What Does SDIC’s Deposit Insurance Scheme And Policy Owners’ Protection Scheme Each Cover?

Deposit Insurance Scheme Singapore

Have you ever feared the thought of losing all your money if a financial crisis hits home? It’s a valid fear and it’s something we should consider carefully. However, don’t panic. You don’t need to go running to the bank and withdrawing all your money to store them under your bed either. This is because bank deposits in Singapore are protected under a scheme that guarantees your savings.

There’s also a separate scheme that applies to insurance policies, like life insurance and home insurance.

We’ll explain.

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What happens if a bank fails in Singapore?

The fall of the Lehman Brothers during the 2008 financial crisis shook the world. 10 years have passed and hundreds more banks have failed since. Yes, hundreds.

Most recently, the lucky name that has been hogging the headlines is Credit Suisse. After a whole slew of scandals and multi-billion dollar losses, the Swiss giant finally announced its takeover by UBS on 19 Mar 2023.

Singapore has yet to experience a failed bank so far, but we need to be prepared for the possibility. What if one of Singapore’s major banks get into trouble?

That’s when the Singapore Deposit Insurance Corporation (SDIC) comes in to save the day.

The SDIC was established in 2006 to protect the savings of depositors in the event of a failure of banks or finance companies. This includes deposits in savings, current and fixed deposit accounts.

The SDIC is in place to create a more stable banking environment. It does so by collecting premiums from banks and finance companies that are part of the scheme. Banks and finance companies that take higher risks will have to pay higher premiums. The amount of deposits held by a bank or finance company will affect the premium as well.

SDIC guarantees your money and even your insurance policies through administering the Deposit Insurance (DI) and the Policy Owners’ Protection (PPF) scheme. Here’s how they work.

How does the Deposit Insurance (DI) Scheme work?

In the event a DI Scheme member bank or finance company fails, all of your insured deposits with that member are aggregated and insured up to S$75,000 by SDIC. Insured deposits held in trust and client accounts held by non-bank depositors are insured up to S$75,000 per account. Separately, monies placed with a Scheme member bank under the CPF Investment Scheme (CPFIS) and CPF Retirement Sum Scheme (CPFRS) are aggregated and insured up to S$75,000.

This means that should a bank or finance company in Singapore fail, you will be paid up to a maximum amount of $75,000, depending on the amount of your deposit.

Beware that there are exceptions to the coverage. This includes:

  • Foreign currency deposits​
  • Structured deposits
  • Investment products such as unit trusts, shares and other securities

In the event that a bank fails, payouts will be made automatically through cheques, casher’s orders or through electronic payment methods. SDIC’s target is to send out most of the payments to depositors within 7 working days after payout is activated by MAS. There’s no need to file any claims and you can pretty much sit back and relax. Sweet.

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How does the Policy Owners’ Protection (PPF) Scheme work?

The PPF scheme protects life insurance and certain general insurance (like personal motor or personal property insurance) policy owners in the event an insurer fails. It provides 100% protection for the guaranteed benefits of your insurance policies. For life insurance policies, caps will apply.

With the enhancement of the protection scheme, motor and property insurance policies are now covered, even if the car or property is used for commercial purposes.

Before, if one were to buy a property and turn it into an office, that property insurance bought would not be protected by the PPF scheme. Now, people who own home offices and private-hire drivers will benefit from the enhanced protection.

Which banks are covered under the Deposit Insurance Scheme?

All banks and finance companies in Singapore approved by the MAS are members of the DI Scheme. If you bank with any one of these Deposit Insurance Scheme members, your deposits are automatically protected.

Similarly, MAS-approved life or general insurers are covered in the scheme.

You can find the list of PPF scheme members on the SDIC website too.

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How does the deposit insurance scheme cover joint accounts?

For joint accounts, the funds in the account will be split evenly unless otherwise specified. If you have another individual account under the same bank, your split deposit amount will be combined with your individual deposit amount. The total amount will then be covered up to $75,000.

For example, if you and your husband have a joint account of $50,000, and you have a separate account of $60,000, your total deposit amount will be $85,000. However, you will only be covered up to $75,000.

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