A critical illness can strike you anytime. With the changing economy and the increasing costs of healthcare, paying medical bills might put you in debt. That’s why hospitalisation insurance is essential.
However, what happens after you’re discharged and are undergoing extended recovery from critical illnesses?
Being prepared for whatever comes gives certainty that you can provide for yourself without burdening your family. It is, therefore, necessary to insure your life with critical illness coverage at an early age.
With the new reforms in the critical illnesses definitions and the policy decisions surrounding it, one needs to be well informed about how things might turn.
This informative read will help you understand everything that you need to know about critical illness insurance in Singapore.
What is Critical Illness Insurance?
Critical illness insurance provides the beneficiary with a lump sum of money in the event of being diagnosed with a critical illness. The most common critical illnesses in Singapore include
- Heart attack
- End-Stage Kidney failure
- Coronary artery bypass surgery
The Life Insurance Association (LIA) of Singapore provides an elaborate list of definitions for around 37 severe-stage critical illnesses. The plan offered by different companies might vary in terms of the protection being provided for such illnesses.
How does critical illness insurance work?
Suppose a person is diagnosed with any of the diseases. In that case, critical illness insurance provides you with a lump sum payout to cover costs such as hiring a helper, private transport, medical expenses not covered by your health insurance, and other non-medical related expenses you might incur due to this illness.
Most importantly, it provides you with income replacement when you experience a loss of income.
The only condition that needs to be fulfilled is that the illness should be well within the definitions laid down in the policy. If not, the claim can be rejected by the insurance provider.
More on the definitions later.
It is important to note that critical illness (CI) and early critical illnesses (ECI) are different. Critical illness policies allow you to make severe stage claims for the defined medical conditions.
ECI are for claims in the early stages of critical illness.
Things you should take note of when considering a critical illness insurance plan
When can the claims be rejected?
Though you might be experiencing a critical illness, for you to make a claim, it has to be within the critical illness definitions defined under the policy that you have purchased.
Another reason for claim rejection can be the overriding of a particular waiting period. Some surgeries that are carried out for a specific type of disease usually have a waiting period.
If a patient expedites the procedure and gets the treatment or surgery done in that waiting period(s), he will not be entitled to any benefits, and they will have to pay from their pocket.
Therefore, it is necessary to choose a plan carefully so that the scope of coverage does not leave you in a vulnerable state and ensure that your procedures are within specified periods.
Does the payment pattern change?
Some life insurers offer a different insurance plan for certain diseases like cancer. In cancer, diagnosis is usually followed by the treatment performed in multiple steps.
Depending on the diagnosis and treatment plan, the insurer can provide several small payments, depending on the sum insured or the policy limits.
What does your critical illness policy cover?
Understanding the coverage of a critical illness plan can be a little complicated. Every insurer offers varying levels of coverage.
This primarily depends on the number of critical illnesses being covered, their types, and if there are stages of that critical illness.
Because of a plethora of details and the complicated medical terminologies that are used in the policy plan, people often avoid learning about it.
It is necessary to keep yourself well informed about anything that you are getting into, especially when it comes to insurance. You don’t want to be left disappointed at the time of need just because you were lazy or disinterested in reading one of the policy points.
The simplest and most accessible way to learn about critical illnesses is to read the Life Insurance Association’s comprehensive list of critical illnesses. It contains 37 illnesses that have been industrially accepted as critical illness definitions.
More on the 37 illnesses later.
What is the duration that your critical illness policies cover?
The choice of an insurance plan differs from individual to individual.
Some people prefer to have critical illness covered till the age of 100 years.
Some prefer short-term coverage.
It is seen that a long-term critical illness coverage plan is more in demand due to the early retirement age and longer life expectancies here.
Many people use the critical illness payout to continue the lifestyle they had been living even after retirement by hiring help for either themselves or any elderly in the family.
If your plan provides coverage for 100 years, you have a strong monetary pillar to rely on.
Whenever the situation of crisis hits you, you can bounce back on your critical illness insurance money.
How much critical illness insurance coverage do you need in Singapore?
In Singapore, you need critical illness insurance coverage of anywhere between 3 to 5 years of your annual income.
Surgical treatments for critical illnesses might be short, but recovery can last for months, sometimes even years. You might want extra money to support the expenses during your recovery.
Maintaining your previous lifestyle can be a hard blow to your savings, leaving you empty pockets after fully recovering. This is where your payout from critical illness products helps.
The amount claimed will help maintain your lifestyle and pay for additional expenses incurred when recovering. Notwithstanding that, it will also provide a safety net for your savings, which can now be used for other expenses.
The coverage amount can be decided by referring to the LIA Singapore’s benchmark of the 5-year recovery period for critical illnesses.
First, you need to figure out your 5-year annual income to calculate the amount. Your insurance coverage should most definitely be higher than this calculated amount.
