Dependants’ Protection Scheme (DPS): Is It Worth It?

This post was originally posted on Planner Bee.

Thinking about how to protect your loved ones financially can be overwhelming, but it doesn’t have to be. The Dependants’ Protection Scheme (DPS) is an accessible and affordable safety net for CPF members in Singapore.

DPS provides basic term-life insurance coverage to ensure financial support for loved ones in case of death, terminal illness, or total permanent disability. However, like all insurance products, DPS has its pros and cons. In this article, we will examine whether DPS is worth your investment.

What is the Dependants’ Protection Scheme (DPS)?

The Dependants’ Protection Scheme (DPS) is a term-life insurance plan that provides basic financial protection for CPF members and their families in the event of death, terminal illness, or total permanent disability (TPD).

It provides a financial safety net to help your loved ones maintain some level of financial stability during challenging times.

What you should know

• Coverage amount: DPS provides coverage for insured members up to 65 years old. Members up to 60 years old are covered for a maximum sum assured of S$70,000. For members aged 60 to 65 years old, the maximum sum assured reduces to S$55,000.
• Eligibility: All Singapore Citizens and Permanent Residents aged 21 to 65 are automatically covered when they make their first CPF contribution, though enrollment is optional, and you can opt out at any time.
• Underwriting: Currently, DPS is solely administered by Great Eastern Life, following the consolidation of insurers in 2021.
• Premiums: Premiums are age-based and remain affordable, starting at S$18 per year for those under 35, and rising to S$298 annually for those aged 55 to 64.

This affordable coverage helps dependents manage immediate financial needs when the insured member faces an unfortunate event.

Key features

The DPS offers a straightforward insurance plan with the following key features:

Coverage amount

DPS gives a payout of up to S$70,000, which helps dependents cover immediate financial needs during tough times. It allows for short-term financial support to help families adjust and manage essential expenses like household expenses, education fees, and other essential needs after losing their primary source of income.

Events covered

DPS covers three main scenarios:

• Death: A payout is made to the dependants if the insured member passes away.
• Terminal illness: If the insured member is diagnosed with a terminal illness and has a life expectancy of 12 months or less, the payout is made to the member or their nominated beneficiary.
• Total Permanent Disability (TPD): If the insured member is unable to work permanently due to severe disability.

Cost of the DPS

One of the attractive aspects of DPS is its affordability compared to other life insurance plans. The premiums are relatively low and are based on the age of the insured member.

Premium structure

Imagine a 30-year-old CPF member named Sarah who enrols in DPS. At her age, she pays an annual premium of S$18 for S$70,000 coverage. As Sarah ages, her premiums will increase gradually to reflect the higher risk of insuring older members.

For instance, when she turns 35, her premium will rise to S$30 per year. By the time she reaches 45, her premium will increase to S$93 annually, and when she turns 55, it will peak at S$298 per year.

Despite these increases, DPS remains a cost-effective option for maintaining basic life coverage, especially since the premiums can be deducted directly from CPF savings, offering convenience and affordability.

Comparison with other term-life insurance plans

DPS premiums are generally lower than those of private term-life insurance plans, mainly because there is no need for medical underwriting.

However, this affordability comes with some trade-offs: DPS offers a fixed maximum coverage of S$70,000, which is lower than many private insurance plans.

Additionally, DPS lacks the flexibility and additional benefits, such as customisable coverage amounts and riders, that private term-life insurance policies provide.

Read more: Best of Term Life Insurance Policies

How to enrol in the DPS

Enrolling in the DPS is a simple process that provides CPF members and their families with essential term-life insurance coverage. Here’s how to do it.

Eligibility criteria

• CPF membership: DPS is automatically extended to Singapore Citizens and Permanent Residents aged 21 to 65 when they make their first CPF contribution. However, those aged 16 and above who are not automatically covered can still apply directly with Great Eastern Life.
• Age limit: The scheme covers individuals between 16 and 65 years old.

Enrolment process

• Automatic enrolment: For members aged 21 to 65, DPS is automatically included when they make a valid CPF contribution.
• Manual application: Those aged 16 to 65 who are not automatically covered can manually enrol by submitting a health declaration and the necessary forms directly to Great Eastern Life
  .

Claiming benefits

Members or their families need to provide relevant documentation, such as proof of death, medical reports, or certification of total permanent disability, directly to Great Eastern Life to make a claim under DPS.

Pros

The DPS has several advantages that make it an appealing choice for many CPF members.

1. Affordable premiums

DPS offers basic coverage at a low cost, with annual premiums starting at S$18 for younger members (under 35) and rising to S$298 for those aged 55-64.

2. Easy enrolment

DPS is automatically extended to CPF members aged 21-65 upon their first CPF contribution. No medical underwriting is needed for enrolment, which allows individuals, including those with pre-existing conditions, to access coverage easily.

3. Peace of mind

DPS provides peace of mind for individuals with dependants with financial protection in the event of death, terminal illness, or TPD.

Cons

1. Age limit

DPS coverage ends at age 65, which can be a disadvantage for those who need insurance coverage later in life. Individuals approaching retirement may need to seek additional coverage beyond DPS to maintain financial protection for their families
.

2. Basic features

It lacks features like riders, cash value, and customisable coverage amounts often found in private insurance policies.

3. Limited coverage amount

The maximum coverage amount under DPS is S$70,000, which reduces to S$55,000 between ages 60 and 65. While this amount can provide immediate financial relief, it may not be sufficient for long-term needs, such as paying off a mortgage or funding children’s education
.

Is the DPS worth it?

The DPS is worth considering if you are looking for a basic, low-cost insurance option, especially when starting your financial journey. It benefits those starting their careers, newly married individuals, or those with young children who may not have extensive financial resources or other insurance plans in place.

While the DPS provides a good entry-level option, it is important to evaluate whether the coverage is sufficient for your needs. Therefore, while the DPS can be a helpful starting point, it should not be relied upon as the sole source of financial protection.

Individuals should consider additional coverage options, such as private term life insurance, to better meet their financial planning goals and provide comprehensive security for their dependants
.

Read more: When Do You Actually Need to Buy Insurance?