Life is so unexpected. We never know what it’ll throw at us. Whether it’s cancer, a stroke or a heart attack, we aren’t really ever prepared for those events. In the event you’re hospitalized (touch wood), it’s good to know that your bills are covered by your hospitalization insurance plan. However, getting a Critical Illness (CI) insurance plan to go with it is more important than you think.
Benefits of Critical Illness Insurance
CI plans are designed to pay out a lump sum at a time upon diagnosis. Most CI insurance plans provide coverage for at least 37 illnesses, which includes cancer, heart attack and stroke.
Why do you need Critical Illness Insurance?
A 2018 study by the Life Insurance Association (LIA), found that when diagnosed with a CI, most Singaporeans and permanent residents are only covered for a year of their expenses or 20% of what they need if they happen to be unable to work for five years.
CI insurance bridges the gap between MediShield Life and your hospitalization insurance plans. Upon a CI diagnosis, apart from the hospital bills, there are additional concerns to think about. For example, you’ll definitely need some time off from work to focus on recovering which means your income will take a hit. In addition, you might also need to hire a domestic helper to take care of household chores when you’re unwell.
In 2018, the Ministry of Health found that the number one cause of death in Singapore is cancer. In addition, the risk for developing cancer in Singapore’s population is around one in every four to five people. In another research study by the LIA, 90% of all severe stage (cancer) claims received by life insurers are for five CIs, namely:
• Major Cancer
• Heart Attack of Specified Severity
• Stroke with Permanent Neurological Deficit
• Coronary Artery By-pass Surgery
• End Stage Kidney Failure
How much coverage is enough?
Now that we know how important it is to get a CI insurance plan, how much coverage is exactly enough?
According to LIA’s 2017 Protection Gap Study, the average employed Singaporean has about S$60,000 worth of critical illness coverage. However, the LIA recommended covering a minimum of 60 months, as this is the estimated amount of time the average person would need to recuperate from a CI. For illnesses like cardiovascular diseases and cancer with multiple treatment options and diagnoses, they may require longer recovery periods so it’s fine to have coverage of more than 60 months.
Therefore, if you’re earning an estimated $2,500 a month, a recommended coverage amount would be S$150,000. This amount should increase as your income increases to match up with the recommended coverage.
You should consider getting CI insurance as early as you can, as the monthly premium will be cheaper compared to getting coverage five years down the road. The premium will still be the same after starting the plan.
Unlike your hospitalization plan; your CI premium will not increase as you grow older. It will be tricky when you’re unexpectedly diagnosed with a health condition as you may end up paying higher premiums or will not be able to get full coverage.
What are the types of Critical Illness insurance available?
CI insurance can be classified into term or whole life insurance. Want to know the difference? Take a look at Insurance 101: Term and Whole Life Insurance.
Some plans allow you to receive a lump sum of money upon a CI diagnosis. In recent years, insurance companies help people to make claims for not just one CI but multiple CIs, subject to the sum assured or policy limits. On top of that, most of these plans will payout upon early and intermediate stage CIs, according to the sum assured or policy limits.
Changes in Definition on 26 Aug 2020
On 26 August 2020, CI definitions will be changed to make coverage clearer for policyholders, However, do note that certain insurance companies may adopt the new CI definitions before this date.
According to the President of LIA Singapore, “This round of review addresses ambiguities that have arisen due to medical advancements and health trends in the past five years. Especially with the rapidly ageing population and rising incidences of chronic illnesses here, regular reviews of the CI definitions will ensure that CI products stay relevant with changing times, and that the intended scope of coverage is clear to consumers.”
To understand the changes made, you can read the detailed list in the LIA CI Framework 2019. For those with existing CI policies, don’t worry! You won’t be affected by the new definitions. These new changes will make CI definitions more specific, resulting in stricter policies when it comes to making a claim. However, it makes it very clear about what you’re covered for and what you’re not.
Final thoughts
In this modern age, medical surgery and medicines are getting more advanced. Thus, the survival rate upon a CI diagnosis is increasing. However, the cost of the journey to recovery is getting more and more expensive.
We cannot predict the future, so if you’re not already covered, I suggest you sit your agent down (or find one) and get talking about CI insurance. Even if you do have CI coverage, consider boosting your coverage that will reach the minimum coverage of 60 months.
If you have any questions or looking to get CI coverage, feel free to click the button below or connect with me through Instagram.
Melvin Ang 