COVID-19 had hit many people financially and we are not spared in Singapore. Monetary Authority of Singapore(MAS) said “many individuals and SMEs in Singapore will continue to face challenges in managing their cash flows and meeting their financial obligations, such as loan repayments and insurance premiums” in the months ahead. The Resilience Budget was announced to help us ease the financial strain in this unprecedented crisis. MAS had work with banks and insurers to to see how best to help businesses and individuals with loan obligations and insurance premium payments.
In this article, we will not discuss about the following which are offered by banks.
- Defer repayment for residential property loans for individuals
- Lower interest on Personal Unsecured Credit
- Defer repayment of Principal on Secured SME Loans
- Lower interest on SME Loans
For the above, please check with your respective banks for information.
In terms of insurance, there are the life and Health Insurance premiums and also General Insurance. Let us first look at life and Health Insurance products. Some companies allow only traditional policies such as your whole life, term or endowment policies for premium deferment and Investment-Linked Policy or HNW products are not eligible. Do check with your Financial Adviser Representative or insurer on the product eligibility.
To qualify for this premium deferment, the policy holder must meet one of the following
- Have lost their job due to COVID-19;
- Experience a sustained income drop due to COVID-19 (such as for small business owners, private hire drivers, etc);
- Are put on indefinite/extended no-pay leave due to COVID-19 (such as for airline staff, entertainment venue staff, etc); and/or
- Are hospitalised due to COVID-19 and/or are paying for COVID-19 related hospitalisation bills for immediate family members. This is provided the hospitalised patient has not travelled out of Singapore since 27 March 2020.
- Other reasons can be consider on case-to-case basis.
The premium due of the policy is between 1 April 2020 and 30 September 2020
Do note this is premium deferment and not premium waiver which means the premium still needs to be paid at a later date. Here’s an example of it works.
Example 1 (Premium is on Monthly Mode)
A policyholder with a monthly premium payment of S$100 has a premium payment due on 30 April. He applies for and is approved for premium deferment on 15 April 2020. In September 2020, he’ll receive a notification for the premium for the 6 months (April – September). There will be no interest charged. Upon collection of full premium payments in arrears, his monthly premium cycle will resume from 30 October.
Example 2 (Premium is on yearly Mode)
A policyholder has an annual premium due on 1 May 2020. He applies for and is approved for premium deferment on 20 April. His premium due date will now be shifted to 1 November 2020. There will be no interest charged. His premium cycle will revert to 1 May 2021.
During the premium deferment period, no interest will be charged on the premiums. The benefits, less any outstanding premiums, are still payable if a claim is admitted successfully. However, if the premium arrears are not paid at the end of the deferred period, the non-forfeiture options would apply. The non-forfeiture options, by default, will be Automatic Premium Loan(APL) to pay the unpaid instalment premiums. Interest ranging from 6.25% or more, depending on insurer, will start to accrue from the date instalment premium was due(i.e. from April if we refer to Example 1). If the policy has Zero or insufficient cash value for APL, the policy will lapse.
Alternatively, the policy holder can consider reducing or review the coverage to reduce the premiums. The last resort which is not advisable is to give up the policy if it is beyond affordability after considering all options. There are also buyers of policies in the market who can offer slightly more cash than you surrender your policy. It is best to talk to a Financial Adviser Representative before making any decision.
There are also General Insurance such as your motor insurance and Home Insurance. If the premium deferment application is approved, you are allowed to pay your premium over 12 equal monthly instalments. Do note that for General Insurance, the premium deferment may vary across companies.
A common question asked by client is if they should utilise the premium deferment to ease their cash flow. These are case-to-case basis depending on each individual’s situation. But if financially one can still afford to pay, please continue with the premium because premium deferment is as good as just kicking the can down the road. When you reach the end of the road, you have to clear a huge pile of garbage. Imagine not paying $100 for 6 months and you have to pay $600 in a lump sum. That can be tougher than tightening the belt and pay a smaller amount every month. You can also look at the different financial assistance scheme that you might be eligible to apply. These will help to tide you over this difficult times. Feel free to drop me a message if you need an independent review on your policies
Let us all do our part to keep to minimal social activities, practice social distancing and good hygiene. Hopefully these will be gone soon & at the meantime, stay safe!