Dependants’ Protection Scheme (DPS) ?

A friend asked me about DPS scheme,  he was sent a form to signup with great eastern. I was surprised that there is another insurance company underwriting the CPF DPS scheme other than NTUC , which is what I have.

I decided to find out more.

http://ask-us.cpf.gov.sg/

Q:      What is Dependants' Protection Scheme (DPS) ?      
 A:     

The Dependants’ Protection Scheme (DPS) is an affordable term insurance scheme that provides insured members and their families with some money to get through the first few years should the insured members become permanently incapacitated or pass away.

Currently, DPS is administered by two insurers, Great Eastern Life and NTUC Income. The scheme is extended to CPF members who are Singapore citizens or Permanent Residents, between age 16 and 60, when they make their first CPF contribution.

DPS is an optional term insurance which covers CPF members for a maximum sum assured of $46,000 up to age 60.  The coverage is worldwide.  The DPS benefit will be paid out if the insured member passes away or becomes permanently incapacitated such that he or she can no longer work.  

Q:      How do I apply to be insured under DPS ?      
 A:     You may do so by submitting your application to Great Eastern Life or NTUC Income directly.

 Q:      If I opt-out of DPS now, can I apply to be covered at a later stage?      
 A:     Yes, you can apply to be insured at a later stage with any of the 2 insurers directly. Your application will be assessed based on your health condition then.

DPS is a death and disability term insurance (worldwide coverage). You are randomly assigned either Great eastern or NTUC , you can write-in to either companies to switch.

In terms of premiums or coverage, both are the same , however there is a subtle difference in terms of the claims process.

http://www.wallstraits.com/community/viewthread.php?tid=2952
I wrote this letter to Straits Times Forum on Saturday. Today, despite NTUC Income, Great Eastern and CPF Board came out with some explanations, they covered some of what I share in this letter, however, they did not cover the potential problems for a person who did not make a nomination if he/she is insured with NTUC Income.

 Here is my letter:

 Recently, Consumer Association of Singapore (Case) caused a big uproar when it pointed out in an article published in Straits Times on 23 March 2006 that people who are covered under Great Eastern Life for the Dependent Protection Scheme (DPS) would need to draw a Will while those covered with NTUC Income need not. 

 While I applaud CASE for highlighting some of the potential problems, as a Certified Financial Planner, I also worry some of the inaccuracies in the information given might actually do more harm than good. Firstly, an insurance company is allowed to pay up to $150,000 in claims to a proper claimnant without a Will. Thus, if your only insurance policy is DPS with Great Eastern Life, you need not unduly worry at all as the sum assured under DPS is less than $50,000 or 1/3 of the said $150,000. If you have not written a Will, under DPS with Great Eastern Life, the rightful beneficiaries goes according to the Intestate Succession Act.

 In actual fact, people who are covered under NTUC Income for DPS have more to worry instead. 

 Because NTUC Income falls under the Cooperative Societies Act and as a policyholder, the only way for you to name a beneficiary for your NTUC Income insurance policies including DPS is to fill up a nomination form. If you have not filled up a nomination form, even if you have written a Will, the distribution of the insurance proceeds of the NTUC Income DPS would not be taken care of by the Will, since NTUC Income falls under the Cooperative Societies Act. 

 NTUC Income would pay the insurance proceeds to your legal representatives, absolving them of any legal liability in payment of the insurance proceeds. However, the issue of who are the rightful beneficiaries is still debatable and can be subject to complicated and protracted legal disputes. 

Furthermore, even if people insured with Great Eastern Life for DPS switch to NTUC Income and make a valid nomination, this does not really solve the problem of not having written a Will. Why? Because for most Singaporeans, DPS is not the only asset they have. A typical Singaporean is also likely to have some separate insurance policies; many Singaporeans also have invested their CPF into CPF Investment Scheme; many Singaporeans were also given New Singapore Shares; many also have savings and deposit accounts with banks; many also have invested in Unit Trust and structured deposits; you might also have other moveable assets such as a car, jewellery etc. 

 Do you know that all the abovementioned assets would go to your estate as well including the DPS insurance proceeds. Thus, if you have not written a Will, in the scheme of all things considered, the DPS insurance proceeds might only be a small part of your total estate that would be distributed according to the Intestate Succession Act.

 Thus, the real problem is many people in Singapore have not written a will because they do not know the importance of doing so and the potential problems of not writing a Will. Many parents with children below age 21 are also not aware that in the event that both of them die leaving behind orphans, the question of who would be the guardians of their orphans would also be left open with serious consequences. Thus, all the problems we mentioned can be solved by writing a Will. The focus of the parties involved, including Central Provident Fund (CPF) Board should be on educating the public and highlighting the importance of writing a Will to ensure your estate is distributed according to your wishes, including deciding on the guardianship for your children while you are alive

Looks like I better go dig up my NTUC forms and make a nomination soon