The topic of term insurance almost always comes up.
A particular one is the old forgotten “paper” back in the army days…
And that’s the Aviva’s MINDEF & MHA group insurance.
Are the cheap premiums justifiable for it to represent the sole life insurance component in your financial portfolio?
Let’s take an objective look and find out now.
A Primer on Term Insurance
Plain vanilla coverage is the essence of insurance.
Along the way, things such as cash value are added to it, creating plans like the whole life insurance.
But in recent years, term plans are the talk of the town once again – going back to old school.
Term insurance strives to provide the highest coverage at the lowest premiums, which is great because a few hundred thousands may not be adequate in today’s context.
But first, it’s good to get an estimate of how much life insurance coverage you need.
The downside of term is that it doesn’t accumulate any cash value and the cover ends when the policy term is up.
So you’re paying for a peace of mind, and if nothing happens, that’s also fine as you would’ve enjoyed good health.
How Does Group Term Insurance Work?
In term insurance, there are 2 main classifications:
They are “same same, but different”.
An employer or an association (in this case, MINDEF/MHA) can purchase group insurance and provide additional coverage for its members.
The major difference is how the policies are underwritten.
In a personal insurance, the insurers pay greater attention to the individual’s age, medical conditions and certain circumstances, etc.
However, for group policies, assumptions about the general health of the group are made.
In addition, the insurer’s risk is spread across the group (of many participants). And that’s why it usually results in a cheaper rate of insurance.
If you base your decision solely on premiums, group insurance is the way to go.
But is it always the best?
I’ll go more into details later..
A Brief History and Introduction to the MINDEF/MHA/SAF Group Term
The SAF term is an example of a group insurance.
Do you remember that one day during BMT, all recruits are seated down in an auditorium…
And we’re made to listen to a Major sharing stories and in the end, pitching about insurance.
We were “strongly encouraged” to apply.
We recognised that it was important to provide something although we didn’t really know what insurance really was.
We just paid for it using our own small “allowance” we had – making it even smaller.
Times have changed.
There was a major overhaul on 1 Jul 2016.
Together with Aviva, the Ministry of Defence (MINDEF) and the Ministry of Home Affairs (MHA) jointly introduced the MINDEF & MHA Group Insurance, which covers members from the SAF, SPF, SCDF, and affiliate members.
There were 2 schemes: Core and Voluntary
1) Core Scheme
In summary, it covers national servicemen (NSFs or NSmen) during their full time service and operationally ready duties. Regulars and volunteers are also included.
The Core Scheme provides:
- $150,000 for Group Term Life
- $150,000 for Group Personal Accident
The premiums are paid by MINDEF and MHA respectively.
2) Voluntary Scheme
In the voluntary scheme, members can choose to further enhance their coverage and/or insure their dependants (spouse or children).
The maximum coverage amount for the voluntary scheme is up to $1,000,000 for Group Term Life and $600,000 for Group Personal Accident.
Even after your service (ORD, MR, ROD, etc), you can still retain the coverage on the voluntary scheme.
Furthermore, you’re able to add different types of cover…
The 6 Types of Coverage and Their Premiums
There are currently 6 different types of cover that you can get with the Aviva’s SAF Group Insurance:
- Group Term Life (main plan)
- Group Personal Accident (main plan)
- Living Care (rider)
- Living Care Plus (rider)
- Disability Income (rider)
- Outpatient Medicare (rider)
They cater to different needs.
To add on a rider, you need to have a main plain – either the Group Term Life or the Group Personal Accident. If you wish, you can also have all 6 plans.
You can also get the same coverage for your spouse or children.
Let’s take a greater look at each type of cover…
1) Group Term Life
The Group Term Life (GTL) provides coverage for Death and Total and Permanent Disability (TPD) up to 70 years old (age next birthday).
