CareShield Life: Taking Long Term Care Insurance to the Next Level

Provides you with an understanding of the new CareShield Life, the enhanced ElderShield scheme that has launched on 1 Oct 2020 and how it impacts your long-term care needs.

Similar to other developed societies, Singaporeans are living longer, and the population is ageing. With a fast-greying population, it is inevitable that more Singaporeans are likely to need long-term care as they age which will make managing long-term care costs an important aspect of one’s financial planning.

Longevity and the possibility of requiring long-term care during old age further become a double-edged sword when there are fewer children providing the support. When this unfortunate event happens, what will form the basis of the long-term care expenses will be insurance together with the personal or family savings and government subsidies (if one qualifies for them). With an ageing population in mind and recognising the importance of planning early for our future long-term needs, CareShield Life was introduced as an enhancement to the existing ElderShield scheme.

Introduction to CareShield Life

The common questions most of us tend to wonder, “What is CareShield Life?”, “How did this scheme come about?”, “What good does it do to me?”. In a nutshell, CareShield Life is the latest national long-term care insurance scheme. This scheme provides basic financial support to Singaporeans when they become severely disabled with a lifetime coverage and protection benefit. This scheme is essential especially during old age when one requires both medical and personal care for a prolonged and extended period of time.

Along with MediSave Care, which allows withdrawals from CPF MediSave accounts (from their own and/or their spouse) for the purpose of long-term care needs, it will be launched on the 1st October 2020. On top of these schemes, ElderFund (launched in January 2020) will form a part of the long-term care financing measures package which were announced back in 2019 to help and to give greater assurance and protection for Singaporeans’ long-term care needs. The definition of severe disability in this context refers to the inability to perform at least 3 out of 6 activities of daily living (ADLs) which consists of feeding, washing, dressing, transferring, toileting and walking or moving around.

Who’s Covered for CareShield Life?

Future Cohorts: Born 1980 or later
(aged 40 or below in 2020)
Existing Cohorts: Born 1979 or earlier
(aged 41 and above in 2020)
Universal, i.e. everyone is covered regardless of pre-existing disability or financial ability  Optional and can join from 2021, if not severely disabled. There is no maximum age limit and those with medical conditions can join. 
Born in 1980 to 1990: Enrolled on 1 Oct 2020 or 30th birthday, whichever is late Born in 1970 to 1979, on ElderShield 400 and not severely disabled: Auto-enrolled from 2021 for convenience but can opt out by 31 Dec 2023, with full CareShield Life premium refund
Born from 1991: Enrolled on 30th birthday

CareShield Life – Benefits at a Glance

Benefits:  
Lifetime Coverage Coverage for life once you have paid all your premiums. Premiums are paid from the age you join until age 67, with the exception of those who join at age 59 or older, who will pay premiums over 10 years.
Lifetime Cash Payouts  - Monthly payouts to be received for as long as you remain severely disabled.
- Payouts received will be in cash so your caregiver and you will be able to decide on desired care arrangements such as home care or nursing home care.
Payouts at $600 per month in 2020 which increases over the years - Payouts will increase every year up till age 67 or when a claim is made (whichever is earlier)
- Upon making a successful new claim, the monthly payout amount will stay fixed for the duration of your severe disability
- From 2020 to 2025, there will be a 2% increase per year on payouts. After which, payout increases and corresponding premium adjustments will be recommended by an independent CareShield Life Council.  
User of MediSave for Premiums Singaporeans can use their MediSave to pay for their and their family memebers' (i.e. spouse, parents, children, siblings or grandparents)
Worldwide Coverage Regardless of where you reside, you will remain covered and receive payouts

CareShield Life vs ElderShield

Before diving deeper into CareShield Life, here is a little history on when long term care insurance first came about. Back in 2002, Ministry of Health introduced ElderShield scheme known as ElderShield 300 where they provide a payout of $300 per month up to a duration of 60 months only. This scheme was further enhanced in 2007 and was named as ElderShield 400 whereby payout amount stands at $400 per month up to a duration of 72 months.

