The second I got my first salary, I was bombarded with mail from banks offering credit cards and companies pushing insurance policies. It’s as if there’s some strange mobilisation warning bell that goes off every time a Singaporean earns money for the first time. I also got a strange letter about the CPF Dependents’ Protection Scheme (DPS). Dependents? Did I have children I didn’t know about? Wait… I didn’t even have a girlfriend then!
So, what is this Dependents’ Protection Scheme?
The Dependents’ Protection Scheme is a term life insurance scheme which is automatically extended to all Singaporeans and PRs between 21 and 60. It’s not compulsory, but you have to opt out if you don’t want to be covered. You are covered for the maximum sum of $46,000 up till your 60th birthday. Like most other term life insurance policies, this benefit will be paid out to your family should you pass away, or to you if you become permanently incapacitated.
Who is eligible for the Dependents’ Protection Scheme?
As we said earlier, you will be automatically included under DPS if you are a Singapore Citizen or Permanent Resident between 21 and 60 years old. Like me, you will get a letter within five working days from making your first CPF contribution. Presumably along with more junk mail than you’ve ever seen in your short life so far.
Here’s the tricky bit: You are automatically covered as soon as you have enough money in your CPF to pay for the most basic coverage. BUT! You are sent a health declaration form so you can declare if you have any serious health issues. Issues that may void your coverage. So you’re in “good shape” until you tell them that you aren’t. (Pun)
This letter will come from either one of these two insurers, Great Eastern Life and NTUC Income. The welcome package will guide you on how you can complete your DPS application. Which insurance company initially handles your insurance policy is randomly decided for you. Not happy with either one? You will have the option to change it later.
But what if I have health problems?
You will need to fill in a health declaration form every time you apply for DPS whether it’s the first time or if you’re getting it reinstated at a later date. The DPS insurers will consider your eligibility on a case by case basis. DPS coverage may be declined if you have any serious pre-existing medical conditions. It also then can be assumed that if you lie and say you’re fine, but have a pre-existing condition that you try to claim upon later… then “sorry no cure”. (Pun, again)
Okay, okay, how much will the DPS cost me?
The Dependents’ Protection Scheme is affordable and premiums can be fully paid from your CPF savings. So if you have sufficient funds in your CPF, you don’t need to worry as your policy will be automatically renewed every year.
The premiums are age-dependent and are regardless of gender. If you have enough savings in your CPF to pay the full premium, you will be automatically covered for the maximum amount of $46,000. The premium will first be deducted from your Ordinary Account. If you do not have sufficient savings in your OA, the premiums will be deducted from your Special Account.
This is what you can expect to pay each year:
|Age (years)||Yearly premium payment|
|34 and below||$36|
Unlike other insurance policies though, your DPS premium will increase as you age. That means, you will start paying $48 a year once you turn 35, or $260 a year once you turn 55, regardless of how long you’ve been on the Scheme.
If you are unable to pay the full premium because you don’t have enough in your CPF, you may opt to pay the remainder in cash. Alternatively, you can opt for your coverage to be lowered to a minimum of $5,000, based on the lower premium you’ve paid.
Now, the big question – who really benefits from the Dependents’ Protection Scheme?
If you’re like me, you’ve been paying for DPS since receiving your first pay check. That’s about 10 years of paying a $36 annual premium for a policy that you’ve thankfully never needed to claim. Sure, it’s only $360, but if you really wanted to maximise your money? You should only start applying for DPS when you’re 30.
Let me explain. According to last year’s statistics, men in Singapore get married when they’re 30, women when they’re 28. They tend to have a child within the first two years of marriage and a second child within the first decade of their married lives.
At the age of 30, you not only have a spouse and children as dependents, you also have retiring parents as dependents. If you die or suffer total permanent disability at this stage, you will be putting a big financial strain on several people.
Paying the full DPS premiums when you’re 30 till you’re 60 will cost you a total of $4,000.
But say you aren’t planning to settle down just yet. Say you’re willing to wait till you’re 40 before you start paying your DPS premiums, maybe because you married late, or you’re not planning to have children.
Paying the full DPS premiums when you’re 40 till you’re 60 will cost you a total of $3,580, or $420 less than if you had started at 30, and $780 less than if you had started at 21.
Why should you get DPS at 40? Because that’s when your body starts to break down. Your risk for heart disease, osteoporosis and other diseases linked to age increases exponentially. The idea is to apply for insurance BEFORE you get any of these diseases.
So what’s the best way to use DPS?
For most life insurance policies, you would want to apply as early as possible. This is because the premium is lower the earlier you apply, and remains the same for as long as the policy is in effect. The Dependents’ Protection Scheme, on the other hand, increases the premiums as you age, so it really doesn’t matter when you start, you will still be paying the same annual premium.
So get a good term life insurance policy from a private insurer when you’re young. You want to take advantage of your youth to get as low a premium with the high coverage possible. If you can afford it, get insurance riders that cover at least critical illnesses. Additional coverage you should consider are for hospitalisation costs and surgery. You may also want to look into personal accident insurance.
Once you’re older, then jump on the DPS while you’re still healthy. Don’t wait too long in case some pre-existing medical condition is revealed before you can get coverage. Because there’s really no penalty to applying for DPS later in life, as long as you keep your body in good shape in the meantime.
What do you think of the Dependents’ Protection Scheme? We want to hear from you.
Research done by: Samuel Tan
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