- Levelled premium rates up to age 65; increasing premiums from age 66 to 70
- Get a maximum cover of $1,000,000
- No medical checkup or underwriting required for insured amounts of up to $250,000
- Provides $30/day Hospital Cash Benefit from the 11th to the 40th day of hospital stay
2) Group Personal Accident
The Group Personal Accident provides coverage in case of an accident, up to age 70 (age next birthday).
- Get a maximum cover of $600,000
- Receive 150% of your insured amount if a TPD happens because of an accident
- Provides coverage up to 100% of insured amount if total and permanent dismemberment happens due to accidents (less serious than TPD)
- Levelled premiums up to age 70
- Additional cover for fractures due to accidents
- Covers second and third degree burns, etc
3) Living Care
The Living Care rider provides coverage if any of the 37 critical illnesses happen.
- Get up to $350,000 coverage
- Receive the claim in a lump sum
- Claim payout doesn’t reduce the insured amounts of other plans (GTL and/or other riders)
List of Critical Illnesses covered:
- Major Cancers
- Heart Attack of Specified Severity
- Coronary Artery By-pass Surgery
- Kidney Failure
- Paralysis (Loss of Use of Limbs)
- Heart Valve Surgery
- Blindness (Loss of Sight)
- Deafness (Loss of Hearing)
- Loss of Speech
- Multiple Sclerosis
- Fulminant Hepatitis
- Major Organ/Bone Marrow Transplantation
- Primary Pulmonary Hypertension
- Alzheimer’s Disease/Severe Dementia
- Surgery to Aorta
- Major Burns
- Terminal Illness
- HIV Due to Blood Transfusion and Occupationally Acquired HIV
- End Stage Lung Disease
- End Stage Liver Failure
- Muscular Dystrophy
- Parkinson’s Disease
- Aplastic Anaemia
- Angioplasty & Other Invasive Treatment For Coronary Artery (with partial payment only)
- Bacterial Meningitis
- Benign Brain Tumour
- Viral Encephalitis
- Motor Neurone Disease
- Apallic Syndrome
- Loss of Independent Existence
- Major Head Trauma
- Other Serious Corornary Artery Disease
- Progressive Scleroderma
- Systemic Lupus Erythematosus with Lupus Nephritis
These critical illnesses (CI) are standardised across the insurance companies. Take a look at the definitions of these CIs here.
4) Living Care Plus
The Living Care Plus rider provides coverage if any of the 10 early critical illnesses happen.
- Get up to $300,000 coverage
- Receive the claim in a lump sum
- Claim payout doesn’t reduce the insured amounts of other plans (GTL and/or other riders)
List of Early Critical Illnesses covered:
- Early Cancer
- Surgery to Aorta / Aortic Aneurysm
- Implantable Heart Device / Early Cardiomyopathy / Pericardectomy
- Primary Pulmonary Hypertension
- Transmyocardial Laser Revascularisation or Insertion of Vena-cava Filter
- Kidney Removal
- Heart Valve Repair Surgery
- Small Intestine / Corneal Transplant
- Mild Coronary Artery Disease
- Brain Aneurysm Surgery / Insertion of Cerebral Shunt
5) Disability Income
The Disability Income rider pays out a monthly income in the event of a disability.
- Provides coverage of up to age 70
- The annual coverage is based on 50% of your monthly basic salary multiplied by 12 times; maximum of $120,000
- Annual inflation adjusted escalation benefit at the rate of 3%
6) Outpatient Medicare
The Outpatient Medicare rider provides coverage for consultation and treatment expenses.
How to Apply for the MINDEF/MHA Group Insurance
Eliminate the hassle of hard-copy application forms.
You don’t even need to meet anyone to apply. Simply apply online through Aviva’s website…
- Click on the “Get Quote” at the top
- Follow the instructions
How to Claim
As there is no agent tagged to you, claims have to be made by yourself or your family members.
Claim forms can be downloaded, filled and submitted online via email along with the relevant documents.
At the moment, there seems to be no indication on whether you can submit a hard-copy claim.
If you have any questions, you’re still able to email or contact them.
