Disabilty income insurance

Hi Mr Tan

I have been offered a disability income plan. It provides a monthly income in the event of disability due to illness or accident. The income will be payable in the event of continuous Disability of the Life Assured exceeding the Deferred Period. This plan does not have any cash value or maturity value.

The premiums are not guaranteed and may be adjusted based on future experience or due to changes in occupation or country of residence. Premium is S$50 per month for monthly benefit of S$2,000 at a policy term of 25 years.

I find it quite expensive. What do you think?

L

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Dear L

You are paying a rate of 2.5% for the benefit. This means that the insurer expects up to 2.5% of policyholders to make a claim. The rate of claim, at a young age, is very low.

You should also consider the duration of the deferred period (for which the benefit is not payable) and the maximum length that the benefit is payable.

I am not experienced in this product, but I think that a rate of 1% or maybe 1.5% is attractive, but 2.5% seems to be quite high.

Tan Kin Lian