Martin Lee @ Sg
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Compensation Cap on Policy Owners Protection Scheme

I received a question on the Policy Owners Protection Scheme (PPF Scheme), which is the scheme that can be activated should one of Singapore’s insurance companies collapse.

Hi Martin, below is an extract of a short footnote from a MAS’s doc on policyowner protection scheme. I dont quite understand what/how the guaranteed payout works. And its applicability to different types of insurance. Would appreciate your simple explanation. Thanks.

MAS Footnote: “For example, the guaranteed benefits of individual life policies and voluntary group policies will be aggregated and subject to caps of S$500,000 for sum assured and S$100,000 for surrender value on a per life assured per insurer basis (excluding annuities) while compulsory group policies will be subject to an aggregate cap of S$100,000 for sum assured and S$50,000 for surrender value on a per life assured per policy basis (excluding annuities). No caps will be applied to personal accident and A&H policies. “

The term aggregate means the combined value of your life policies with a certain insurer.

So if you have 3 policies with surrender cash value $50k each with a certain insurer, the total is $150k which exceeds the cap of $100k.

Based on a ratio basis, if you surrender the plan, you will get back 100/150 *50 ($33.3k) from each plan.

Caps are not applicable to general insurance policies.

For more examples, you can refer to the illustrations provided by the Singapore Deposit Insurance Corporation Limited (SDIC).

They also provide quite a complete FAQ on the PPF Scheme which pretty much covers the workings of the scheme.

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1 comment
xyz says 9 years ago

By the time an insurer in S’pore collapses, the economy will already be in hellhole, with high chance of retrenchments, or already kena retrenched, SME’s going bankrupt like dead flies, and when you most need the money, you won’t be able to get back all your savings in insurance policies after socking away expensive insurance premiums for 10, 20, 30 years. Plus you will need to wait a few months before your partial savings can be returned back to you.

All the more reason to buy term and keep your savings and investments separate.

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