Aviva’s MINDEF/MHA Group Term Insurance vs Personal Term Insurance
We’ve come to the most important question, “should I go for the Aviva’s SAF term or a personal term insurance?”
Can the group insurance be too good to be true?
Let’s be objective and look at the pros and cons.
We’ll only look at the Group Term Life, Living Care (critical illness) and Living Care Plus (early critical illness) as they represent the core elements in insurance.
1) Premiums are cheap
At the top of the list, what makes the MINDEF group term so irresistible is the affordable premiums.
The premiums are extremely cheap.
If you’re looking for the cheapest term plan, then you don’t have to read further because there’s nothing else that can beat it.
2) Able to get high coverage at levelled premiums
If you’ve just entered the workforce, a sum of $1,000,000 coverage can be a good amount to be insured with because of income protection.
But that’s the maximum you can get with the Group Term Life.
And whether it’s $100,000 or $1,000,000, the premiums are proportionate – $4.10/mth vs $41/mth. There’s no discrimination with smaller sum assureds.
The Group Term Life makes sense if you only wish to get coverage till 65 years old. Beyond that, the increase in premiums can be too heavy.
Although for the critical illness coverage – living care and living care plus – the premiums are increasing with age.
3) Able to apply for your spouse and children
You’re able to take advantage of the affordable premiums and get the same coverage (all 6 types) for your spouse and children.
It’s something that you can start with.
At least in the meantime, they are protected.
4) Get coverage even if you have pre-existing conditions
For those who have pre-existing conditions, it can be a challenge to get any form of life insurance coverage especially if they are severe.
Even if you manage to, there may be loadings (increase in premiums) on those private plans.
As stated in the product documents, Group Term Life allows you to get up to $250,000 coverage – for death and TPD – without medical underwriting or checkups. However, take note that if a claim were to be made because of those existing conditions, there will not be a pay out. Even so, it still makes sense as other events can be covered.
5) It should last for a long time
The SAF term is not like the typical group insurance from employers whereby if you were to switch companies, you’ll lose that coverage.
The MINDEF group insurance can still be active even if you’re out of service.
But make sure you apply for it when you’re eligible.
As there are many participants in this group insurance, it is also unlikely that Aviva or MINDEF/MHA would discontinue it.
1) The Young may be “paying more” for the Old
If you realised that for the GTL, the premiums are the same for Age Next Birthday (ANB) 65 and below.
This means that no matter whether you’re 23 years old or you’re 59 years old, you’re paying the same premium.
Based on statistics, the probability of a claim is higher when you’re older.
So if you’re older, you can take advantage of this.
But if you’re younger, the pool of monies gathered favour the older folks more.
And just as a side note, if those same people were to buy private insurance, the premiums will never ever be the same.
So technically, you’re paying a “higher premium” to benefit the older folks more.
2) Premiums are not guaranteed
The premiums you see in the MINDEF group term insurance are not guaranteed.
These premiums can change over time depending on the insurer or if MINDEF/MHA want to revise it.
For CI coverage, the premiums are usually not guaranteed be it group insurance or private insurance.
What this means is that if in the future, there’s an “epidemic”, the insurance company may revise the premiums to make it sustainable.
However, for private term plans, Death and TPD premiums are usually guaranteed – they won’t change.
3) Critical illness coverage can be more expensive
Whether it’s for the standard CI or the early CI, the premiums are increasing for group insurance.
While it’s true that at younger ages, the premiums are much more affordable, it goes up a steep curve at 46 years old – tripled; keep increasing at a steeper rate.
Now, statistics have shown that most claims happen usually 40-70 years old.
So that’s usually the “critical” period.
If nothing happens and you add all the premiums together for the SAF term, these premiums could be more expensive than a private term.
In a private term, the premiums are usually levelled.
So the premiums can be slightly higher than the SAF group CI cover at the start, but over time, the total premiums could be lower.
