How to React to a Market Downturn

Oh wow, what a tumultuous start to 2016. So how has it been for you?

Given that within the first month of 2016:

1. The Chinese equities market crashed yet again;

2. Price of oil fell below $30, a level not seen since a decade ago;

3. Investors around the world seems to be reeling in shock from the above news and are withdrawing from the market, bringing assets prices (equities, commodities, everything!) crashing down; a reminiscence of the market crash in 2009.  

On a personal note, my portfolio has decline by about 20% during this period of market uncertainty. 

However, I am taking comfort in the fact that I am not the only one who is experiencing the heartache as well as the myriad of emotions that comes with a declining portfolio. Right guys? 

In fact, I believe you will have at some point of time, become confused, fearful, and panicked over your position in the market.

Likewise, so am I. 

But what have you done in reaction to this sudden downturn in market condition? Beside panicking of course..

Now now, please allow me to give a disclaimer first. 

This post will not be a guide on what you should do to maximize your returns in a crashing market. I am far from qualified to be able to do so.

Instead, I am just going to share my plans and thought processes, which has enabled me to remain as calm and rational as possible in such a volatile period. 

What's the major benefits of staying calm and rational you ask?

1. You are less likely to make hasty and silly decisions that will adversely affect your investments returns in the long term.

2. Hmm..Instead of having sleepless nights due to the constant worrying, staying calm allows you to get a good night sleep baby. Every single night. 

So what are my thought processes and plans during this period of great upheaval in the market?

• I sat on my portfolio, à la the "lazy style", with no plans for divesting any of my downtrodden assets during this crazy period.

• This is because I know that my plans are for the long term. Studies have shown that 20 years down the road, my plans such as the purchase of ETF, will still give me positives returns regardless of how badly the market is currently doing.

• In fact, the current market fall of 25% from its height is to be expected and I have already factored in such market crashes during my planing. During the 1997 Asian Financial Crisis and the 2009 Global Financial Crisis, several equities market, such as Singapore, crashed by more than 50%! And then the market recovered abruptly.

Look! There will always be a recovery after every crash.

• Hence, whenever I feel like panicking and off loading my equities at a loss in this bearish market, I will tell myself not to be rash and think long-term instead. 

• If I still feel uncertain and worried, I will refer to my previous posts where I have detailed my investment plan. When I read my previous postings, I am reminded that I have a plan and the downturn has been factored into my plan. Hence, I should continue to stick to my plans and not be swayed by my emotions.

• We must also realise that a market downturn is also a good buying opportunity if we wish to remain vested for the long term. By re-reading my previous posts, I am reminded to purchase undervalued assets when my target price is hit. This is contrary to my previous experiences when I did not have a plan and hesitated to invest when the price was attractive, causing me to lose awesome opportunities to be vested in greatly undervalued assets.

• There is also my personal experience in the market since 2008. Throughout these few years, I recognized that at the first sign of a downturn, speculators and so-called industry "experts" will bash the market mercilessly, either through very pessimistic analyst report or by aggressively shorting the market, causing further panic and mayhem in the market.

• But yet, as if on command, all these speculators and  industry "experts" will suddenly sing praises of how the market is set to recover, and manipulate the market to recover swiftly. While the majority of us, the retails investors, are left in their wake and will not stand to benefit from the sudden market recovery if we had sold off our equities in a panic during the market crash.

My point is this guys. There is no need for us to do anything during a market crash if we have a well thought-out plan. Get on with your life for the world is not going to end and things will normalised in time to come.

Instead of panicking and trying to cut your losses, why don't you take this opportunity to observe the market and see for yourself that the market indeed functions in a cycle. Gain some knowledge and experience in dealing with a market crash, and factor what you have learnt into your investment plan. And stick to it!

*******

Photo of Missus PassivePeon, taken at the Singapore Sport Hub.

Paying Yourself First

Hi friends! Do you think that having a pile of cash on hand will be useful? 

Regardless of whether it functions as a tool to generate more income, or to function as your emergency stash for rainy day, having cash savings on hand will be useful, wouldn't it?:) 

BUT! Are you always left with just dimes and pennies at the end of the month, without making any saving? If so, you are just like me many years back when I was a teenager.

