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Written by: Pin Quan (Financial Consultant, RNF: OPQ300667717) , Chervelle and Daniel Chong (Financial Consultant, RNF: CHR300636914) Mentor by: Sean Ang (Financial Consultant, RNF: AJP300126130) Wealth Protection is a term used in the financial industry…
Written by: Pin Quan (Financial Consultant, RNF: OPQ300667717) , Chervelle and Daniel Chong (Financial Consultant, RNF: CHR300636914)
Mentor by: Sean Ang (Financial Consultant, RNF: AJP300126130)
Wealth Protection is a term used in the financial industry to describe wealth management strategies and tools that help individuals and businesses to safeguard their assets. Due to uncertainties in life, it is imperative for an individual to safeguard his wealth during his earning period. Picture your wealth as a castle that has to be protected by strong walls that surround it. Through this article, we aim to discuss the various walls that could help strengthen the protection of wealth for individuals.
Hospital and Surgical
The North wall is guarded by Hospital and Surgical policies, also known as medical expense insurance, this insurance reimburses inpatient and some outpatient treatment after taking into account the co-insurance and deductibles (subject to policy limit). A common form of medical insurance is MediSave – approved Integrated Shield Plans which can be paid for using MediSave (subject to Additional Withdrawal Limits). The insured can upgrade their plan using cash to attain more protection, better wards and lower co-insurance and deductibles.
H&S insurance usually covers 3 main areas:
- Inpatient Expenses (the list is not exhaustive)
- Daily room and board charges, ICU charges, short-stay ward
- Surgeon and Anesthetists fee
- Inpatient and transplant costs
- Outpatient Expenses (the list is not exhaustive)
- Pre-hospitalization charges
- Emergency accidental treatments
- Catastrophic Outpatient Expenses (the list is not exhaustive)
- Outpatient kidney and cancer treatment charges
- Major organ transplant
There are limits to how much the insured can claim from H&S insurance
There are 3 types of benefit limits as follows:
- Lifetime Limit
- Reimbursement amount is the maximum amount the insured can claim throughout his lifetime
- Annual Limit
- Reimbursement amount is the maximum amount the insured can claim within a policy year
- Benefit Limit
- Reimbursement amount is the maximum amount that insured can claim for each benefit state in the policy schedule
H&S insurance is one of the most crucial parts of the wealth protection foundation since hospitalization and surgeries are common and the fees can be extremely expensive.
The East wall will be accident insurance which aims to provide protection in the event of unfortunate accident that may result in loss of life and/or injury. H&S provides both inpatient and outpatient reimbursement if the insured is going to be hospitalized afterwards or in the event of an emergency. Accident insurance usually comes with reimbursement benefit to provide protection for accidents that require medical attention but not hospitalization. The Death benefit provides a lump sum pay out in the event of the insured’s death due to accident. The lump sum can e used to pay off any existing liabilities and the remainder can be used to help their dependents cope with the loss.
Accident plans are highly important as they help to take care of outpatient bills and over the smaller expenses. It would usually be beneficial to add on as a rider to a Critical Illness plan due to the lower cost involved.
On the South wall comes Critical Illness coverage. People tend to believe that hospitalization insurance coverage would be sufficient to cover their medical expenses when they fall sick. However, they fail to realize the need for income replacement should they are not able to continue earning the same level of income due to critical illness.
Critical Illness insurance provides a lump sum benefit in the event the insured is diagnosed to be suffering from one of the critical illnesses or has undergone a surgical procedure covered under the policy. While the H&S insurance may be able to cover some of the hospitalisation and treatment cost, there might be limitation on how much and how comprehensive a H&S insurance can cover.
The lump sum benefit from Critical Illness insurance will assist to cover some of the treatment and other medical costs, which are not covered under H&S insurance . It must be noted that the number of illnesses listed in various insurance plans varies, and benefits will be paid only if the condition suffered meets the standard definition as specified in the policy.
Once the payout is received, one can utilize the payout however they like. For instance, one can use it to support their loved ones, or pay for their medical expenses. Generally, one critical illness plan will only provide a lump sum payout in the event the insured meets the definition of the Critical Illness in the Policy Schedule and the policy will terminate.
however, there is also another type of Critical Illness plan that provide multiple Critical Illness payout (subject to terms and conditions). furthermore, it is recommended by LIA1 that people should ensure that their Critical Illness plan can pay for their family’s needs for over a recovery period of 5 years.
The last wall is guarded by Disability Income. This policy is designed to protect an individual by replacing a portion of the insured’s income that he loses f he becomes incapacitated and is unable to work as a result of an accident or illness, subject to certain conditions. Income protection may provide up to a certain percentage of one’s last drawn monthly income. It can supplement Critical Illness insurance in case one gets an illness that does not fall under Critical Illness’s definition. The benefits would be payable on a monthly basis for up to a fixed number of years or age.
Disability definition in his policy would refer to the extent the insured can fulfill the duties of his occupation. The term ‘Total Disability’ may be on the following terms:
- Own Occupation Disability
- Inability to perform the material duties of his own occupation
- Modified Own Occupation Disability
- Inability to perform any gainful occupation to a similar occupation for which the insured is reasonably suited by reason of education, training or experience
- Any Occupation Disability and,
- Inability to perform any occupation
- Severe Disability
- Unable to perform at least three of the six Activities of Daily Living (ADLs) – washing, dressing, feeding, toileting, mobility and transferring
Since we will not be certain when we will contract a major illness or face a serious accident, it would be imperative for us to protect our income during our working phase. This is not only to protect us, but to protect our loved ones, to ensure that their way of living would not be too negatively affected when we are unable to work.
The above ‘Total Disability’ definition are retrieved from Singapore College of Insurance Limited, Health Insurance 7th Edition Textbook.
To put it simply, it is imperative to protect our wealth during our earning periods, and taking our analogy as an example, having these four walls would be the baseline to safeguard our castle. Wealth Protection is not just the benefit of individuals, but also those around them. ‘Protect those you love’, even if not for yourself, do consider having a robust wealth protection portfolio with you in order to protect your loved ones.