The Ultimate Asset Protection

 

[29 Jun : Update - I've reached out to the insure updated the responses below, marked in green] 

I'm revisiting this as I was offered to buy Mortgage insurance package after buying my house. In my case, I already had an existing term policy bought in 2015 with asset protection in mind.

However, this coverage isn’t enough to cover the full loan.

For context, I asked for quotes on mortgage insurance to cover 1.25 mil till 65. The annual premium was $800 – $870.

The current term I have covers 1 mil for about $1000. This is even after buying it 8 years ago.

I wouldn’t discuss in detail the pros and cons of mortgage insurance vs term insurance or why mortgage insurance is essential as this has already been covered.

Esssentially, I’m not going ahead with mortgage insurance as term insurance isn’t quantum-reducing. As I pay down the loan, this would provide a residual payout for my family. I feel the trade-off of $100-$200 is justified.

If I can’t cover the shortfall, then the best option would be to prioritise the repayment of the principal.

Well, this is until I saw this video from PLB. It was very brief, “Get the Mindef Group Term Insurance”. Looking at the product summary, for a coverage of  1 mil, the annual premium is $300. 

  That is really CHEAP~!😍😍😍😍

However, isn’t it too good to be true?  

Let me first highlight the characteristics of personal term insurance and how we can use it like mortgage insurance. Next, I’ll share what I found out about the Mindef Group Insurance plan. 

The Individual Term Insurance

Main Characteristics:

1. Coverage up to $1 mil, higher coverage will require a medical report.
2. Add-ons to CI or early CI or CI waiver are available.
3. Premiums are locked in at entry age.
4. 100% payout in the event of death, total permanent disability or terminal Illness.

As such it’s important to start early. I know an insurer offering 30% perpetual premium discounts but it would still be good to get a few quotes.

One issue that was raised was the timeline of the payout. Essentially, you need to make a nomination in order for the direct payout to be given. Otherwise, your family might have an issue paying off the loan. 

The Mindef/MHA Group Insurance

Main Characteristics:

1. Coverage up to $1 mil, can’t go higher.
2. Add-ons to CI or early CI is available, but premiums step up with age. CI waiver is unavailable.
3. Premium schedule is the same regardless of entry age but subjected to premium schedule revisions 
4. 100% payout in the event of death, Total permanent disability
5. 400k Cap on payout for Terminal illness, the balance will be paid later.
6. Group Risk: Claims due to Terrorism/ War is capped at 1.5% of Aggregated Sum Insured (i.e. I’ll hope it never happens or minimise the no. of victims) 

To qualify, you must be an eligible member and either a Singaporean or Permanent resident

For most of the guys, we would have to serve the nation. Our qualifying period will end when we complete our reservist which is 40 for non-officers and 50 for officers.

In the year you turn 40/50. the system will automatically mark you as ineligible even though your birthday hasn't passed. You'll need to go through an appeal process by reaching out to them for an appointment with their agents for a hardcopy submission.

Also, changes to coverage (Increase / Decrease) or added dependents can be done at any time.
Hence, meeting the entry criteria is the most important.

For ladies, you can still qualify as an eligible member or apply as a dependent.
Note: For dependents, the coverage cannot be higher than the main applicant and they must be PR or Singaporean.

The same nomination issue applies and but we can now make a nomination on a group policy.
However, unlike private, nominees are restricted to your parents, spouse and children.
i.e. for in singles, you can only nominate your parents. 
Here’s the link to the nomination form and send it to SGGROUPADMIN@singlife.com

Summary

I do agree that the Group Term insurance is an extremely good deal.

However, Do Note that I am only looking at coverage up to 65 years old and there is no CI as mortgage insurance doesn't offer either.

The major plus point here is that I can enjoy the same premiums anytime I enroll/upgrade.
Hence, after enrolling, I have the option to increase coverage/add dependents and keep my premiums low in the interim.

I personally feel premium schedule changes wouldn't be too drastic and the cap on Terminal illness/war/terrorism isn’t a blocker to me. 

I'm continuing my private term policy and will use this mindef policy as a supplementary protection. 

Note: there's a weekly lucky draw to win $400 of WOGI e-vouchers till 03 Sept 23.

Bonus

This is not only available for private housing but also for HDB.
You can also apply for an exemption from Home Protection Scheme with this.

Note:  you will need two plans instead of one which doesn’t give much savings.
Assuming coverage for $400k, each policy will be $120 per year which amounts to $240.
I’m not sure how much HPS is but this doesn’t have a reducing quantum and you can still use it when you move. 

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