After some time, I kinda grew sick of seeing an empty bank account all the time. So I decided to open another bank account which I termed my "savings" account. This account is where I immediately deposit a portion of my income (usually 25%) into once I receive any income. Additionally, if I receive any extra income, such as dividends or bonus, I will also deposit 90% of it into the "savings" account at once.

Once the monies have been deposited into my "savings" account, it will not be touched except for investment or education usage. 

All discretionary spending, such as dating, movies, eating out and daily expenses, will be covered by the monies I have in another account, which I termed as my "spending" account.

Surprisingly, after some time, I realized that this method of saving has a terminology ("Paying Yourself First") dedicated to it and it is in fact, a very popular saving method advocated by peoples who are financially literate.

So how has this method of saving helped me, a sandwiched middle-class citizen residing in Singapore, considered the world most expensive and yet exciting country to live in.  

Well, for one thing, in terms of measurable benefit, I can see how my savings are growing consistently throughout the years. This is definitely much better than seeing an empty bank account at every months end, all the time.

However, it is the intangible benefits of this saving method that appeals to me more. By putting aside my monies into my "savings" account even before I have the chance to spend it, it means that:

• I never ever have to fret that I will sub-consciously over-spend and end up not being able to save;

• I can spend however much I want, as long as I still have monies in my "spending" account;

• I have a darn good reason to say "NO" to purchases or events when the monies in my "spending" account is getting low (pssst..it's easier to decline invitation to eat out when you claim that you are broke);

• I am happier as I see my "savings" account grows;

• I am more motivated to save more monies when I see my "savings" account grows;

• I do not have to worry that I will end up broke yet again at months end, and thus being unable to save.

So how's that for the benefits of paying yourself first when you get your paycheck? :D Want to give it a try?

It's easy to start this saving habit. All you have to do the next time you have monies coming your way is to immediately put aside a portion of it (maybe 25% for a start?) into a dedicated account. 

In fact, it can be even easier and convenient with the automated services the banks are providing nowadays. Check with your banks on setting up an automated transfer to your "savings" account on every payday and you will have made a good start on your journey to financial independence! :D    



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Street art. Oriental style. Photo taken along Jonker Street at Malacca, Malaysia.

My First Million

No no no no no. I have not struck the jackpot.

I was just wondering how long it will take for me to earn my first million given my current rate of saving. 

I'm not day-dreaming by the way. Having my first million is not a dream. It is my goal. Albeit a longggggg-term goal.

Afterall, it's always good to have a long-term goal in mind right? And who doesn't wants to be a millionaire!

Counting money all day long~~

Hence I decided to run the figures just to see just how long it will take me and what can be done to propel me towards being a millionaire earlier!

First, let's have a look at my current financial standing to determine when I'll be a millionaire:

Age: 27 years old

Current Assets: $45,715.53

Current Monthly Saving: $600

Estimated Annual Return on Investment (ROI): 5% (Quite achievable I believe, since my main holdings, STI ETF and VWRD, are giving returns of 7.21% and 13.87% on an annualised basis respectively)

So with the above parameters, I ran the figures, starting from when I'm 28 years old. Any gains I made during this period will be poured back to be compounded.

And here we go~~

 

Uh oh. Doesn't look too good. I initially thought that I'll be able to hit a million when I'm 50 years old. But it seems that I'll only be a millionaire when I'm 64 years old! Noooooo~

Time to revise my rate of savings then.

In my earlier estimation, I adopt a constant rate of saving, putting aside $7200 on a yearly basis. However, in reality, my rate of saving and salary will fluctuate accordingly to the different stages of life I will be going through; single, married, being a dad, being made obsolete at work, etc.

Hence,  I tried my best to picture which stages of life I will be at, as the years goes by, and calculate my estimated rate of saving accordingly.

And so, here we go again~~

28years old to 30years old: 

The rate of saving will be low as the bulk of my salary will go towards the clearing of an estimated $50,000 renovation loan when my house is ready next year.

31years old to 37years old:

My salary will have increase during this period and I will be able to save more if I am a SINGLE. But I am planning to start a family during this period and household expenses are expected to rise correspondingly.

