There was a saddening article on The Sunday Times, March 8 2009. The article was about the scarcity of beds in local nursing homes. The reason is that people are flocking to subsidized homes, that it is estimated that one has to wait for 4 months to get a bed there. Ironically, there are some other available beds in other homes, but most families cannot afford them as they aren’t subsidized.
Alternatives that some families take are to check their ageing parents into nursing homes in Malaysia. While it is cheaper, the price really isn’t that encouraging too.
While it has always been the maxim to provide for our elderly parents, sometimes it’s clear to me that the cost of living makes it somewhat near impossible.
Let’s study three possible scenarios arising from the result of an ageing parent becoming disabled. The following are the simplified calculated costs (all costs of nursing homes are derived from the article mentioned):
Scenario 1 – Disabled parent checks into local nursing home
Nursing Home Cost: $1,000 to $4,000 monthly
Scenario 2 – Disabled parent checks into Malaysian nursing home
Nursing Home Cost: $450 to $1,000 monthly
Scenario 3 – One adult child stops work to look after disabled parent
Income loss of adult child: $1,200 to $3,000 monthlyCost required for adult child’s lifestyle is still required
While it is easy to conclude that Scenario 2’s cost is the lowest, not all families can accept putting their disabled and ageing parent in another country. Scenario 3 is the most ideal in the aspect of family ties, but this will literally mean a loss of income due to an adult child stopping work to look after the parent. We also must not forget that this adult child too has lifestyle costs like his/her food, bills, clothing, etc.
Most often, families are likely to choose Scenario 1, and pool resources from family members to pay for the nursing homes cost. And if they have no choice but to choose subsidized nursing homes, they may now have to wait 4 months to get a bed for their parent.
The Ministry of Health’s Eldershield plan created for CPF members is a useful idea. However, it falls short in relevance to the spectrum of the problem. By default, Eldershield insured members are entitled $400 monthly for 6 years in the event of severe disability under their terms and conditions*. This would be a far cry from the nursing home costs in Singapore. Paying out for 6 years only, also isn’t comforting enough. Another whammy is that such coverage ends when the insured reaches age 65.
However, private supplementary plans have been created to make the Eldershield coverage relevant. Using the CPF Medisave as insurance premiums, such plans can increase the monthly payout up to $2,000. The payout period can also be extended to 12 years to a lifetime.
In conclusion, the most cost effective arrangement to cater to this long term care problem is the Eldershield plus is supplementary plan. Caregivers can also pool Medisave resources to supplement the premiums, instead of needing to pool to supplement the nursing home bills. Either ways, the disabled and ageing parent remains closer to home, and yet having his/her medical needs taken care of.
* To qualify for payout for Eldershield, the insured must not be able to perform at least 3 of the following Activities of Daily Living: Washing, Dressing, Feeding, Toileting, Mobility, Transferring.
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Tuesday, March 31, 2009
Tuesday, December 16, 2008
Monday, November 17, 2008
Taking Care of Dad, Mum, Grandpa and Grandma
I got a scare.
My buddy at work shared with me that when her grandmother was alive, she became ill with dementia. The children still needed to work, and the final decision is to put her in a nursing home. The bill was $3,000 monthly.
My maternal grandmother had a fall early this year, and her children disallowed her to live alone anymore (much to her near violent objection, however, she finally lost the arguement, and now living with one of my aunts). Prior to the current arrangement, the possibility of a nursing home was considered. The quote given by the nursing homes was $3,000 monthly.
My grandfather has an injury in his nerve, and can no longer walk for many years. He has a nasty temper, so if he were to go to a nursing home, I think there will be lots of casualties in there. Thus, he stays at home with my grandmother, and a maid. The maid is employed specially to tend to my grandfather. With all expenses in, the domestic service should amount to $700 or more per month.
What do the above real-life scenarios tell me? Cost. Big cost.
My grandfather's scenario yielded the least cost because apart from the injury, he is actually pretty healthy. He and I debate over the current markets and political situations, and because he is just in front of the TV the whole day, he is even more up to date than I am (maybe he should start a blog too)!
My other grandmother's fall gave only a temporary (but pretty serious) injury. She has now since recovered and back with a vengeance.
But my buddy's grandmother's scenario is a very real example of health gone really really wrong. In the event that a family member becomes disabled -- be it physically or mentally -- to the point that close care is necessary, that's when the crunch comes in.
Did you read earlier that the monthly bill was $3,000 at the nursing home?
