Unless you have a death wish, you won’t jump out of a flying airplane without a parachute, or dive deep into the ocean depths without an oxygen tank. In the same way, you shouldn’t be going through life without enough insurance coverage. But when it comes to insurance coverage, how much is enough?
While term life insurance and whole life insurance policies cover you should you die suddenly, or suffer permanent disability, many don’t automatically cover you in the case of critical illness. Instead, insurers expect you to pay a bit more than the stated premium to get critical illness coverage. Alternatively, you’re given the option of buying a separate critical illness insurance policy.
But critical illness coverage is definitely something you should be getting. The statistics are worrying – according to the Singapore Cancer Society, 37 people are diagnosed with cancer every day, and according to the Singapore Heart Foundation, 16 people die from cardiovascular disease, or heart disease and stroke, every day! And those numbers are slowly but steadily increasing each year. Critical illness, or CI, is definitely something you want to protect yourself from.
Don’t worry about it. I checked my policy and it says I’m already paying for CI coverage!
Well, it’s great to know that you’re covered by your policy for critical illnesses, but do you know exactly how much coverage you’re paying for? Have you actually read the terms and conditions for your CI coverage? Here are 3 things you need to look out for in your CI coverage.
1. What critical illnesses does your policy cover?
While most policies on the market should provide coverage for at least 37 illnesses including cancer, heart attack and stroke, it still doesn’t mean that you should take it for granted that you can just buy the cheapest policy. Not all policies are alike.
That being said, don’t be fooled by certain numbers provided by some insurers. Some policies claim to cover over 90 “conditions”, but what they’re actually referring to is three different stages of the same critical illness.
2. Speaking of different stages… Are you covered for early stages of your critical illness?
Check to see if your CI insurance policy covers you for early stage diagnoses of your critical illness. In the past, insurance policies only covered intermediate or even later stages of your critical illness. People had to wait till they were about to die before they qualified for the payout. Fortunately, things are different now and most insurers offer coverage for early-stage diagnosis of most illnesses. Still, it pays to check exactly what the criteria for “early-stage”, “intermediate-stage” and “severe-stage” are.
The last thing you want is to be disappointed to find out that you’re not going to get any money from your policy because your heart attack wasn’t “severe” enough.
3. Just how much of the sum assured will you be getting?
Critical illness insurance can come in many forms, but the general purpose is similar – to pay you a lump sum should you be diagnosed with one of the illnesses specified in the policy.
Before we go further, don’t confuse this with the coverage you get from your integrated shield plan for example. Those are only supposed to subsidise your hospitalisation bills and the costs of some treatments.
Some critical illness insurance policies pay out 100% of your sum assured as soon as there is an eligible diagnosis regardless of what stage the illness is at. This means that if you’re covered for $200,000, and you get diagnosed with early-stage cancer, you’ll still get the full amount of $200,000, which is great!
Other insurers will stagger the payouts, and cap the amount you can get from an early-stage claim or an intermediate-stage claim. For example, if you’re covered for $500,000, and get diagnosed with early-stage cancer, you may only get a maximum of $100,000. If down the road you get diagnosed with a terminal illness, then and only then will you get the remaining $400,000.
But if I don’t need to worry about my medical bills, then why do I need a lump sum payout?
So if you don’t need to worry as much about your medical bills, why do you need a lump sum payout when you get diagnosed? Because a critical illness very often can potentially lead to some loss of income. If you’re “lucky”, then all you’ll need to worry about is missing several weeks of work while recuperating. However, most critical illnesses often lead to a significant loss of income. In addition, it also leads to purchasing mobility aids, physiotherapy sessions, or even hiring a domestic helper – and all that often doesn’t come cheap.
So take note of how much you’re covered for, and ask yourself if it’s enough.
But here’s the real problem with CI coverage…
Once you’re diagnosed with a critical illness, you’re usually seen as uninsurable. According to AIA Health Matters Survey 2016, 94% out of a hundred people with a CI surveyed found it difficult to buy another CI plan. Unfortunately, when you’re diagnosed with a CI, there’s a 1 in 3 chance that you might be diagnosed with another critical illness later in life.
As you can imagine, this is not a good situation to be in. In addition, 53% of those surveyed felt their current CI plans weren’t comprehensive enough and 40% of those surveyed revealed that their coverage was only for major stage CI, with no protection for early and immediate stages.
Fortunately, things are changing in the world of Critical Illness Insurance Plans
Insurers, realising that there are gaps in the critical illness protection that Singaporeans are receiving, are coming up with new products to cover those gaps.
For example, AIA’s new AIA Triple Critical Cover (TCC) is Singapore’s first multiple early critical illness product that covers you up to 300% of your sum assured. The special feature of this policy is the Power Reset, which allows you to restore your cover after being diagnosed with a critical illness even for early stage. That means that if you get diagnosed with heart disease, and make a full claim, you will still be covered for the original sum assured should you get diagnosed with cancer later in life.
One other key gap in the market that this product also addresses is the fact that many CI plans do not have any cash value. The AIA TCC has a Life Plan option where customers can receive cash value upon surrender of the policy or mature at the age of 100.
With so many various options for critical illness insurance coverage in Singapore, at the end of the day, it is important to understand your overall financial needs and family medical history before deciding what sort of coverage is needed for yourself.
Do you think you are sufficiently covered for critical illness? Why or why not?