Planning for the unexpected is never fun, but that’s where disability income insurance (DII) comes in – it’s your backup plan if an illness or injury stops you from working.
Most people don’t realise that up to 20% of people in Singapore face some form of disability in their lives, which can be a huge financial shock if you’re unprepared.
In this post, you’ll learn:
- What DII is and why it’s essential
- How it compares to other disability coverage like TPD and CareShield Life
- What to consider when buying a plan
- Reasons you should consider DII to protect your income
Keep reading to find out how to protect your income and get the peace of mind you deserve!
What is disability income insurance?
If you ever find yourself unable to perform your job due to a disability – whether temporary or permanent – disability income insurance (DII) steps in to ease the financial strain.
Unlike critical illness insurance, which provides a lump sum, disability income insurance works by giving you monthly payouts.
Typically, this is around 75% to 80% of your income.
This regular stream of income is a lifesaver, helping you manage day-to-day expenses such as rent, utilities, and groceries when you’re unable to work.
What’s the difference between a disability income plan and regular disability coverage?
There are several types of disability coverage in Singapore, including disability income insurance (DII), total and permanent disability insurance (TPD), and severe disability insurance.
Here’s a breakdown to help you understand the key differences:
| Feature | Disability Income Insurance (DII) | Total and Permanent Disability Insurance (TPD) | Severe Disability Insurance |
| What is it for? | DII provides financial support when you are temporarily unable to work due to an accident or illness. | TPD provides a lump sum payout for total and permanent disability. | Severe Disability Insurance provides cash payouts when you are unable to perform 3 out of 6 Activities of Daily Living (ADLs). |
| Found in | Standalone plan or as a rider in other insurance policies. | Typically found in life insurance, endowment plans, or investment-linked policies. | Included in government schemes like ElderShield and CareShield Life. |
| Payouts | DII pays monthly until you recover or resume working. It’s not meant to fully replace your income. | TPD provides a one-time lump sum payment if you are permanently disabled with no recovery. | Monthly payouts for a fixed period or for life, depending on the policy. |
| Claim criteria | Temporary disability caused by illness or accident, requiring proof of inability to work. You must have an occupation and salary. Payments stop when you return to work. | Total physical loss or inability to participate in any paid work for life. You cannot claim if you’re unable to perform the same job but can do other work. | Inability to perform 3 of 6 Activities of Daily Living, such as eating, dressing, or mobility. |
What are the criteria for claiming disability income insurance?
To qualify for a claim under DII, you generally need to meet certain conditions, which can vary slightly depending on your policy.
Here’s a breakdown of the typical criteria:
- Temporary disability due to illness or accident resulting in the inability to perform current job responsibilities
- Proof of employment and salary
- Payments will stop or reduce upon recovery or return to work
Each insurance provider has its specific definitions and conditions, so it’s crucial to read your policy details closely.
What should you consider when buying disability income insurance in Singapore?
What you’re covered for
DII policies typically cover the inability to perform your job due to a disability, but the specifics can vary from plan to plan.
It’s important to differentiate between temporary and permanent disabilities, as some policies may focus on one type.
DII is generally for those temporarily unable to work, but restrictions based on severity or expected duration may apply.
Ensure your policy adequately covers both temporary and permanent disabilities.
Own occupation coverage is another key consideration.
Many policies protect you if you can’t perform the duties of your specific job rather than just any job.
Confirm that your policy allows for this kind of protection during your recovery.
Understanding how insurers define “disability” is crucial, as definitions can vary widely.
Some may consider you disabled if you can’t perform a percentage of your duties, while others require complete incapacity.
Finally, be aware of policy exclusions, which may omit coverage for disabilities arising from pre-existing conditions, mental health issues, or high-risk activities.
What benefits it provides
When evaluating DII, the monthly benefit payout is a key feature, typically ranging from 75% to 80% of your salary.
This amount helps cover daily expenses like bills and groceries while you cannot work.
Be sure to check for any maximum payout limits that might apply.
Some policies also provide partial disability benefits, allowing you to receive a reduced payout if you can still work in a less demanding role due to your disability.
Many DII plans offer support for rehabilitation, covering costs for medical treatments, physiotherapy, and other recovery services to facilitate a quicker return to work.
Lastly, consider policies with a premium waiver benefit, which allows you to stop paying premiums while receiving benefits, ensuring your coverage remains intact during financial hardships.
How long you’re covered for
In Singapore, most DII plans provide coverage until you reach a certain age, usually between 60 and 65, aligning with the typical retirement age.
While some policies may offer extended coverage beyond this age, such options are less common and often come with higher premiums.
The benefit period defines how long you can receive monthly payouts after a claim is approved.
Some policies may offer benefits for a limited number of years (e.g., 5 to 10 years), whereas others continue payments until you return to work or reach retirement age.
Additionally, most policies have a waiting or deferment period of 30 to 90 days before benefits commence.
This waiting time should be considered in your financial planning, as you’ll need to manage your expenses during this initial gap.
How much it costs
The cost of DII varies based on several factors, including your age, health, occupation, and the coverage you choose.
Insurance premiums are usually paid monthly or annually and vary based on the insurer, coverage period, and benefits.
Generally, younger and healthier applicants face lower premiums.
Premiums are influenced by job risk; high-risk professions (e.g., diver, pilot) incur higher costs compared to low-risk jobs (e.g., office worker), affecting both eligibility and coverage costs.
Enhancing coverage with riders (like premium waivers or rehabilitation benefits) can provide additional protection but will increase overall premiums.
Some insurance policies feature level premiums, meaning the cost remains consistent throughout the policy term.
Others have increasing premiums that start lower but rise as the insured ages.
Why should you get a disability income insurance plan?
Disability Income Insurance (DII) is a crucial financial safety net that offers peace of mind in the event of an unexpected illness or injury.
Here’s why you should consider getting one:
Protects your income and living expenses
DII ensures that a portion of your income continues to come in when you’re unable to work due to illness or injury.
This allows you to cover essential living expenses like rent, groceries, utilities, and medical bills, so you don’t need to rely solely on savings.
Whether your disability is temporary or more long-term, DII provides a steady income stream to help you maintain your lifestyle.
Comprehensive coverage for a range of disabilities
Unlike other policies, such as Total Permanent Disability (TPD) insurance, which only pays out for severe disabilities, DII offers broader protection.
It covers temporary, partial, and permanent disabilities, ensuring that you are supported even if your condition is expected to improve over time.
This makes DII more versatile and relevant for a wider range of situations.
Works alongside government schemes
While government schemes like CareShield Life offer some basic coverage, DII serves as an essential supplement.
The payouts from government schemes may not be sufficient to cover your day-to-day expenses, especially if your disability affects you for a longer period.
DII bridges this gap and provides more robust financial support.
Supports your recovery
One of the great benefits of DII is that it helps you focus on recovery without the pressure of rushing back to work.
You’ll have the financial breathing room to undergo necessary treatments, rehab, or retraining, knowing your income is protected until you’re ready to return to work.
Conclusion
Disability income insurance might not be the first thing on your mind, but it’s definitely something to consider if you want to secure your financial future.
We’ve covered what DII is, how it compares to other types of disability coverage, the key factors to consider before buying, and why it could be a smart decision to protect your income.
Remember, the right DII plan can provide peace of mind, covering your expenses if an illness or injury prevents you from working.
And if you’re still unsure about which plan fits your needs best or have more questions, don’t worry – you’re not alone.
Feel free to reach out and speak to one of our trusted financial advisor partners for free advice and personalised recommendations.
Your future self might just thank you for it!
