Maid Insurance: Is Purchasing the Waiver of Counter Indemnity Add-On Worth the Extra Cost?

When purchasing maid insurance, you'll notice there is an optional add-on called the "waiver of counter indemnity." The Ministry of Manpower requires employers of foreign domestic workers to deposit a S$5,000 security bond as a guarantee that employers will not break any laws surrounding the FDW's employment. The waiver of counter indemnity is an optional add-on feature of maid insurance policies where the insurer promises to bear the loss of this deposit in the event of a contract breach from S$5,000 to S$250 or even to S$0. The prospect of not being at the risk of losing such a large sum eases the stress employers feel and reduces the need to micromanage domestic workers, lest they do something that will cause a bond breach. However, with changing Ministry of Manpower regulations, bond breaches are becoming more and more infrequent, leaving us with the question of whether or not this add-on is actually worth the cost.

Frequency of bond breaching events

According to the Ministry of Manpower, there have been 64 bond breaches annually between 2004 and 2010. However, with recent updates to the regulations, the MOM no longer holds employers accountable for their worker's actions (including pregnancy) or if she runs away to the MOM or to her embassy. Since then, the number of bond breaches has declined materially to about 22 in 2011, all of which were partial breaches instead of full ones. This means less than 0.01% of bonds are forfeited in a given year year. The only time you are at risk is if you knowingly do something that violates your work permit contract, including abuse, inadequate nourishment and housing and assigning hazardous tasks. The table below shows the frequency of events that can lead to a bond breach, including those that the MOM has since stopped holding the employer liable for.

Expected value of the waiver of counter indemnity

The latest numbers from 2011 show that there is 0.01% chance of losing S$2,500 of the security bond due to a breach. Given these figures, a FDW employer's expected loss of a bond breach is only S$0.26. This means that any employer of a FDW can expect to lose about S$0.26 in a year because of a bond breach, though the actual loss would be much greater if she actually violates the terms of the bond.

When is the waiver worth getting?

In most cases, you will be paying the S$53.50 add-on fee to get the waiver of counter indemnity bond. In comparison to the expected loss of S$0.26 from a bond breach, this price of over S$50 is astronomically high. This means that most insurers are vastly overcharging for the waiver of counter indemnity add-on. If you are an employer with a good track record of hiring domestic workers and you don't run into legal troubles from your end, the waiver of counter indemnity is for a peace of mind rather than for usefulness, though there are insurers like FWD that automatically provide waiver without additional cost.

The Ministry of Manpower has greatly reduced the types of actions that will result in a full bond breach, making it more difficult to forfeit. Not only are you no longer liable for your domestic worker's actions, but there are now relaxed policies surrounding domestic worker runaways. The only bond-breach cases that the waiver of counter indemnity may protect you against is if your domestic worker escapes or if she has a life-threatening work accident (through no fault of yours). In this case, the waiver could help you save at least S$2,250 if you are successful in filing a claim. Therefore, the waiver of counter indemnity add-on is useful mostly only for those who are completely unfamiliar and uncomfortable with their new maids.

On the flipside, the only way to truly breach the security bond is if you purposefully did something that you knew was illegal, such as withholding pay, abuse or not providing adequate accommodations and privacy, in which case, the waiver of counter indemnity will be useless. If you find that you are quite close to your maid already, you could save at least S$50 per year by choosing a policy like Etiqa's eProtect Maid Insurance that allows you to forgo the waiver for a reduced price.