If you have a CPF account, then you are most likely automatically covered by a basic form of life insurance known as Dependants’ Protection Scheme or DPS.
Dependants’ Protection Scheme is government-administered term insurance that covers all CPF members by default. But what is it, really? And should you opt out if you already have your own life insurance?
[Update: With the latest change announced by the CPF board on 2 October 2020, DPS has become more attractive with lower premiums and the higher coverage amount. The article has been updated to reflect the latest changes.]
What is the Dependants’ Protection Scheme (DPS)?
The Dependants’ Protection Scheme is a term life insurance plan that covers eligible CPF members. It provides coverage for death, terminal illness, and total permanent disability (TPD)
On 2 October 2020, the CPF board announced some key changes to the DPS. This include
- Increasing the maximum age to 65
- Higher sum assured of $70,000
- More attractive premium
These changes will take effect from April 2021.
The DPS works on an opt-out basis. All Singaporean citizens or permanent residents will be automatically enrolled if they are between the age of 21 and 60, and have made their first CPF working contribution.
You can choose to opt-out of the scheme if you decide DPS is not suitable for you. (More on that later)
DPS premiums are deducted from your CPF OA/SA account, and you will be notified whenever this happens. There is usually no action or top-up required from you.
Who administers the Dependants’ Protection Scheme?
From 1 April 2021, Great Eastern Life will be the main administrator for DPS.
You will receive a welcome package from your assigned insurer after your first CPF working contribution is credited. The welcome package will guide you to complete the necessary DPS forms.
For those who have an active DPS cover as of April 2021, your DPS covers will continue to be automatically renewed annually until your 65th birthday, no action will be required.
If you are currently insured under NTUC Income, you will be moved to Great Eastern Life when the latter takes over the sole administration of DPS. A new DPS nomination will be required.
How much are Dependants’ Protection Scheme premiums?
Like most life insurance plans, the Dependants’ Protection Scheme premiums vary with your age. Currently, it is based on a maximum sum assured of $46,000 and is standard across insurers.
From 1 April 2021, the changes in premium and sum assured will take effect. For individuals age 60 to 65, if you wish to rejoin DPS, you can submit an application directly to Great Eastern Life come April 2020.
The annual DPS premium for the different age groups is as follows:
DPS premiums are first automatically deducted from your CPF Ordinary Account (OA). If there is insufficient balance, it will be then deducted from your CPF Special Account (SA).
You will get a renewal letter every year, about one month before the renewal date, to notify you of the upcoming premium deduction.
If there is insufficient balance in both CPF accounts, you will be notified in this letter, and you’ll have to contact your DPS insurer directly for payment by cash.
Is DPS sufficient to meet your life insurance needs?
If you have no dependants and no liabilities whatsoever, then maybe…. but just barely.
For most Singaporeans, the basic Dependants’ Protection Scheme would definitely be insufficient to meet your life insurance needs.
Your life insurance payout is meant to cover your dependants’ living expenses as well as any outstanding loans (e.g. mortgage). The payout will need to be enough to sustain your life support in the unfortunate event of total permanent disablement as well.
The Life Insurance Association of Singapore (LIA) recommends a protection coverage amounting to 9 to 10 times of your annual earnings as basic life cover.
With the median gross income of Singaporeans reported as $54,756 for 2019, the standard DPS sum assured of $70,000 is barely enough to cover two year’s earnings.
In addition, DPS also does not provide coverage or riders for critical illness, which is increasingly prevalent amongst Singaporeans and is extremely costly to treat.
To avoid being under-insured, we highly recommend purchasing life insurance separately. Speak to us to find out more.
Dependants’ Protection Scheme vs term life insurance: which is better?
The increase in sum assured and changes in premium have definitely made the Dependants’ Protection Scheme more attractive. That being said, it is still not the most cost-effective option.
The table below compares DPS against one of the more affordable term life insurance plans available in the market.
As seen from the table, despite having a lower sum assured, the total premium payable for DPS is higher compared to the term life insurance plans.
DPS premiums start out low — for age 45 and below, DPS is cheaper than similar products with similar coverage amount. However, premiums significantly increase after the age of 45. That’s why it ends up costing more.
So if you already have your own term life insurance plan, you might be wondering…
Should you opt out of the Dependants’ Protection Scheme?
Assuming that your personal life insurance policy already covers your financial needs, should you then opt out of DPS to preserve more savings for retirement?
At PolicyPal, we recommend that you keep your DPS plan and NOT terminate it.
First, the upcoming changes have made DPS much more attractive and comparable to other plans in the market.
Secondly, because DPS premiums are auto-deducted from your CPF OA/SA, you will be covered as long as you have enough savings in your CPF. On the other hand, if you meet with financial difficulties and can’t pay with your private life insurance, your coverage may lapse.
Hanging on to DPS means you have a backup plan in place, in case you are unable to pay your life insurance premiums one day.
In addition, DPS pays out on top of your private life insurance plan, so that’s an extra $70,000 compensation for your family members should anything unforeseen happen to you.
What if you really want to opt out of DPS?
If you’ve thought it through and decide you really want to opt out of DPS, you can do so. It is not a compulsory scheme.
You can terminate your Dependants’ Protection Scheme policy by contacting your DPS insurer, who will send you an opt-out form to complete and submit.
Should you change your mind about DPS in the future, you can re-apply for DPS coverage. However, you will need to make a new health declaration if you re-apply, and your application will be assessed on your health condition.
With this hurdle in mind, we recommend (again) that you retain your existing DPS insurance coverage until at least age 45 (which is when the premiums go up).
At the same time, DPS should not be your sole form of protection. Instead, it should serve as a complement to your existing insurance plans.
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Looking to supplement your Dependants’ Protection Scheme policy with higher payouts from a term life or whole life insurance plan? Speak to us. We’ll recommend only the plans that meet your needs and budget.
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Arrange a free teleconsulting service with PolicyPal
Because life insurance plans are not one-size-fits-all products, we strongly recommend speaking to us before you commit to a long-term plan of any sort. Our professional advisers can assess your budget and needs holistically, and give you personalised recommendations.
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