It has come to my attention that there is some talk regarding the "Family Income Plan", and more specifically, that it is a better substitute for term plan. So I've decided to do my own comparison and to see whether if it is a better deal or not.
The "Family Income Plan" is a type of insurance plan that pays a monthly income to the family following the death of the life assured. So I looked around and a possible fit that I can find is the "Disability Income Plan" offered by one of the insurers. The "Disability Income Plan" pays a monthly income to the family when the breadwinner suffers a continuous "total disability" which renders the insured unable to work. And even so the definition of being unable to work is quite strict as you can see from the policy wordings:
The "Family Income Plan" is a type of insurance plan that pays a monthly income to the family following the death of the life assured. So I looked around and a possible fit that I can find is the "Disability Income Plan" offered by one of the insurers. The "Disability Income Plan" pays a monthly income to the family when the breadwinner suffers a continuous "total disability" which renders the insured unable to work. And even so the definition of being unable to work is quite strict as you can see from the policy wordings:
Disability Benefit
(i) Total Disability Benefit
Total Disability Benefit is payable upon continuous disability beyond the Deferred Period.
Total Disability Benefit is payable upon continuous disability beyond the Deferred Period.
During working periods:
"Total Disability" means a state of incapacity, resulting from illness or accident, which is such that the Life Assured is
"Total Disability" means a state of incapacity, resulting from illness or accident, which is such that the Life Assured is
(a) totally unable to perform the material duties of
i. his own occupation or profession for the first twenty four (24) months of any period of Total Disability; and
ii. any occupation or profession to which he is suited by reason of his training, education or experience after the first twenty four (24) months of any period of Total Disability; and
(b) not performing any work or engaged in any occupation or profession to earn or obtain any remuneration, whether declared or undeclared to the company.
The diagnosis of "Total Disability" must be confirmed by a Registered Medical Practitioner appointed by the insurer.
More interestingly, is the death benefit of this policy. Rather than continuing the monthly payout if the insured dies, the death benefit is only a lump-sum payout of $5,000. (And that is only payable if the insured is already on the monthly payout. If the insured dies outright before the disability kicks in, there will be no death benefit).
On top of this, the premiums for these plans are not cheap. The annual premium for this plan which covers specifically disability (resulting from illness or accident) is $2,419.50 for a $3,000 monthly payout. Meanwhile, with a similar amount of annual premiums ($2,480.00), the insured can get a $500,000 term plan that covers death, total and permanent disability and critical illnesses.
How is the disability income plan better than a term plan?
4 comments:
Hi Jade,
I don't think it is fair to compare both plans using total disability. To me, the purpose of buying this plan is to cover myself in the event of a partial disability e.g. the lost of an arm or leg due to illness/ accident, mental illness. I don't think the general plans out there cover the lost of a limp due to an illness and mental illness is not covered. It is also to cover me in the event that I am not able to earn back the same amount before my disability.
In addition, where did you get the premiums from? My current premium for a $1,500 monthly payout is only $193 per yr. Of course there are other factors such as your job scope, pre-benefit period, whether you want the payout to adjust for inflation etc.
I was last quoted that an annual premium for $2000/mth benefit, 180days pre-benefit period till age 65 will be $294.00/yr.
Hey Derek,
Thanks for your feedback! You've mentioned an interesting point about coverage in times of illness and mental illness. I think its a valid point - what happens if you can't work when you've been diagnosed with schizophrenia or major depression? That is something to check out. (This reminds me of the case of a Canadian woman who loses her benefits over a Facebook Picture. But that is another story. :))
Another point that interest me is also the premiums that you are quoted. If the premiums are like what you've said then it's really affordable! Can you share your lobang with me? :)
If you are comparing Disability Income insurance to Term Insurance with CI and thinking both serve the same purpose then you are sorely mistaken. No offence, but as a financial advisor you should be more well educated then this. Btw, I am not a financial advisor
While Term with CI and Disability Income do cover similar purposes (medical-related financial disasters) and may partially overlap, they cannot mutually replace each other.
Firstly, I consider Disability Income easier to claim than Term with CI, because it uses the definition of *OWN OCCUPATION* disability. This is difference from the definition of TPD used in most Term plans. It means that as long as you are medically certified unfit to work in your occupation you can claim. This means that as an office worker, you can claim if you meet and accident and the doctor says you cannot use your fingers (e.g. typing) for the next few years.
Also please note for Term plus CI, the insured will most likely be near death during the claim. CI survival rates is not spectacularly high as most die within 5 yrs, which is why it is called Critical Illness. This is unlike Disability Income where the insured does not need to suffer a major medical condition to claim.
My quote for GE Paysecure insurance for a period from 25-55 yrs old for a $2000/mth DI insurance is only $260 annual premium.
Hi Garrett,
Thank you for sharing your knowledge with me. You are right that as a financial advisor I should be more educated, and I thank you for widening my perspective. :) So long as my mistake can prevent others from committing the same, I do not insist on being right all the time. Sometimes being wrong would generate a better discussion. :) I will work on you and Derek's suggestion and check out the GE Paysecure.
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