The government has a national severe disability insurance scheme for CPF members that provides monthly income to the family of the caregivers. Based on the above 3 scenarios, my buddy's grandmother and my grandfather would already qualify for the benefits, except that they do not have this plan in force when their disability happened.
The government's version -- called Eldershield -- at best, provides from $300 to $400 monthly only, and pays up to 6 years only. Coverage ends at age 65. That may have helped cover about half of my grandfather's maid's expenses. But for a much severe case like my buddy's grandma, the amount is only a consolation.
Then there are the supplementary versions that can extend the coverage to $2,500 a month, and with a lifetime payout every month should the disability qualify. Boy, won't it help the family!
I told my Dad and Mum that if they don't have this coverage, and if there is a need to hire a nurse to tend to them, my sis and I will be financially killed. Sounds so blunt, but that's a true fact.
Premiums for these plans, by the way, can be paid using Medisave.
I won't put details here and for corporate compliance, I cannot share information of the products on this blog. At best, I can only forward you to the relevant companies' websites.
But if you are keen to find out how exactly it facilitates your family, drop me an email.
My buddy at work shared with me that when her grandmother was alive, she became ill with dementia. The children still needed to work, and the final decision is to put her in a nursing home. The bill was $3,000 monthly.
My maternal grandmother had a fall early this year, and her children disallowed her to live alone anymore (much to her near violent objection, however, she finally lost the arguement, and now living with one of my aunts). Prior to the current arrangement, the possibility of a nursing home was considered. The quote given by the nursing homes was $3,000 monthly.
My grandfather has an injury in his nerve, and can no longer walk for many years. He has a nasty temper, so if he were to go to a nursing home, I think there will be lots of casualties in there. Thus, he stays at home with my grandmother, and a maid. The maid is employed specially to tend to my grandfather. With all expenses in, the domestic service should amount to $700 or more per month.
What do the above real-life scenarios tell me? Cost. Big cost.
My grandfather's scenario yielded the least cost because apart from the injury, he is actually pretty healthy. He and I debate over the current markets and political situations, and because he is just in front of the TV the whole day, he is even more up to date than I am (maybe he should start a blog too)!
My other grandmother's fall gave only a temporary (but pretty serious) injury. She has now since recovered and back with a vengeance.
But my buddy's grandmother's scenario is a very real example of health gone really really wrong. In the event that a family member becomes disabled -- be it physically or mentally -- to the point that close care is necessary, that's when the crunch comes in.
Did you read earlier that the monthly bill was $3,000 at the nursing home?
The government has a national severe disability insurance scheme for CPF members that provides monthly income to the family of the caregivers. Based on the above 3 scenarios, my buddy's grandmother and my grandfather would already qualify for the benefits, except that they do not have this plan in force when their disability happened.
The government's version -- called Eldershield -- at best, provides from $300 to $400 monthly only, and pays up to 6 years only. Coverage ends at age 65. That may have helped cover about half of my grandfather's maid's expenses. But for a much severe case like my buddy's grandma, the amount is only a consolation.
Then there are the supplementary versions that can extend the coverage to $2,500 a month, and with a lifetime payout every month should the disability qualify. Boy, won't it help the family!
I told my Dad and Mum that if they don't have this coverage, and if there is a need to hire a nurse to tend to them, my sis and I will be financially killed. Sounds so blunt, but that's a true fact.
Premiums for these plans, by the way, can be paid using Medisave.
I won't put details here and for corporate compliance, I cannot share information of the products on this blog. At best, I can only forward you to the relevant companies' websites.
- Aviva - http://www.aviva-singapore.com.sg/ElderShield
- Great Eastern Life - http://www.lifeisgreat.com.sg/ElderShield
- NTUC Income - http://www.income.com.sg/insurance/eldershield/
But if you are keen to find out how exactly it facilitates your family, drop me an email.
Wednesday, October 1, 2008
Lessons learnt so far
The month of September has been a big upset for the financial market here in Singapore. Besides the US mortgage crisis, we also experienced, yet again, another AIA problem. Both investments and insurance areas in our local financial markets have been thrown to a challenge.
While September just ended, and October is unlikely to be a turning point, there are still valuable lessons that we can learn from this:
While September just ended, and October is unlikely to be a turning point, there are still valuable lessons that we can learn from this:
- Diversify - everyone made losses on their investment portfolios. Those that had some money market or cash funds suffered lesser than others. In terms of insurance, the public has learnt that big brand, size and history of the company no longer guarantees stability. Diversify even your methods. Been investing lump sum? Have another account that invests on a regularly timed basis. See here.