4) Fewer conditions covered for early critical illnesses
In terms of claim definitions…
For the standard 37+ CI, these are standardised across the board. So it’s the same even with the private term.
However, if you’re interested to get early CI, then these definitions do change.
While definitions across insurers for early CI may differ, they tend to cover much more conditions.
In the Living Care Plus, it only covers 10 conditions.
5) There are claim limits
While still a minor point, the group term has limited liability for certain claims.
For acts of terrorism or in the event of a war, claims are heavily limited.
Although Singapore is relatively safe, it’s a point for you to note.
6) You’re not the policy owner
MINDEF and MHA are the policy owners.
You’re just the insured person.
So there are restrictions in what you can and cannot do.
If in the future, they wish to change insurers from Aviva to another company, they can do so.
Although drastic changes may not be likely, they’re able to revise terms and conditions.
7) Unable to do nominations
As it’s a group insurance, you’re unable to do nominations.
If you don’t have a will, claim proceeds will go by the intestate law:
|Survivors||Who gets what|
|Spouse (no parents or child)||Spouse gets everything.|
|Spouse, children (with or without parents)||Spouse gets half, children get the other half in equal portions.|
|Children (no spouse)||Children get everything in equal portions. Grandchildren can claim their parent’s share in equal portions if their parent is deceased.|
|Spouse, parents (no children)||Spouse gets half, parents get half in equal portions.|
|Parents (no spouse or children)||Parents get everything in equal portions.|
|Brothers and sisters (no spouse, children or parents)||Brothers and sisters get everything in equal portions. If a brother or sister is deceased, their children can claim their share.|
|Grandparents (no spouse, children, parents or siblings)||Grandparents will each get the estate in equal portions.|
|Uncles and aunts (no spouse, children, parents, siblings or grandparents)||Uncles and aunts get the estate in equal portions.|
|None||Everything goes to the government.|
In a normal insurance policy, you’re able to nominate who and how much percentage a nominee can receive if you were to pass away.
And still able to change these nominations in the future. The process of claiming will be easier too as the company have records of who should be receiving what.
8) No agent is able to service you
Why do you buy insurance?
Just in case you need to make a claim, right?
The MINDEF group term can be applied online but there’s no agent tagged to you.
Any questions or queries have to be directed to their email or hotline.
Another thing is that you need to ensure your premiums are paid on time if not the policy will lapse.
But the more important area is when claims arise, no one else can assist you other than yourself or your family members.
When such crisis happens, it can be overwhelming for all parties.
In a personal term insurance, an agent is not there to just “sell” you the policy, but to ensure that everything else in your financial portfolio is sound. Policy is kept in-forced. And most importantly, to be there when the unfortunate happens.
9) Lack of flexibility
Do you want other options?
Do you want to have a longer period of coverage?
More CI cover?
The group term is structured to be rigid. It’s “take it or leave it”.
But for personal term plans, you can do longer terms till 75 , 85 or even till 99 years old.
You can get more than $1,000,000 coverage.
And more than $350,000 of CI cover.
And much more.
There is greater flexibility so that it suits your needs rather than the other way around.
Summary of the Pros and Cons
|1.||Premiums are cheap||The Young may be “paying more” for the Old|
|2.||Able to get high coverage at levelled premiums||Premiums are not guaranteed|
|3.||Able to apply for your spouse and children||Critical illness coverage can be more expensive|
|4.||Get coverage even if you have pre-existing conditions||Fewer conditions covered for early critical illnesses|
|5.||It should last for a long time||There are claim limits|
|6.||You’re not the policy owner|
|7.||Unable to do nominations|
|8.||No agent is able to service you|
|9.||Lack of flexibility|
If you decision is based solely on premiums, SAF term is hard to beat.
But insurance companies know this.
That’s why it’s not a simple decision to just go for the cheapest.
There are many features and benefits that come with getting your own personal insurance.
Group insurance need not be an all or nothing thing either.
It can complement your overall financial protection strategy along with a private term.