

Another very important thing we must have is hospitalisation insurance. Hospital bills are not cheap at all and it can be stressful to handle the bills while having to take care of your loved ones. All Singaporeans including permanent residents are protected automatically under a basic healthcare insurance called Medishield Life. This insurance covers for life even for those with serious medical conditions currently up to B2 ward in the hospital. For the detailed benefits, you can refer here.

Medishield life is indeed just basic. If we want to have better healthcare coverage, we can get it from a private insurer. I'm sure many of us know about this. We can cover up to private hospital and even cover fully such that we don't have to pay a single cent for the hospital bills. Something to take note when buying hospitalisation insurance is the deductible and the co-insurance. We can cover these 2 through riders where the premiums have to be paid in cash. You can consult a financial consultant for the various hospitalisation plans out there.

Eldershield - Basic Disability Income

Besides hospitalisation insurance, all Singaporeans above the age of 40 are also covered under Eldershield. This is an insurance which pays out a monthly sum of money should we be severely disabled.  “Severe disability” is the inability of an individual to perform at least three of the six Activities of Daily Living (ADLs) independently, with or without mobility aids (e.g. walking aids, wheelchair). This means that the individual will require the physical assistance of another person for the ADL. Under the Eldershield, we can receive $300 or $400 up to 6 years.

Be sure to check if you or your loved ones is covered under Eldershield as they may have opted out unknowingly. Log on to the Central Provident Fund (CPF) Board website with your SingPass. After logging in, please select “My Messages” and check under the “Healthcare” section. If you are covered under ElderShield, this section will also let you know the ElderShield insurer you are covered under*.

* If you are not covered under ElderShield, the CPF website will not reflect any infomation on ElderShield.

I checked my father's Eldershield and was surprised that he was not covered under it. He had no recollection of opting out also so its good if we check.

If you are looking for higher disability income, the eldershield can be upgraded or you can get a seperate disability income insurance.

Home Protection Scheme - Protection for Home Mortgage

If you lose the ability to earn an income, paying for outstanding home mortgages can be really stressful. All HDB properties are protected under the home protection scheme (HPS) under CPF board. The HPS is a mortgage-reducing insurance that protects members and their families against losing their HDB flat in the event of death, terminal illness or total permanent disability. HPS insures members up to age 65 or until the housing loans are paid up, whichever is earlier.​

For HDB, you can also get a private mortgage reducing term insurance and opt out of the HPS. But, it would not be that wise of a choice as I think HPS will be easier to claim in the event anything happens. HPS will just offset all the outstanding loans while for private mortgage insurance, they will pay out in cash and it may take some time. For private properties, it would also be wise to take up a mortgage term insurance. Private properties mortgage amounts will be even higher than HDB so it is better to cover ourselves.

Term Life Insurance - Lumpsum payout for future use

After an unfortunate event be it death or critical illness or disability, there will be a lost of income where your dependants may have some financial difficulties thereafter.

A basic term insurance pays out a lumpsum amount upon death. Riders can be added to increase the coverage to pay upon critical illness or total permanent disability.

The younger we get the term insurance, the more affordable the premiums will be. It can be as low as $100+ per month for a 1 Million coverage. Of course, being a term insurance, we will not get anything back vs if we have bought a whole life insurance. For myself, I go for the term insurance because it would be impossible to pay the premiums for high coverage with a whole life insurance.

Are you prepared?

No matter how much planning we do, staying healthy is still the most important. Regular health check ups also help in detecting problems early. For Singaporeans age 40 and above, there is a government scheme which allows for health screening at $5. You can refer here for the information. You will get a letter on it too so do look out for it. Most people would have already received the letter. For us who are younger than 40, we can encourage our parents to go for it and for ourselves, it is also important to go for health check ups too.

Eat healthy, exercise and stay healthy. Having a balance life with lesser stress also helps too. Hope the above planning tips are useful for your future.

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