You will be able to project shield plan and rider premiums by age band and test whether they fit your retirement budget.
Jun Hao's father is 68. Last year he told the family he was thinking of dropping his shield plan rider, then the plan itself, because the cash premiums had become one of the largest bills in his retirement budget. When he bought the plan in his forties, the cash part had been small enough to ignore. Nobody had shown him what it would cost at 68, and by now his health made switching to a cheaper plan with full cover unlikely.
Jun Hao realised his own plan was on the same path. This lesson shows you how to see the path in advance.
Shield plan and rider premiums are stepped, as lesson 1.2, Why premiums rise with age, and how level premiums hide it, explained. They're set by age band, and they rise as you move from one band to the next. The rise is gentle through your thirties and forties, faster in your fifties, and usually sharp after 60, when hospital admissions become much more common.
Two things make the cash side climb even faster than the total premium. Rider premiums are all cash, and they rise steeply. And the MediSave limit for the private part of the plan, while it rises with age, may not keep up with the premium, so the cash portion of the plan can grow faster than the plan premium itself.
Every insurer publishes premium tables for its shield plans and riders, by age band, on its website. Your renewal notice shows this year's premium only, while the table shows the premium at every age you'll reach.
Pull up the table for your plan and your rider and read off the premium at the ages you care about. For planning, the useful ages are now, the year you expect to stop working, and a few points in retirement. The activity asks for 40, 50, 60, 70 and 80.
Then split each into the MediSave part and the cash part. To do that, check the current MediSave limit for each age on the CPF or MOH website and assume, for planning, that it stays where it is.
Here is Jun Hao's version. The premium table is invented for this lesson, and the figures are only the cash he'd pay each year for plan and rider together. At 40 he would pay S$120 for the plan and S$400 for the rider, S$520 in total. At 50 the two come to S$300 and S$600, so S$900, and at 60 to S$800 and S$950, which is S$1,750. By 70 he'd pay S$2,000 plus S$1,650, or S$3,650, and at 80 he'd pay S$3,800 plus S$2,700, a total of S$6,500 a year.
His cash bill for hospital cover at 80 would be more than twelve times what it is at 40.
The table shows today's rates. Insurers revise premiums for everyone on a plan from time to time when claims cost more than expected, and MOH reviews MediShield Life premiums too. So treat the figures in the current table as a floor for what you'll pay, and expect the real numbers to land above it.
A rough way to allow for this is to add a margin when you plan. Some people simply note that the real figure will probably be higher and keep a buffer. What you shouldn't do is plan as if the table will hold for 40 years.
Now put the numbers beside the budget you'd live on. Jun Hao expects to spend about S$3,000 a month in retirement, at today's prices, as a rough estimate. At 75 his example table shows cash premiums of S$5,050 a year, or about S$420 a month, which is roughly 14% of his retirement spending on hospital cover alone, before any premium revisions. By 80 the monthly figure is about S$540.
That doesn't mean he can't afford it. It means it has to be in the plan. Retirement & Estate covers how to build healthcare costs into a retirement budget, and CPF LIFE, savings and family support all play a part.
If premiums become too heavy later, you can usually move to a lower ward class plan or drop the rider. Insurers generally don't underwrite a downgrade, because you're asking for less cover.
Going the other way is different. Moving to a higher ward class, or adding a rider later, is usually underwritten, so any condition you've developed may be excluded, or the application declined. That's what trapped Jun Hao's father: he could only move down.
This creates a real choice when you're young and healthy. A higher plan now keeps the option of moving down later, at the cost of higher premiums meanwhile. A lower plan now is cheaper but may be hard to upgrade from if your health changes. There's no right answer, but there is a wrong process, which is picking a plan on this year's premium alone.
Some people plan to step down at a set age, for example dropping the rider at retirement or moving from a private hospital plan to an A class plan at 65. If you do, write the age down, because the decision is easier to make in advance than when you're older and a premium notice arrives.
The activity asks you to fill in your plan's and rider's premiums at 40, 50, 60, 70 and 80 from the insurer's table. Write the cash part beside each one, because that's the part your future budget has to carry.
Use a premium table to write the premium for your plan and rider at ages 40, 50, 60, 70 and 80.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).