KGI Blog | Is Critical Insurance “Critical”?
Published by Christina Chua, 1 August 2020
Why is Critical Insurance so “Critical” to you and your loved ones?
In the course of my work, I conduct regular ‘Health & Wealth’ seminars/webinars for our clients and the general public in collaboration with specialist doctors, focusing on the topic of critical illness prevention and protection, both from a health and wealth perspective.
Preventing and protecting against critical illnesses from the health or medical standpoint is where you go for regular health screening, make changes to your lifestyle and diet to stay fit and healthy. But let's face it – even among the most health-conscious and fittest group of individuals, illness may still strike unexpectedly due to factors that are not within their control, such as hereditary and genetics.
And when this happens, that’s where the wealth part of critical illness protection comes in to save the day.
Regrettably, when engaging with the participants in these events, I realized that many people still do not understand the importance of having adequate critical illness coverage. Separately, approximately 40% of the sample group are unaware of the differences between having a private integrated shield plan and critical illness insurance.
In this article, we are going to look at the top reasons on why you need critical illness insurance and how they work to protect you and your family from facing financial problems when a critical illness strikes.
What is critical illness insurance?
Critical illness insurance pays out a lump sum of money to the life assured if they are diagnosed with a critical illness covered by the policy. These include illnesses such as:
- Kidney failure
- Stroke
- Certain types and stages of cancer
- Heart attack
- And so on.
Depending on the insurer and the type of plan offered (early-stage, advanced stage, or multiple stages), the critical illnesses covered by a policy may differ. Nonetheless, the Life Insurance Association (LIA) Singapore has an industry list of 37 critical illnesses and their standard definitions, which can be found here: https://www.lia.org.sg/media/1463/lia-ci-framework-2014_lia-definitions-for-37-cis.pdf
Top reasons why you need critical illness coverage:
1. The possibility of getting diagnosed with critical illness is exceptionally high
According to a Straits Times article published in 2015, there is a sharp rise in the number of people diagnosed with cancer in Singapore since 2010, with 36 Singaporeans being diagnosed with cancer daily. In the article, it is also mentioned that not all cancers can be avoided by living healthily. Therefore, it is necessary to be financially ready in the event of an unexpected diagnosis of critical illness. The good news is that with early detection through health screening and medical advances in recent years, it has also led to higher survival rates. The payout from a critical illness plan will help to alleviate the financial burden of ongoing treatments and other related costs in the recovery journey.
Reference: https://www.straitstimes.com/singapore/health/sharp-rise-in-number-diagnosed-with-cancer
2. Hospitalization insurance (Medishield Life or private integrated shield plan) won't cover all your medical expenses
Many people have the misconception that critical illness insurance is not required when hospitalization plans can cover all the medical expenses incurred. What they don’t realize is that there are limits to what hospitalization plans can cover.
If you only have MediShield Life, you need to be aware that the MediShield Life payout will cover just a small fraction of your bill. To pay the balance, you will need to draw from your Medisave account or top up with cash.
Reference: https://www.moh.gov.sg/cost-financing/healthcare-schemes-subsidies/medishield-life
You will be in a better position if you have a private integrated shield plan, which offers an enhanced coverage over MediShield Life and covers hospitalization stays, surgeries, and specific outpatient treatments such as kidney dialysis or chemotherapy. Nonetheless, critical illnesses require repeated costly treatments, especially during the early stages. Even for private integrated shield plans, there are claim limits as well and it may not cover all tests, treatments, and consultation fees.
In such situations, critical illness insurance will make up for the limits of your Medishield Life/private integrated shield plan coverage so that you do not have to dip into your savings to cover the shortfall or gap.
3. A critical illness plan can cover for the loss of income during recovery
Most companies in Singapore have between 60 to 90 days of paid sick and hospitalization leave per year for each employee. However, recovery from a critical illness certainly takes longer than that. To put things into perspective, LIA has set a 5-year benchmark as the recovery period for critical illness. Any leave that exceeds the annual paid sick/hospitalization leave will be considered unpaid leave, and there will be no income during this period.
With critical illness insurance, you will receive a lump sum payout upon the diagnosis of a critical illness covered by the plan. This payout can be used for whatever purposes you deem fit, which allows you to make up for lost income and continue to support your family during recovery.
4. Once you are diagnosed with a critical illness, it will be challenging to get covered in the future
Insurers assess every applicant based on their health and the risk they represent before determining whether to offer coverage to them. Once you are diagnosed with a health condition, it will be more challenging to get coverage for critical illness protection. Although it is still possible, the premiums may be higher due to loading, or there will be exclusions imposed which excludes your pre-existing conditions. Therefore, if you are in the pink of health and do not have adequate critical illness coverage, now is the best time to get covered. Not only are the premiums more affordable, but you will also get comprehensive coverage for all illnesses covered by the plan.
Summary
Considering the high probability of getting diagnosed with a critical illness and the financial implications that are involved, having critical illness insurance will give you a peace of mind knowing that even if you become ill, you will be able to cope financially.
Before I finish, did you know that from 26 August 2020 onwards, all life insurers in Singapore will be changing the definitions of critical illnesses based on LIA’s latest changes to the CI framework in 2019?
The changes are meant to address ambiguities that have emerged as a result of medical advancements and health trends in the recent years, mainly in the areas of major cancer, stroke with permanent neurological deficit, heart attack of specified severity, end-stage kidney failure and coronary artery bypass surgery.
Policyholders who purchased their critical illness insurance between 2014 till now will not be affected by the changes, as their existing policy will still follow the 2014 CI framework.
Do reach me at [email protected] if you would like to discuss more on this topic.
Stay safe and be well, everyone!