38years old to 48years old:

I expect my salary income to peak when I am about 40 years old. Thereafter, due to my increasing age, I might face a 5% reduction in my salary on an annual basis. Hence, my rate of saving will decrease once I hit 41 years old. 

Additionally, my rate of saving will also be reduce when my kid/kids enter school. This is after witnessing how all the children are getting more materialistic nowadays, especially when they meet their peers in school. 

For those with kids, is this not true? :(

49years old to 52years old:

Yay!

My kids will have gotten pretty old by now and I am going to make them work for their own upkeep and any materialistic wants they have! I am serious.

After all, I did the same thing too when I was 19 years old.

And with this burden of providing for my children gone, I believe I will be able to increase my rate of saving.

53years old to 60years old:

I will be old. And again, my salary income will probably be cut by 5% annually as my company finds me more and more of a liability:(

But hey! Guess what? 

If I continue to stick to my plan of investing wisely and systematically, I will finally be a millionaire at 60years old! 

Old but rich :D

So there's that. With sufficient patience and perseverance, coupled with some sacrifices along the way, I would think that any young adult who is not born with a silver spoon has a pretty good shot at being a millionaire eventually.


*******
By the way, recently, I started to get into the hobby of iPhonegraphy, which is the taking of photos using the default iPhone camera.

Dear readers, if there are any readers at all:p

Please let me have your honest view on each photos that I post at the end of each blogpost, starting from today. Are they good? What could be further improve, etc.

Much thanks!

Growing old. Both buildings and man.

Insurance for my 63 Years Old Mum

I am a paranoid person.

Being paranoid, I always fear that my loves ones will be stricken with illness or meet with incidents. Now that my family only consist of my mother and me, it is only natural for me to be worried about my mother healthcare needs since mine is already taken care of (read HERE).

Yup, just realise I am probably quite selfish since I insured myself before insuring my mother first. Time for some self-reflection in a dark corner:(

Okay, I am done with the emo-ing..Now let us look at some of the questions bothering me with regards to my mother healthcare needs:

1) What is the average hospitalisation cost for an elderly stricken with a complicated illness?

Let us assume that an elderly had a heart attack, which is one of the more expensive illness to treat in Singapore. In this worst case scenario, we can expect a hefty hospitalisation bill of about S$13,523 before taking into account subsidies by the goverment.

This is assuming that the patient is warded in a public C-class ward at Tan Tock Seng Hospital, which is the nearest public hospital to where my mum is living. My personal experiences with the quality of healthcare provided at the C-class wards are pleasant and I believe that being warded in a C-class ward will be more than adequate if our finances does not allow us to upgrade to a higher-class ward

This figure of S$13,523 for treating heart attack was obtain from here. For more information on the hospital bill for other major illness as well as the different class of wards, you may wish to visit this webpage here.

2) How much of the cost is subsidised by the government?

Subsidies by the government for C-class wards in public hospital range from 65%-80%. For more information on the different level of subsidies for the different class of wards, you may like to refer to this page here.

Let us now assume that I am only looking to ward my mother in a C-class ward and that we can only obtain 65% subsidy, which is the minimum range due to our income level.

Hence, in this assumption, for a major hospital bill of about $13,523 for treating heart attack, the government will subsidize about $8789.95, leaving me to foot the remaining $4733.05.

3) How much cash would I have to fork out in such an event?

Of the $4733.05 that is not subsidized by the government, part of it will be paid via MediShield, with the balance paid via MediSave and/or Cash.

So what are MediShield and MediSave?

MediShield 

It is basically a nationwide insurance scheme by the government that works on a basis that the patient will share some of the responsibility of their medical bills by paying for the Deductible and Co-Insurance. MediShield will then be applied to help the patient cover the reminder of the bill.

In case anybody is wondering what are deductibles, co-insurance and the entire intricate workings of the MediShield scheme; I will be lazy and not rephrase what has already been explained succinctly by the Ministry of Health (MOH) over HERE:p

Go on, read it people. It wouldn't take you more than 10minutes to fully appreciate the wonder of the MediShield scheme; especially for low income group like me:(

If you are bored by the chunks of words and would prefer a visual explanation of MediShield, I have displayed two graphs from the MOH website :

MediSave

It is a nationwide saving account set up by the government in which a small portion of our monthly payroll will be transferred into. In other words, it is a forced saving 'banking account' set up to pay for our medical expenses. Click HERE if you like to find out more about the MediSave.