- We cannot time the market, but learn better how to tell the signs - I believe I have learnt a lot better in how to anticipate market peaks. When peaks come, it's probably high time to cash out or transfer to safer instruments. When everyone on the streets say, "It's a good time to buy." it's probably a good indicator to run for cover.
- Cash liquidity - Fortunately, I've yet to have met anyone who is screaming in misery because he or she has lost all life savings in the stock market. Never ever invest your emergency fund. Emergency fund should be around 3 to 6 months of your income, for events whereby you quit, get retrenched, or fired, you still have this buffer space to make necessary adjustments.
- Never lose sight of your goals - You have invested for a purpose. There is a point to reach. Markets will always rise and fall. Don't let today's setback make you make irrational moves and delay, or if not, derail your track to your financial goals.
- Take ownership of your investment and insurance portfolios - Your insurance agent is the guy who sold you the insurance plans, but don't ever mistake him to be the guy solely responsible for your policies. Always know what you bought, and why you were recommended that product.
- Surrendering your insurance plan is not punishing your agent - Sadly, many people I know surrender their insurance plans because they began to hate their agent. They don't realize that the ones hurt is themselves, not the agent.
- Have more choices to make - Either you do your own research in the investment and insurance products in the market, or work with a professional who can recommend the various products. If you work with a tied agent or banker, that's just about all you will be sold -- THEIR products.
Is there a formula to calculate Critical Illness coverage?
I once attended a seminar that was hosted by doctors. When it came to Q&A, I asked about their views on how to calculate cancer coverage?
One of the doctors took my question, and replied that none of them had the answer. He reminded me that each cancer alone is unique, let alone each illness. However, on his experiences on working with patients, the common financial challenges his patients faced were:
One of the doctors took my question, and replied that none of them had the answer. He reminded me that each cancer alone is unique, let alone each illness. However, on his experiences on working with patients, the common financial challenges his patients faced were:
- Income losses
- Unpaid loans and debts
- Hospital bills
- Chemotherapy
- Alternate treatment (eg, Chinese treatment, medicines and herbs)
- Medication
The doctor could not put a price tag on the above factors. Another incalculable factor is the time frame that the patient has to go through. Some stabilizes (or dies) in a year, some 5, some 10, some till old age.
The keyword to this doctor's answer is "assumption". Indeed we have to make assumptions to how much we need to cover and to lat for how long.
Generally, there are 3 main factors to plan for:
- Income replacement - a serious illness usually takes the victim's job away. These days, there's only so much the employer can do for an ill employee. Also, you may want to consider this income replacement to cover for outstanding loans and debts. Next to ask is, how long do you think you will need? Clients usually say 3 years is reasonable, but it can be unique to you.
- Hospitalization - A seriously ill patient usually has to go to the hospital. It may occur a few times within a year, or over many years.
- Medication and other alternate treatment - Medicine and treatment seeked outside hospitalization is a whole new cost altogether. Often, people mistake that once they have hospital insurance, this is taken care of. Consider a heart patient who has to consume daily 5 prescribed pills, each pill costing $4.20 each - that's $21 a day, $147 a week, $630 a month, $7,560 a year! This need is required even after your working years, so insurance planning should have this particular portion covered for life.
How to counter these needs? Here are insurance products that can help:
- Income replacement - in my professional opinion, is best catered to by term insurance. That's because term insurance is low cost, and does not cover for life. Such arrangements are more cost effective, and in the event the insured retires early, he can simply drop the plan. If he works till age 65, the coverage still stands. Term plans do not have cash value, and I don't think there is a need for that since insurance returns are not attractive anymore.
- Hospitalization - most easily taken care of by the Shield plans and their supplementary plans. Things to consider would be whether you want the option to choose private hospitals for better comfort, faster response time, better attention, etc. and whether you are willing to pay higher premiums - whether you are hospitalized or not - for total coverage, or save on premiums and co-pay a small affordable portion if the hospitalization occurs. Shield plans also cover some cancer and kidney outpatient treatment.
- Medication and other alternate treatment - as this need can occur after your working years, it is necessary to have it covered by a permanent life insurance. Such coverage lasts for as long as you live. It also has bonuses added to the coverage, thus serves as a hedge against inflation. While cash value is also accumulated, I personally don't see it as a critical benefit. It's usefulness could be in the event you are in severe need of money like paying off a loan or something, you can withdraw the money but in turn, surrender your plan. Today's insurance market also sees a new permanent life insurance product, whereby the policyholder only needs to pay for a limited number of years, and the coverage lasts the lifetime. This is ideal for those who value having a more free cash flow in his or her senior years.
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