MINDEF Group Term Insurance – The Pros and Cons
MINDEF Group insurance is likely the first personal insurance introduced and purchased by army recruits who have just joined the National service as the premiums are really affordable for a high sum assured. Let us dwell into the benefits and limitations of MINDEF Group Term Insurance to have a better understanding of this ‘’army insurance’’.
The most attractive and probably deciding factor when purchasing the MINDEF Term insurance is the premiums. MINDEF Group insurance is widely known to be the most affordable coverage in the market when it comes to plain vanilla Death/TPD insurance coverage only.
Comparing the premiums for $1,000,000 sum assured coverage till age 65, against an individual term insurance for Age 25:
Group Term Life Vs Individual Policy
Sum Assured - $1,000,000
*Note premiums quoted in this table are during a consumer campaign offering perpetual discounts for individual policies, and may vary during the time of quotation.
We can view that there is a possibility you may obtain a more favourable quotation from individual insurers, depending on the entry age,sum assured, smoking status and gender.
2. Coverage Term
MINDEF Group insurance allows the policyholder to cover up to age 70 ANB (age next birthday) only. If you are an individual that is looking to beyond age 70, the policy may not fully address your needs. Furthermore, the premium will increase yearly once you reach 66 ANB and beyond. Paying premium of $588/month to maintain the sum assured of $1,000,000 at 66 ANB will be tough, especially when you are at your retirement years.
Given that the average life expectancy in Singapore is 81 for males and 85.5 for females, we have to consider how MINDEF Group insurance will fit into our financial planning when in it comes to long term care, and legacy planning too.
Eligible members of MINDEF Group insurance includes NSF, NSmen, Regular Servicemen, Public officers with MINDEF and MHA, and volunteers of SAF Corp, NS volunteers, SCDF.
What is good about the policy too is that the coverage can be extended to the family members (spouse/children) of the aforementioned members too.
4. Critical illness
Living Care Rider: You may choose to add on an optional rider to protect you and loved ones from the financial burden against critical illness.
Living Care rider covers for 37 severe critical illness, and will not reduce the coverage from Group Term Life. However, it is also crucial to point out that the premiums for Living Care Rider is age banded, and non-guaranteed.
Living Care Plus Rider: Your protection against early Critical illness
Living Care Plus Rider only covers against 10 early critical illness. The early critical illnesses covered are:
1. Early Cancer
2. Large Asymptomatic Aortic Aneurysm Or Minimally Invasive Surgery to the Aorta
3. Cardiac Pacemaker Insertion Or Pericardectomy Or Cardiac Defibrillator Insertion Or Early Cardiomyopathy
4. Primary Pulmonary Hypertension
5. Transmyocardial Laser Revascularisation Or Insertion of Vena-cava Filter
6. Surgical Removal of One Kidney
7. Heart Valve Repair Surgery
8. Small Bowel Transplant Or Corneal Transplant
9. Mild Coronary Artery Disease
10. Brain Aneurysm Surgery Or Cerebral Shunt Insertion
Similar to Living Care Rider, premiums for Living Care Plus rider premiums for Living Care Rider is age banded, and non-guaranteed.
5. Claim matters
We come to arguably the most important factor when it comes to insurance, which are claim matters. The purpose of life insurance is to provide a lump sum amount to the family as soon as possible, for them to tide over the difficult period when financial burdens arise during a Death or critical illness of a family member.
Under MINDEF Group Term Insurance; you are not the policy owner. Therefore, there are limitations imposed to you over the control of the policy. You will not be able to do nominations as the nomination of Beneficiaries framework is not applicable for group insurance scheme. Thus, the claim proceeds are distributed by the intestate law in Singapore in the event of Death.
In the event of a Death benefit, the insurer will pay the first $150,000 to the proper claimant. The pay out of the balance of death benefit has to be decided by a Court.
If the deceased had written a Will in place, the beneficiaries have to engage a lawyer to apply for a Probate, which may take up to 6 months.
However, if the deceased has no Will in place, they will be deemed to have died intestate. In such events, the family also has to engage a lawyer to apply to the Court for a letter of Administration, which may take up to 3 years to resolve. As such, the policy should not be the main plan to cover against liabilities such as mortgage loan.
In the event of TPD benefit, the policy will first pay a lump sum of $200,000, and pay the balance of sum assured in 3 equal annual instalments at every anniversary.
Summary: The good and bad
While MINDEF Group insurance offers attractive premium, the plan should act as a supplement to your own personal insurance portfolio, and should not be the core component of your insurance planning.
There are various limitations to the plan to address important needs such as legacy planning to cover beyond 65ANB, critical illness coverage, and also the ease of receiving the pay-out in the event of death benefit.