In summary:
MediShield - Nationwide healthcare insurance scheme
MediSave - Nationwide forced saving account for healthcare needs

I am going to run some numbers now to calculate what are the amount in cash that we have to fork out based on the scenario below:

Scenario:

An elderly, aged 63, is covered by MediShield and have a balance of $12,500 in her Medisave account. Unluckily for her, she had a heart attack and was warded in a C-class ward at Tan Tock Seng Hospital.

Thereafter, she made a full recovery :D but was saddled with a hospital bill of $13,523.

After subsidies of 65% by the government for being warded in a C-class ward, her bill is reduced to $4733.05.

With the coverage of MediShield, the elderly will only have to pay the Deductible of $1500, as well as the Co-Insurance of $559.56 [(20% of $1500 = $300) + (15% of $1733.05 = $259.96)]. Hence, the bill is further reduced to $2059.56 [$1500(Deductible) + $559.56(Co-Insurance)] as MediShield will cover the balance amount.

This payment of $2059.56 can be fully paid using MediSave, of which the elderly still has a balance of $12,500.

In summary, as long as the elder is warded in a C-Class ward in a public hospital, she should not have any problem making payment for her hospitalization due to the coverage of MediShield, as well as the subsidies from the government.

4) What if an elderly is afflicted with a long term illness and requires long term care?

In Singapore, there is the ElderShield, which provides monthly monetary disbursement for the long term care of a severely disabled(mentally or physically) elderly. This is another initiative by the government to provide affordable severe disability insurance for the elderly.

Under the basic ElderShield scheme, which is the ElderShield300, an elderly will be entitled to a monthly payout of $300 up to 60 months if the elderly is unable to perform any three of the following activities:

• washing
• dressing
• feeding
• toileting
• mobility
• transferring

Of course if you would like to receive more payout or a longer period of payout, you may choose to enhance your ElderShield via private insurers. For more information on enhancing your ElderShield, please see here.

Scenario:

Let us assume that an elderly covered by ElderShield400, is immobilized or suffers from mental incapacity such as dementia, and has only one child with no other dependent or spouse caring for her.

As the child is the sole breadwinner, he definitely have to work despite earning a meager salary of only $2600 per month (yes, that's me). Therefore, the per capita household monthly income is $1300.

With the child out at work, a caregiver such a maid have to be hired. Alternatively, the child can choose to place the elderly in a nursing home.

With the above considerations, the cost of caring for this elderly would come up to about $1500 per month. This cost estimation applies to both hiring a maid or a placement in the nursing home; as well as the miscellaneous medical cost of caring for the elderly.

I made this estimation based on information from the sources listed below:

• Nursing Home in Singapore
• Subsidies Rates for Residential Services
• Cost to Hire a Domestic Maid (provides a very good cost breakdown of hiring a maid)

To help relieve some of the $1500 incurred in caring for the elderly, the child can rely on the following:

• $400 monthly payout from ElderShield
• $500 monthly from renting out the common room

As we can see, there is still a deficit of $600 even after recovering some of the cost. Hence, the child should look into enhancing the existing ElderShield400 by purchasing supplement ElderShield insurance from private insurers. This will help to relieve a big part of the monthly cost of $1500, incurred for caring for the elderly.

For a comparison of all the supplement ElderShield insurance by the private insurers, please refer to here.

I will blog about which supplement ElderShield I might be getting for my mother on another day. This is a very long post already:/

I am tired; so are you I believe:p

Psstt.. I believe you guys can tell that my mum was used as an example for all the above scenario. However, I can't explicitly state that it's her as this would appear to be cursing her. Hur hur hur:(

Nonetheless, this blogpost was written with her health-care needs in mind and hence, I have to tailored the scenarios such that it would mirror my concerns.

I sincerely wish my mum the best of health and I just like to say 'I Love You Mum' <3.

Why Do I Invest In REIT

There are many types of business we can acquire in the market (sounds like towkay eh ;p). Some examples includes F&B business such as Old Chang Kee, supermarkets such as Sheng Siong, and my personal favourite, business dealing with real estates (malls, office space and homes).

