Disability income insurance

Dear Mr. Tan,
What are your views about disability income insurance?

REPLY:

As a general principle, disability income insurance is useful. If a person is disabled due to illness or accident and is not able to earn an income, the insurance will make a regular payment to replace the lost income.

In practice, the situation is different.

Here are my views, based on my limited knowledge of the market for disability income insurance in Singapore.

1. The market for disability income insurance taken by individuals is quite undeveloped in Singapore.

2. The premium rate tends to be quite high in relation to the actual cost of the risk. You will probably have to pay a high premium for a cover that is worth much less.

3. There is a long waiting period (usually three months), before the disability income starts to pay. The period of payment may also be limited.

4. If you buy disability insurance in a group, for example through an employer, or an association, you are likely to get more competitive premium rates.

5. For individuals, you can insure for temporary disablement caused by accidents through a personal accident policy. The premium rate is quite competitive.