What are Disability Income?

A Thorough Comparison & Analysis

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Disability Income Plan is a type of insurance that, in case you become disabled due to illness or injury and are unable to work, provides you with a specified monthly payment as an “income replacement”.

So if you can’t work for several months, a year or longer, you’ll have at least a decent measure of financial security to survive.

Disability income insurance pays you for the loss of income due to an accident or illness. The policy helps to ease your financial loss, but will not completely replace your income before the accident or illness.

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Is disability income plan important?

A significant portion of personal financial planning is health insurance. However, a person needs to know many different types of health insurance policies. We’ve written about Private Integrated Shield Plan (Hospital Plan) and Critical Illness (CI) Plans.

The important part of health insurance that can be neglected is disability coverage. But what exactly is coverage for disabilities and for what does it cover you?

There are three main types of insurance policies in Singapore that provide disability payouts: Disability Income Plan, Severe Disability Plan, and Total Permanent Disability.

Why is it important to me?

If you think about it, we need to be able to do these important daily things (Activities of Daily Living – ADLs) before we can even get out of the house every morning.

In the event of a severe disability, I can only imagine how mentally, emotionally and financially difficult it will be for oneself and loved ones. In terms of getting a skilled helper nurse or even nursing care services there is undoubtedly a need for long term care.

One-Stop Financial ElderShield CareShield, Long Term Care Financing
One-Stop Financial - ElderShield CareShield Life - Cost of Living

An additional cost of $2,324 a month can over time become a heavy financial burden on the family and one’s self. That’s why planning for long-term care is a crucial thing to prepare for. ElderShield & CareShield Life is a national severe disability insurance plan that seeks to cover some of the costs.

What is the Disability Income Plan?

Disability income insurance pays a monthly fixed amount to cover the income you would lose if you were unable to work due to an accident or illness.

Up to 80% of your average monthly salary can be covered by these plans. The plan is aimed at mitigating your financial loss, but will not replace the income you received before the accident or illness.

Disability Income Plan effectively protects you from the possibility that a disability will stop you from working and earning income for yourself and your family. The continuing premium benefit given by an insurer would give you the payout you need to cover for your monthly expenses.

When getting a Disability Income Plan, do take note of the below key pointers:

Payout isn’t lifelong. Most of the Disability Income Cover provides payout till age 65, or until policyholders have made a full recovery, whichever comes earlier.

It makes sense because even if the individual is not disabled, he or she would likely have stopped working by the age of 65.

It is important to remember that the Disability Income Plan is a health insurance policy, not a replacement for a retirement plan.

If a policyholder suffers from an accident as a result of a bad hand injury and is unable to work due to injury for a period of time, he will be receiving payouts from Disability Income Plan.

And, if he can make a full recovery and start working, the payout for disability insurance will cease as he is now able to work.

Alternatively, if he can find work but can not earn as much as he used to due to previous his injury, the plan will reinforce the gap in earned income between what he received and what he earns today.

Alternatively, if you have a question with regards to the Disability Income Plan, you can choose to connect with us to understand more.

You will only be paid by a disability income plan if you are employed. If you experience a disability during a period when you are found to be unemployed, you may not receive the payout you expected to receive.

Also, the payout is also a percentage of your average salary. For example, if your average salary has been $5,000 over the past 24 months, you can’t just claim a $7,000 bonus every month.

You can’t claim a $5,000 payout if you haven’t worked for the past three years either.

What is Severe Disability Plan?

In Singapore, we have ElderShield and CareShield Life (to be launched in 2020). Both of these plans provide a payout when an individual is severely disabled. Both of the plans can be paid by CPF Medisave Account (CPF MA).

The severe disability criteria are when a patient is unable to perform at least 3 out of 6 Activities of Daily Living (ADLs). The same payout criteria are expressed by both ElderShield and CareShield Life.

ElderShield has optional supplement plans that allow policyholders to enjoy higher payout, and for payout to be extended beyond 72 months, while CareShield Life is compulsory which has an increasing of premiums and payout of 2% yearly. CareShield payout will be fixed for life once the first claim is made.

One-Stop Financial - ElderShield CareShield Life - Activities of Daily Living
Credits: Ministry of Health

Unlike disability income insurance, for which payouts are linked to:

1) How much you made before you were unable to work (severe disability plan payout is not pegged to salary), and

2) Disability income insurance payout are paid up to age 60 or 65 while payouts made under CareShield Life are for life.

You can read more about ElderShield and CareShield Life details as there is a page written specifically about it.

What is Total Permanent Disability (TPD)?

Total Permanent Disability (TPD) is not a standalone life insurance policy, but one of the benefits you can find in the life insurance or an endowment plan.

A TPD payout occurs only when it is found that an individual is permanently disabled. A lump-sum payout, usually equivalent to the death benefit payout, will be given when this condition is satisfied. Then the policy will be terminated. Total Permanent Disability (TPD) payout benefit can be commonly found on Whole Life Plan or Term Plan coverage.

It is important to note that Total Permanent Disability (TPD) coverage varies from Disability Income Plan offers monthly payouts as long as the individual is certain to be unable to do his current job until a certain age due to an injury, whether temporary or permanent.

Total Permanent Disability (TPD) is only given out, in a lump sum, when the permanent disability occurred.

What are the plans that has disability coverage?

One-Stop Financial Disability Income - 3 types of disability plans

Why you may need disability insurance, even if you think you don’t...

Despite popular belief, disability insurance is not just for on-the-job injuries.

While some may argue that there are overlaps between insurance for income from disability, total permanent disability, and severe insurance for disability, these policies are not alternatives to each other.

All of these policies cover you for a different purpose. Notwithstanding the budget, you should consider getting all important policies. Of course, you also need to make sure that you fully understand the policies you are acquiring, rather than just acquiring the cheapest.

Get your Disability Income Plan comparisons from the top providers in Singapore here!

Protect your income and ensure a stable inflow of it
to sustain with your lifestyle, find out which is the
best suited Disability Income Plan for you.
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