For business dealing with real estates, there are property developers such as CapitaLand, and property owners such as Real Estate Investment Trust (REIT). REITs are essentially investments trust listed on the stock market that owns real estate assets (malls, office space, homes, etc), allowing them to receive recurring income.

Surely you can tell that I am predominantly vested in REIT by now right? So why do I prefer REIT as an investment?

Allow me to relate to you from a viewpoint of a tiny weeny insignificant retail investor as to why I prefer to invest in REITs. 

Low Barrier to Entry 
The most important reason. For someone like me who has always been interested in owning multiple properties (monopoly fanatic you see..), REITs offer me the opportunity to own real estates without requiring a huge outlay of cash unlike other real estates’ investment.

If you purchase a property on your own, it is the norm to foot a down-payment of tens of thousands of dollars, and that is not even including other hefty costs such as stamps fee, renovation, etc.

However, the cost of initiating your REITs investment can be as low as a few hundreds dollars, a sum I can comfortably afford. Therefore, REITs have enabled me to be a 'property owner' even though I do not have much capital.

Liquidity
Sales and purchases of any REITs shares can be done in a matter of minutes in the stock market. Can that be said for other real estates’ investments? I would think not.

Let's now imagine that I possess a physical property and the property market is expected to be on a downtrend in the near future. At this particular moment,  I needed cash urgently and hoped to sell my property in a downbeat market. The likelihood of me selling that property quickly is very low unless I lower my price substantially.

Should I decide not to lower my price,  I would have to wait for a long while before the property gets sold. Let's not forget for a moment that cash is required urgently and the value of the property is dropping daily during this period. Sounds kind of stressful to me indeed. Lol.

Hence, time is of the essence here. This factor is very important to small time investors like me. Investing in REIT allows me buy and sell within hours or even minutes, thus allowing me to be nimble with my limited funding.

Diversification
With limited capital, investing in REITs allow me to spread my risk amongst a number of properties and different segments of the real estate industry (industrial, retail, residential, etc.). Additionally, if I find that the local property market is over-heated, I can just choose to invest in a REIT that owns their properties in other countries.

This is as opposed to owning physical properties where my fortune could be badly affected by a single bad property investment. 

Relatively High and Constant Yield
Most REITs distribute at least 90% of their annual profit to their shareholders so as to enjoy tax breaks. Therefore, shareholders are guaranteed of obtaining recurring income as long as the REIT is making a profit.

With 90% of their profits going to their shareholders, REITs are able to offer relatively high dividends yield in the range of 5.5%-8% on average. This payout is relatively higher when compared to the dividend yield of most equities which range between 2%-4.5%.


Fuss Free 
As REITs’ properties are all managed by professional facilities management team, there are no nasty tenants for you to deal with when the pipes burst, lighting blows, etc, as they will be taken care of by the facilities management team.

When the property starts getting old, most well-run REITs will also plan for upgrading works to ensure that the value of the property does not depreciate. This is something most retail investors will not be able to execute on their own.

Liaising with tenants over complicated leasing agreements is also not required. With REITs, they have dedicated teams who will look for tenants, ensure the right tenants mix and to maximise the property revenue.

Therefore, by investing in REIT, I am able to sleep well at night as I know that the properties are well taken care of. Or maybe I am just a heavy sleeper. lol

BUT..

Investing in REIT is not without its drawbacks. When investing in REIT, we should consider these drawbacks in order to make an informed decision.

Co-relations with Broader Stock Market
Although REIT are fundamentally real estate’s investments, the value of their shares are still intrinsically tied to the stock market since they are listed there. Therefore, the value of our REIT investments will also be subjected to the stock market sentiments and not just the real estates segment. Do not be surprise if the value of your REIT investment falls even though the real estates market is holding up well. When the stock market is crashing, the value of your REIT investment WILL (confirm+chopped) drop too.

Low Cash Reserve
As the majority of the REIT’s profit goes to the stockholders, REIT usually have very little cash reserve to purchase additional properties. When there are opportunities to acquire  more properties, REIT will have to raise the cash by:

• Piling on more debts which might cause it to be overly-leveraged; 

          OR

• Issuing more shares in the market which will dilute current shareholders’ holding unless the shareholders purchase the additional shares.