Singaporeans and Permanent Residents 40 years and above will be eligible for ElderShield (those who are not already severely disabled). Eligible candidates will be able to take up an ElderShield policy from one of the 3 private insurers (NTUC Income, Great Eastern and Aviva) using CPF Medisave or cash.

Under ElderShield 400, upon severe disability, policyholders will receive a $400 a month payout for a duration of 72 months (6 years) if they meet the definition of “severe disability” which means that the policyholder is unable to perform at least 3 out of 6 activities of daily living.

CareShield Life, the enhanced ElderShield scheme will be launched in 1 Oct 2020 for those born 1980 or later, and 2021 for those born 1979 or earlier. ElderShield will no longer be applicable to individuals turning 40 from the year 2020 onwards except for individuals who are already enrolled. However, those who choose to stay in ElderShield can continue to do so. In addition, if they have ElderShield supplements, coverage continues regardless if they join CareShield Life.

Comparison of Features
  CareShield Life ElderShield 400
Eligibility Applicable to all individuals aged 30 and above Optional coverage for individuals who are 40 years and above
Premiums Premiums increased by 2% yearly for the first 5 years, adjustments will be made to the rate of increase after 5 years (reviewed regularly) Premiums are constant throughout the entire policy term.
Monthly Payout - Higher than ElderShield and payout starts at $600 per month in 2020 and increases yearly up till a successful claim is made or up till age 67, whichever is earlier
- Individuals who recovered and make a 2nd claim will have the same
Payout remains constant throughout the entire policy term ($400 per month) 
Payout Duration Lifetime payout in the case of severe disability 72 months payout in the case of severe disability
Increase in payout 2% p.a. approximately (payout fixed once a claim is made) No increase
Annual Premiums Male age 30 - $206
Female age 30 - $253
Male age 40 - $175
Female age 40 - $218
Availability of CPF Medisave Payment  Yes Yes
Premium Payment Term Till age 67 Till age 65
Administrators Government Private Insurers
Coverage - Existing cohorts born in 1979 or earlier will be optional
- Future cohorts will be mandatory (1980 or later) coverage will be regardless of pre-existing disabilities they have
- Able to opt out
- Individuals with pre-existing severe disabilities will not join ElderShield

Key Takeaways Between the 2 Schemes

·       Lifetime payout for CareShield Life. One of the key differences to point out is the payout duration between these 2 insurance schemes. ElderShield only has a payout duration of 6 years as compared to CareShield Life’s lifetime payout. From one scheme to another, this definitely elevates the proposition of choosing CareShield Life over ElderShield. In addition to this, no individual will lose their CareShield Life coverage even if they are unable to fork out the premiums. The Additional Premium Support helps with that.

·       Payouts increase over time for CareShield Life. This is also one of the benefits of CareShield Life that is relevant to policyholders as they age. The 2% increment may help to hedge against inflation and possibly help in the payments of medical supplies, nursing services, long term care support or hiring a helper.

·       Government as the single administrator for CareShield Life. CareShield Life will still be targeted at severe disability, i.e. no change from today’s criteria for the current ElderShield schemes. However, as a single administrator, the Government could achieve better consistency in the implementation of underwriting and claims processes across insureds. 

·       To top it all off, Singaporeans also have the option to purchase additional supplements from private insurers for a more comprehensive coverage to make sure that they and their family members have a peace of mind in the later years.

The Big Question “Switching from ElderShield to CareShield Life or Not?”

Given the timeline posted by the Ministry of Health, individuals can switch from ElderShield to CareShield Life from closer to end 2021 onwards if they are not severely disabled. There are also many considerations to this question. Cross referencing to the key differences between ElderShield and CareShield Life as well as factoring in the studies and reports from various articles stated below, it does seem like an overwhelming yes to this question due to the wider scope of coverage provided by CareShield Life.  

