How Important Is It To Have Critical Illness Coverage In Singapore?
Being an independent adult normally means navigating through life while juggling various responsibilities, be it your career ambitions, family obligations, or plain old monthly bills.
And that’s not even considering the need to create a financial plan for you and your loved ones! Yikes.
Financial advisory services (including ours) and finance articles often stress the importance of safeguarding your own finances, as an unexpected medical emergency can easily wipe out your hard-earned savings. Sure, hospitalisation and life insurance plans are probably the first insurance plans you would have gotten, but perhaps there’s still one crucial and often overlooked aspect of your protection – critical illness coverage.
What exactly is critical illness insurance and why is it so important?
We’ll address these questions and misconceptions surrounding critical illness coverage. So, let’s delve into the nitty gritty, shall we?
How Does Critical Illness Plans Protect You?
Critical illness, also referred to as "dread diseases" by insurers, refers to life-threatening medical conditions that can severely impact you emotionally and financially.
Insurance coverage for critical illness provides a financial safety net to help you cover medical treatments arising from a critical illness as these bills can easily rack up.
The Life Insurance Association of Singapore’s 2022 Protection Gap Study recommends that Singaporeans have critical illness coverage of about 4 times the annual income of economically active adults.
Critical illness coverage isn’t just about covering medical bills that aren’t fully covered by your existing hospitalisation insurance plan – it’s also about maintaining your financial commitments. The payouts provide income replacement when you’re recovering and unable to draw a salary. This in turn can help cover household bills, loan repayments, and other financial obligations, such as mortgages and caregiving expenses.
Tip: Look for plans such as Complete Critical Protect, which provides comprehensive coverage from diagnosis to recovery and offers up to 10 times the sum assured1,2,3 from early to advanced stages of dread diseases. This will help you focus on your recovery without worrying too much about your finances.
Critical Illness Coverage Is Often Misunderstood
Critical illness coverage, despite its importance in financial planning, is often misunderstood. Let’s address these misconceptions and hopefully provide you with greater clarity on critical illness insurance.
Misconception 1: A Hospitalisation Or Life Insurance Plan Is Sufficient
Hospitalisation insurance plans cover medical expenses and hospitalisation. For instance, if you were diagnosed with cancer or suffered a major heart attack, your hospitalisation insurance plan would cover the hospital bills, but a critical illness plan like Complete Critical Protect would give you lump sum payouts that you can use for treatments.
Life insurance plans are typically designed to provide a death benefit in the event of the policyholder’s death.
However, many insurers offer optional riders that can be added to a life insurance policy to provide coverage for critical illnesses. This can be a good option to get critical illness coverage if you already have life insurance plans.
Misconception 2: Young, Healthy Individuals Don't Need It
The belief that critical illness coverage is unnecessary for young, healthy individuals is another misconception.
Critical illness can strike at any age, and the financial impact can be significant. Getting coverage early not only ensures financial support during an emergency, but it often comes with more affordable premiums, as premiums for critical illness are usually lower when you’re younger before any health issues arise.
Getting critical illness coverage later in life may result in certain conditions being excluded from your coverage due to new medical conditions that you may develop.
That’s why getting critical illness coverage early, while you are young and healthy, is crucial. This provides peace of mind against the unexpected, without draining your own or your parents’ savings.
Misconception 3: It Covers All Types of Critical Illnesses
While critical illness coverage can get extensive, it's essential to understand that not all policies cover the same set of illnesses.
For instance, while many plans cover only the LIA Singapore’s list of 37 critical illnesses, plans like Complete Critical Protect covers 158 conditions across various stages of dread diseases and benefits.
Some critical illness plans may only cover certain specific illnesses, with the extent of coverage varying between plans and additional criteria for making a claim.
Be sure to review the policy details before you make a purchase to understand what you’re getting covered for.
Misconception 4: Critical Illness Coverage Is Very Expensive
While getting the most comprehensive coverage might require a higher budget, there are also basic coverage plans that cover the most common and severe illnesses.