The aftermath of the two action plans mentioned above will have detrimental effects on the value of our REIT investment if the REIT does not invest wisely with the cash raised. Hence, we have to look into the acquisition history of the REIT to determine if their acquisitions have been beneficial to shareholders in the long term, i.e. yield accretive. 

Links to Parent Company (Developer)
Some REITs are created by a parent company, usually a property developer, to purchase the real estates properties that are newly constructed by the parent company. The main reason for doing so is to offload the newly developed property into the REIT in exchange for quick capital in which the parent company would be able to reinvest into.

This strategy sounds great theoretically. The REIT has first choice when it comes to the sales of the property while the parent company would have access to fast cash raised by the REIT to purchase the property.

However, what happens if the parent company decides to make their subsidiary REIT pay for an overpriced property?

Therefore, we have to check if the REIT has a tendency of purchasing overvalued properties from its parent company so as to maximise the value of our REITs investment.

Currency Fluctuation for Overseas Assets
As with other investments that have assets and earnings from overseas, REIT investment is similarly subjected to currency volatility if they insufficiently hedged against it.

This factor will have a great impact on our REITs investment if the vast amount of the REIT earnings and assets originate from overseas. A 20% drop in the value of the currency will result in not just a 20% drop in earnings, but also a 20% drop in the value of the REIT assets. This will most likely cause a massive drop in the REIT share price as the investors start panic selling.

Personally, I have experienced this issue with my investment in Lippomall. The value of my Lippomall shares dropped by more than 20% due to the devaluation of the Indonesia Rupiah, which is where most of Lippomall's revenue is accounted for. This is even though the REIT is reporting healthy profits in terms of Rupiah!

Hence, we must have an understanding of the currency exchange situation in which the REIT is involved in. By understanding, we will be able to avoid or mitigate losses similar to what I had faced with Lippomall.

Lippomall REIT. One painful lesson which I'll blog in detail someday:(

To sum it all up, investing in REIT has both its rewards and drawbacks. Only by understanding both  then are we able to determine if investing in REIT fits our investment profile.

For example, if you are in your 20′s and have a very high tolerance for risk with the expectation of high returns within a short time horizon, REIT investment might not be your cup of tea. This is because the steady returns from investing in REIT will never allow you to obtain the high returns you desire in such a short period of time.

In my case, I am satisfied with the steady returns from investing in REIT. However, I feel rather discomfort with the recent volatility in the market, which is affecting the value of these REITs. I am not saying that my reasons for REIT investments are no longer relevant. I just feel that I might have allocate too much of my portfolio to REIT.

On another note, I have been lurking around in the following thread:
- http://forums.hardwarezone.com.sg/money-mind-210/*official*-shiny-things-club-4866757.html

Very informative and perhaps I might even adjust my portfolio, base on some of the advices being dished out over there. With a little tweaking of my own of course.

Insurance for a Peon

Released the '天灯' a few days back. Hope it will bless me with a smoother year ahead:)

Anyway, I got my insurance sorted out finally, after much procrastination. 3 years plus to be exact...

My dad recent stay in the hospital made it much more compelling for me to get myself well covered. As I mentioned in the previous post, my dad is not a really financially savvy dude. However, it was really a surprise when I discovered that he was not even covered with the most basic and fuss-free coverage, the Medishield. Thus, his treatment cost us a bomb even though he was warded in the cheapest ward. When I said a bomb, I mean a really fcuking huge ginormous bomb. A nuclear bomb. The total cost of his treatment almost wipe out the funds from my mum's Medisave and we had to seek some help from the social welfare.

With this incident in mind, I hasten my search for the most comprehensive coverage with the budget of a peasant/peon/serf.

 
So with a grand budget of $50 in cash per month, I went on my search for the best coverage and upgraded/applied for the 4 policies stated below.

1) Aviva SAF Group Term Insurance

I was on this policy prior to this assessment of my insurance coverage. However I added 3 additional riders and increase my Death and Total Permanent Disablement(TPD) coverage.