The next question is, will the comparison of the different features or premiums between ElderShield and CareShield Life be the best gauge for any individual to decide on the switch. What about individuals who are contented with just a basic coverage, where they do not worry about the differences possibly due to the fact that long term care may not be a matter of concern at the moment for them. The contentment of just having the basic coverage may not sway one into wanting to make the switch.

There are also individuals with the mindset quite the opposite of just wanting a basic cover and instead wanting to be covered way beyond what ElderShield can provide. It is an obvious choice to make the switch in this case, however does the budget constraint of such individuals be a cause of concern? Let’s say for example, Aviva’s long-term care studies states that long term care costs stand at $2,324 a month on average. A basic coverage for CareShield Life (if the individual makes the switch) provides $600/ month. Purchasing additional supplement to provide for such potential costs is necessary for an individual who prioritises long term care as their objective. Additional supplement from private insurers requires out of pocket expenses as well and there is also the possibility that the supplements will cause a strain to low income families. Would individuals rather stay with basic ElderShield if the supplements are cheaper and affordable or would individuals make the switch?

Long Term Care Support and Insurance, Is It Enough?

Based on an article in 2016 written on Straits Times, it is reported that elderly health costs will most likely rise tenfold by 2030. Which means, each senior residing in Singapore will need approximately $51,000 a year for long term care support, which is the highest figure in Asia-Pacific. This amount takes into consideration costs of long-term care, shifting demographics, public expenditure, insurance plans, out of pocket expenses and inflation in medical cost.

To narrow down specifically to long term care costs, Aviva Singapore has also done a study in 2018. Factoring in aids to help daily living, caregiver expenses, miscellaneous expenses, medication and therapy and everyday living expenses which sums up to a total of $2,324 per month on average.

Long-term care can hence be prolonged and costly. With monthly payout starting at $600 in 2020, CareShield Life is designed to provide basic financial support, in the event of severe disability.

It is therefore important that we are aware of the type of costs we are expecting in the years to come when we require long term care support or other form of help/aid. The schemes and help provided by the government provides basic support for long term care costs. Individuals should consider additional coverage and benefits through private supplements insurance plans to complement the basic CareShield Life to minimize the financial burden of long-term care to the family. 

Conclusion

As a basic insurance scheme that will help to pay up certain unforeseen expenses related to long-term care, implementation of CareShield Life will definitely help and give us a peace of mind in future. With an ageing population and the rise of long-term care costs, understanding what CareShield Life can offer and planning for long-term care as part of one’s financial planning is important. While there are many things happening around us that is not within our control, our personal well-being and finances can be something we can take charge and plan ahead.

Source:

https://www.businesstimes.com.sg/government-economy/careshield-life-starts-oct-1-for-singapore-residents-born-in-1980-or-later
https://www.straitstimes.com/singapore/health/elderly-health-costs-to-rise-tenfold-by-2030-report
https://www.todayonline.com/commentary/making-careshield-life-and-long-term-disability-care-more-inclusive
https://www.todayonline.com/singapore/singaporeans-living-longer-spending-greater-proportion-time-ill-health-study
https://www.careshieldlife.gov.sg/long-term-care/other-long-term-care-financing-support.html
https://www.aviva.com.sg/en/money-banter/2020/common-questions-careshield-life-answered/
https://www.moh.gov.sg/docs/librariesprovider5/pressroom/featured-articles/careshield-life_essential-affordable-start-to-long-term-care-financing.pdf

Important information

This article should not be regarded as an offer, recommendation, solicitation or advice to buy or sell any investment product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. The information provided herein is intended for general circulation only and does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You may wish to seek advice from a financial adviser before making a commitment to purchase any investment products. In the event you choose not to seek advice from a financial adviser, you should consider carefully whether the product(s) are suitable for you.