Consider this illustration: John, a 34-year-old senior marketing executive, who is focused on building his career, traveling the world, and supporting his parents. However, a sudden heart attack left him unable to work for months, putting immense strain on his finances and emotional well-being. Fortunately, John has secured a critical illness plan, he opts for Complete Critical Protect, choosing the Protect Max Plan with a sum assured of S$100,000 and a policy term up to age 64. For this coverage, John pays a monthly premium which equates to S$117.
Just think about it – this premium is likely less than what many of us spend on a weekend outing or a gym membership. Yet, in return, John gains substantial financial security during his recovery and invaluable peace of mind, knowing that he has protection against life-threatening illnesses like cancer, heart attack, and stroke.
If you’re unsure about which plan to choose or how to balance coverage and budget, speak to an insurance advisor to work out a plan that’s tailored to your financial needs.
How To Pick The Right Critical Illness Plan
Everyone’s personal protection and financial needs are different, so it’s important to assess which plan works best for you.
1. Evaluate Your Critical Illness Coverage Needs
Begin by assessing your specific needs. Consider factors such as your age, health history, family medical background, financial obligations, and dependents (if any).
In the 2022 Protection Gap Study by LIA, it’s recommended that you have a critical illness coverage of about 4 times the annual income of economically active adults. Individuals, on average, take approximately five years to recover from a critical illness, which can significantly impact their earning potential and savings.
Hence, you should have sufficient critical illness coverage to ensure you and your family are adequately covered through your recovery period.
2. Decide On Your Preferred Plan Type
You can select between term life insurance and whole life insurance with critical illness coverage riders.
Term life plans generally have lower premiums but only offer coverage for a fixed period, making them suitable for those on a tighter budget. Whole life plans, though more expensive, come with the benefit of having cash values that can be used to supplement your retirement income. Additionally, whole life plans will cover you for life and ensure a piece of mind, no matter when a critical illness may strike.
Do consider this carefully, as you’ll want to weigh your long-term goals, financial situation, and the level of protection you desire for your loved ones, and choose a plan that balances coverage and affordability.
3. Look For Essential Benefits In A Critical Illness Plan
Ensure the plan covers the essential major conditions such as cancer, heart disease, stroke, organ failure, among others.
Another important benefit is to receive a lump-sum payout upon the diagnosis of a covered condition in its early stage. This will enable you the flexibility to use the funds for medical expenses, income replacement during recovery, mortgage payments, and any other pressing needs without depleting your savings.
Do look out for plans that also offer coverage against recurrent condition during the policy term for that additional financial security.
4. Consider Terms & Conditions And Claim Process On Riders/ Add-ons
Riders/ add-ons on existing life insurance plans are an easy way to get on board with critical illness coverage, but you must also be aware of certain terms and conditions, exclusions, and the claims process to ensure it’s right for you.
Be sure to look out for exclusions from the coverage plan – exclusions are conditions that are not covered under the plan, and can include pre-existing conditions, specific illnesses, or conditions not defined as critical illnesses.
There may also be a waiting period from the time you get the riders/ add-ons before the coverage becomes in-force. There can also be a survival period requirement, which means you’ll need to survive for a certain number of days after the diagnosis of a critical illness before you can make a claim.
Speaking about claims, do familiarise yourself with the process of filing a claim, including what documents you’ll need, and how the claim will be paid out. Claims can sometimes affect the benefits from the main policy, such as reducing the death benefit once a critical illness claim is made.
5. Find out your Protection Gap To See How Much More Coverage You Need
As your life stages and circumstances change, it’s essential to regularly review and update your coverage using a protection gap calculator. The protection gap calculator helps you determine the difference between your current coverage and the ideal coverage needed based on your specific circumstances and financial obligations. This will give you a general idea of any protection gap and additional coverage you might need to safeguard your future and that of your loved ones. Speak with an advisor for further analysis and guidance in working out a personalised solution.