All in all, my coverage for this plan includes:

Life insurance coverage

•   Death due to illness - $200,000
•   TPD due to illness - 120% of Sum Assured

Personal Accident Coverage

• Death due to non-SAF related accident - $225,000
• Death due to SAF related accident - $300,000
• TPD due to an accident - 120% + $25,000

 Major Illness Coverage Rider

• Payout when inflicted with any of the 30 Major Illness - $100,000

Personal Accident  Coverage Rider

•   Death due to accident - Additional $200,000
•   TPD due to accident -Additional Sum Assured

 Disability Income Coverage Rider

• Monthly payout in the event of incapacity to work - 50% of last drawn pay

Miscellaneous Benefits

• Cash Rebate in good years
• Daily payout when hospitalize for more 10days up to a maximum of 30days - $40
• Advance payout when terminally ill(<1year to survive) - $100,000

Cost of policy monthly = $25.60 + $10(Major Illness Rider) + $8.90(Personal Accident Rider) + $9.84(Disability Rider)
                                    = $54.34
                     
*To be paid fully in cash

2) NTUC Income - Dependents' Protection Scheme(DPS)

DPS is a low-cost term life policy which can be paid using monies from the CPF Ordinary Account(OA). Normally, any Singaporean would be automatically insured under this upon contributing to CPF. However, I must have been hit in the head years ago by a plane to be insane enough to opt out it then, leading to the hassle of applying for it now again.

The benefits for this policy are:

Life Insurance Coverage

• Death - $46,000
• Permanent Incapacity(inability to work) - $46,000 

Cost of policy annually = $36
Cost of policy monthly = $3

*Payable using CPF(OA)

3) CPF MediShield

MediShield is a scheme by the CPF board to help members to pay part of their medical bills. This is achieved by complementing the CPF Medisave account. In theory, what this means is that members would first pay only their Deductible and Co-insurance portion of their bill either by Cash or funds from their Medisave account and MediShield would then follow up by settling the rest of the bill. Premium for this policy can be borne entirely by CPF(Medisave). 

However, there are claim limits for this policy and they are as followed:

• Per Policy Year - $50,000
• Lifetime - $200,000

Cost of policy annually = $33
Cost of policy monthly = $2.75

*Payable using CPF(Medisave)

4) NTUC Income - Enhance Income Shield Plan

This excellent policy complement MediShield which further complement MediSave........
It is sickening stuff like this which makes me wonder why insurance coverage have to be so complicated when simple folks like me have a hard time understanding.

Anyway, back to the policy. This Income Shield plan provides a lifetime coverage for most of your hospitalisation bills. Once covered by this plan, members would only need to pay for their Deductible and Co-insurance(lower than MediShield) portion of their bill either by Cash or funds from their Medisave account. Premium for this policy is payable by using the CPF(Medisave). However, the premium for the riders for this policy have to be borne entirely by cash.

I have also applied for two riders for this plan as shown below:

Daily Cash Rider

• Daily Cash Benefit(Per Day) - $150
• Get Well Benefit(Upon recover) - $300

Assist Rider

• Pay only 10% of claimable amount
• Insured person not required to pay deductible
• Additional cash benefits if warded at a ward lower than what you are entitled to

Cost of policy yearly = $142(Medisave) + $83(Daily Cash Rider - cash) + $111(Assist Rider - cash)
                                 = $142(Medisave) + $194(cash)
                                 = $336

Cost of policy monthly= $11.83(Medisave) + $6.92(cash) + $9.25(cash)
                                  = $11.83(Medisave) + 16.17(cash)
                                  = $28

*Payable using a mixture of CPF(Medisave) and Cash




To summarise, I would have to pay a total of $88.09 monthly for all the above coverage. However, only $70.51 have to be paid in cash monthly with the balance covered by CPF. While I exceeded my budget of $50 by cash, I am feeling pretty smug glad about getting such a pretty good deal with the amount I am paying compared with the coverage I am getting. In the event that I am stricken with any of the 30 major illness, I would most probably not have to fork out a single cent unless the insurers decided to play punk.

Is this the best value combination one can find in Singapore?

PS: This is a freaking long post. My fingers and eyes hurt.
PSS: The '天灯' flew behind the block of flat and disappeared. I am sorry if it burns any of your stuff.