It’s ironic that when it comes to critical illness insurance, the sheer variety of product offerings on the market can make it confusing to determine which provides truly “critical” coverage. How can you know which illnesses your insurance should cover?
Unfortunately, the answer is not that straightforward. What may be “critical” to one person may not be to another. But there are certain guidelines that you can look out for, and factors you can consider, when deciding on which coverage is right for you.
We break down what critical illness insurance is all about, so you can understand what your policy should minimally deliver, and where you can exercise the flexibility to customise it according to your needs.
Purpose of critical illness insurance
Critical illness insurance differs from health or hospitalisation insurance in terms of the type of pay out it provides. Where the former usually goes towards covering the cost of treatment, critical illness insurance provides a lump sum amount. As such, its purpose can be viewed as providing money to replace your income while you recuperate from the illness.
Estimating the amount needed
Since critical illness insurance is meant to help replace your income, you can estimate how much coverage you need based on your current salary or expenses. The Life Insurance Association (LIA) recommends coverage that equates to roughly four years of income, to allow sufficient time for recovery and returning to work.
Pro tip: Planner Bee’s Emergency Fund Calculator helps estimate how much you need to tide you over in the case of emergencies that last six months to a year. You can then multiply that amount to figure out how much you need for around four years.
Illnesses to be covered
In general, critical illnesses refer to 37 medical conditions, as defined by the LIA. These include coma, major head trauma and terminal illness. However, among the 37, two of the conditions rank as, or are closely associated with, the leading causes of death in Singapore: cancer and heart attacks. The latter is usually a symptom of ischaemic (where blood flow and oxygen are restricted) heart diseases, the second most common cause of death in Singapore.
Another factor to consider is whether there is a history of any critical illnesses in your family. This might put you more at risk for certain conditions. Besides cancer and heart disease, other common inherited critical illnesses include Alzheimer’s disease, dementia and multiple sclerosis.
Critical illness coverage should minimally include cancer and heart attacks, and it would make sense to also ensure that coverage extends to illnesses that run in the family. If you are looking for comprehensive coverage, make sure that it includes the 37 conditions laid out by the LIA.
The types of illnesses that you opt to get covered would determine what other criteria you should look out for when choosing your plan. Significantly, whether the policy provides a one-time payout or multiple payouts.
The former is generally typical of policies in the market – once a claim has been made, the policy terminates.
In contrast, the latter allows for multiple claims to be made if the illness recurs, or if a different illness is discovered. Your policy allowing for this would be preferable if the illness/es that you are prioritising tend to recur, like cancer, for example.
Factoring in your budget
As part of prudent financial planning, you’d want to make sure your insurance premiums gel with your budget. Given that you may already be servicing premiums for other important policies such as life and health, you might need to allocate a smaller portion of your expenditure to your critical illness plan.
No matter, as there are a number of ways you can save on your policy, and expand its coverage later when you have increased your income or savings.
For one, you could start with policies that cover just the illnesses you would like to prioritise, and later take up riders that include other conditions as well.
In addition, you could consider investing in policies that focus on intermediate- and late-stage diagnosis. While some policies also cover early-stage diagnosis – at which point the ailment may not yet qualify as a “critical illness” yet, they are also more costly as a result. Since later-stage critical illnesses will likely take a greater toll on the body and require more intensive treatment, it would be important to make sure that you have a form of income replacement then.
Alternatively, you could start off by getting a smaller sum insured, even if it’s less than the income replacement amount that you’ve calculated. Later on, you can increase the sum insured.
Read more: Do You Really Need Early Critical Illness Coverage?
Types of policies available
Though by no means exhaustive, we’ve compiled a list of policies that illustrate some of the different types of coverage available.
Common critical illnesses: FWD’s Big 3 Critical Illness Insurance
Aiming to cover the most commonly claimed critical illnesses, FWD’s policy focuses on cancer, heart attack and stroke. It provides insured sums of S$50,000, S$100,000 and S$200,000.
Because it has a narrow focus, it sets itself out as more affordable than most other critical illness plans, with premiums starting at S$31 per month.
You also have the option of topping up for a rider to cover 24 additional heart and neurological disorders.
This plan will pay out regardless of the stage of diagnosis. The nature of FWD’s plan is a one-time pay out, so once you make a claim, the policy will end.
Cancer: Prudential’s PRUCancer 360
This policy provides coverage for cancer at all stages of diagnosis, with assured sums of S$10,000 up to S$300,000. The policy provides a 100% pay out no matter the stage, and covers the policyholder up to age 100 – one of the longer terms in the market.
All stages of critical illnesses: Great Eastern’s GREAT Critical Cover: Complete
If you’re looking for as comprehensive a coverage as possible, plans such as Great Eastern’s can provide peace of mind through its inclusion of 53 critical illnesses and 121 conditions at any stage of diagnosis. You also have the option of adding the “Protect Me Again” rider that can provide two more payouts if your illness recurs or if a different illness is diagnosed.
The variety of coverage provided by critical illness insurance can lead to flexibility but also paralysing confusion when it comes to choosing which policy to get. Understanding the purpose of such a plan – for income replacement – and being clear on which illnesses most commonly strike Singaporeans and/or your family, and the nature of such illnesses, as well as knowing what you can afford, can help you clarify what kind of coverage you should prioritise.