6. Get Help From Our Insurance Advisors
Getting your financial coverage in order can be overwhelming, which is why speaking to our insurance advisors can help take away that stress. And rest assured that you’ll be getting advice that’s tailored to your needs and financial goals.
So, How Critical Is It For Me To Get Critical Illness Protection?
Unlike general health or life insurance, critical illness coverage is tailored to address specific challenges associated with severe health conditions.
It’s important to remember that critical illness can strike at any age, regardless of your health status. Preparing early ensures you're financially ready for any curved balls life throws at you, especially with healthcare costs constantly rising.
With payouts tailored specifically to the diagnosis of a critical illness, you can ensure the financial stability of you and your loved ones through the lump-sum payouts that can help with treatment costs, loan repayments, and other financial obligations.
If you need help to find out more about critical illness coverage, you can speak to our insurance advisors to work out a plan tailored to your needs.
1If more than one dread disease covered under the Dread Disease Benefit and/or recurrent condition (if applicable) and/ or impairments of vital function are diagnosed on the same date, only one claim with the highest possible benefit payout, regardless of the number of dread diseases and/or recurrent condition (if applicable) and/or impairments of the vital functions that are diagnosed will be approved.
If the insured is covered by Dread Disease Benefit, Recurrent Benefit and Vital Function Benefit (or equivalent benefits) under any policies which have been issued and paid (whether issued and paid by Income Insurance or by any other insurer), the total of these benefits under all these policies cannot be more than $3.6 million (including premiums waived due to dread disease but excluding bonuses). In this case, Income Insurance will first take into account the amounts due under the earlier policies and then pay out only an amount to bring the total payments to $3.6 million (including premiums waived due to dread disease but excluding bonuses).
2The payout for the early and/or intermediate stage dread disease of the same dread disease under this benefit will not exceed $350,000 for each insured, including all policies Income Insurance has issued and paid for the same insured.
If the policyholder has chosen Protect 100, the claim for the early and/or intermediate stage dread disease may be approved when the Vital Function Benefit of the corresponding dread disease, which the same early and/or intermediate stage dread disease belongs to has not been claimed.
If the policyholder has chosen Protect Max, the claim for the early and/or intermediate stage dread disease may be approved when the Vital Function Benefit of the corresponding dread disease, which the same early and/or intermediate stage dread disease belongs to has not been claimed and no claim has been approved for the advanced stage of the same dread disease. The payout for the early and/or intermediate stage dread disease will not exceed $1.05 million for each insured, including all policies Income Insurance has issued and paid for the same insured. A waiting period of 12 months applies from the date of diagnosis or date of surgery performed, whichever is later, of the latest claim approved under the Dread Disease Benefit for another dread disease, Recurrent Benefit or Vital Function Benefit.
3If the policyholder has chosen Protect 100, the payout for the advanced stage Dread Disease Benefit will less claim paid for the early stage and/or intermediate stage dread disease and Vital Function Benefit.
If the policyholder has chosen Protect Max, the payout for the advanced stage Dread Disease Benefit will less claim paid for the early stage and/or intermediate stage dread disease of the same dread disease and Vital Function Benefit of the corresponding dread disease.
This is for general information only and does not constitute an offer, recommendation, solicitation, or advice to buy or sell any product(s). You can find the usual terms, conditions and exclusions of this plan at income.com.sg/complete-critical-protect-policyconditions.pdf. All our products are developed to benefit our customers but not all may be suitable for your specific needs. You should speak to a qualified insurance advisor before you purchase any product. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. This plan does not have any cash value.
Protected up to specified limits by SDIC.
This article is meant purely for informational purposes and does not constitute an offer, recommendation, solicitation or advise to buy or sell any product(s). It should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. Please seek independent financial advice before making any decision.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org.sg).
This advertisement has not been reviewed by the Monetary Authority of Singapore.
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