You will be able to project how your insurance premiums change over the decades after you stop work.
At 34, the yearly premium on a shield plan is easy to ignore. It comes out of MediSave, you never see it leave your bank account, and it is a few hundred dollars. Now look at the same insurer's table for age 75. The premium is several times larger, a big slice of it has to be paid in cash, and you will be paying it with no salary. Most people never look at that column until they are in it.
Lesson 7.1, What changes when you stop working, showed which costs move to you when you leave employment. This lesson is about the one that grows fastest over the decades that follow.
Health insurance in Singapore is priced by age. Both MediShield Life and Integrated Shield Plans charge premiums that step up as you move into each new age band, and the steps get larger at older ages. That reflects how claims rise as people age: hospital stays become more frequent, longer and more complex.
For a financial independence plan, this matters for two reasons. The first is that the rises are predictable. You do not know what will happen to your health, but you can know roughly what your premium will be at each age. The second is that the biggest rises come late, often after your CPF LIFE payouts have started, when your portfolio is meant to be carrying only the gap. If the gap was sized without them, it will be too small.
You do not need to guess. Every insurer that sells Integrated Shield Plans publishes a premium table, with the premium for each age band. MediShield Life premiums are published by the CPF Board and the Ministry of Health. Find the table for the plan and ward class you actually hold, or the one you intend to keep, on your insurer's website.
Read the premiums at today's prices. They will change, since premiums are revised from time to time, and nobody can tell you what the table will look like when you are 75. But today's table, read at your future ages, is a far better estimate than a guess, and it fits a model that already works at today's prices, as lesson 1.4 set up.
An Integrated Shield Plan premium has two parts. The MediShield Life part can be paid in full from MediSave. The private insurance part can also be paid from MediSave, but only up to a yearly limit that depends on your age, called the Additional Withdrawal Limit. Anything above that limit has to be paid in cash.
At younger ages, the limit often covers the whole private part, so the plan costs nothing in cash. At older ages, the private part rises faster than the limit, and a growing cash portion appears. Check the current limits on the CPF Board or Ministry of Health website, because they are revised.
There is a second constraint. Even where MediSave is allowed to pay, your balance has to be large enough. If you stop working at 50, your MediSave no longer receives contributions, as lesson 7.1 explained, and each premium paid from it draws it down. Look at your balance and ask how many years of MediSave-paid premiums it can carry.
Many people add a rider to their shield plan to reduce what they pay when they claim, such as a co-payment or deductible. Riders cannot be paid from MediSave, so their full premium is cash, and rider premiums also rise with age, often steeply.
A rider that costs a few hundred dollars at 34 can cost several times as much at 70. So decide now, while it is a planning question rather than a fear, whether you would keep it at older ages. Some people plan to drop it at a set age and accept higher co-payments in exchange for lower premiums. Others decide the protection is worth the cost. Either is reasonable, as long as it is a decision and the cost is in your number.
Priya, from the earlier modules, finds her insurer's table and reads off the premiums at today's prices. Her figures here are made up, for illustration only.
At 34, her shield plan premium is a few hundred dollars and her rider a little more, and MediSave pays all of the plan. At 55, she reads S$1,600 for the plan, of which MediSave would cover S$1,300, leaving S$300 in cash, plus a S$800 rider. At 65, the plan is S$3,000 with S$1,000 in cash, plus a S$1,300 rider. At 75, the plan is S$4,800 with S$2,000 in cash.
At 75 there is no rider in her table, because she has decided to drop it at 70. Without that decision, the rider alone would add a large cash cost each year in her seventies.
She notes two things. Her cash premium goes from nothing now to S$1,100 at 55 and S$2,300 at 65, counting the rider. And her MediSave will be paying more than S$1,000 a year from her mid-fifties with no contributions coming in, which she needs to check against her balance.
Find the premium table for your own plan before the activity. Use the ward class you would actually keep, and include any rider you hold.
Look up your insurer's premium table and write the premium at your current age, at 55, at 65 and at 75.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).