The above is a general recommendation put forth by LIA Singapore. However, insurers have a maximum limit to the amount you can claim. Furthermore, different individuals earn varying levels of income.
Therefore, another rule of thumb you can follow is to either have coverage for 5-7 years of your annual income or have a range between S$250 000 to S$350 000.
The reason for a higher amount is that your coverage plan should provide you with enough support to maintain your current expenses and additional expenses added by the treatment procedure. It might include expensive medications, tests, or even hired help.
How much does critical illness insurance cost?
Though there are multiple benefits to an extensive and comprehensive critical illness plan, it can also be pretty expensive for your pocket.
Before purchasing, figure out what options fit your budget and daily expenses. You wouldn’t want to live a difficult life when you are healthy and a lavish one when you are sick! Striking a balance between the two is necessary.
The cost of critical illness products is based on age, the duration of the plan, and the coverage amount. Not forgetting the medical conditions and the intended scope of the critical illnesses plan.
If the plan appears a lot over your budget, instead of covering yourself for the entire 5-year period, you can opt for a shorter duration.
The cost also depends on the type of CI insurance you buy.
Types of Critical Illness Insurance Plans
Term Plan with CI Rider
This type of CI coverage comes from adding critical illness riders to term plans offered by insurers. Usually, this plan is the cheapest option because it provides you with limited time coverage.
If you use your CI coverage, your sum assured for your term plan will be reduced by what you have used up.
Whole Life Plan with CI Rider
This type of CI coverage comes from adding critical illness riders to whole life plans offered by insurers.
Usually, this plan is more expensive than the term option because it provides you with coverage until you are 99 years old.
Similar to the term plan with CI rider, if you use your CI coverage, your sum assured for your whole life plan will be reduced.
Standalone CI Plan
There are different standalone critical illness plans—either a single-claim or a multi-claim plan. You can opt to cover for only cancer or get a full range of coverage based on the current list set by LIA Singapore.
For single-claim CI plans, you can only claim once as it terminates upon a successful claim made.
For multi-claim CI plans, you can claim multiple times, up to 900% of your sum insured.
Premium payments are monthly and can last as long as you want them to be or until you hit the age limit (similar to a term plan).
These plans are meant to enhance any current CI riders that you have so that your death/TPD benefits won’t be reduced.
Due to the nature of standalone CI plans, they are more expensive than CI riders.
The current list of critical illness conditions
Apart from the five major critical illnesses mentioned earlier, there are about 32 other critical illness conditions specified by the Life Insurance Association. These illnesses are as follows:
- Deafness (irreversible loss of hearing)
- Major burns
- Irreversible aplastic anaemia
- End-stage lung disease
- End-stage liver failure
- Open chest heart valve surgery
- Major burns
- Major organ/ bone marrow transplant
- Muscle dystrophy
- Multiple sclerosis
- Alzheimer’s disease/ severe dementia
- Idiopathic Parkinson’s disease
- Primary pulmonary hypertension
- Motor neuron disease
- HIV due to Blood Transfusion and occupationally acquired HIV
- Benign brain tumour
- Severe encephalitis
- Severe bacterial meningitis
- Blindness (irreversible loss of sight)
- Major head trauma
- Paralysis (irreversible loss of use of limbs)
- Terminal illness
- Loss of independent existence
- Other serious Coronary Artery diseases
- Progressive scleroderma
- Systemic lupus erythematosus with lupus nephritis.
- Irreversible loss of speech
- Fulminant hepatitis
- Open chest surgery to the aorta
- Persistent vegetative state
Recent changes to the critical illness definitions
Recently, LIA Singapore brought about some significant updates in the definitions of critical illnesses.
These changes aim to either broaden or narrow the already existing criteria for claiming insurance due to the advances in medical treatment.
Some of the significant updates are as follows;
Deafness (Irreversible loss of hearing)
This addition has been made by taking into account the advancements that keep occurring in the field of medical sciences. The word ‘irreversible’ indicates that if in the future, there is a possibility of restoring the hearing impairment, it will not be covered by the insurance.
Any specific severity is resulting in a heart attack
The earlier definition of heart attack stated the death of heart muscle due to obstruction of blood flow. The revised edition is to include the death of heart muscle by ischemia. This revision has brought both Type 1 and Type 2 myocardial infarction under the ambit of the definition.
Previously, it was defined as major cancers, while the new definition has been amended to the singular form, major cancer.
The definition now excludes coma that has been medically induced.
Irreversible Aplastic Anaemia
The earlier definition did not give any explicit mention of an irreversible form of aplastic anaemia. The new meaning, however, proves to be disadvantageous to customers, as some forms of aplastic anaemia are reversible.
Why do you need critical illness insurance?
Critical illness insurance policy can be your knight in shining armour in the days of pain. Insuring your losses can help you in the longer run.
An insurance policy that can cover all the medical expenses up to 5 years of recovery can help you maintain a good lifestyle without creating a dip in your savings.
A critical illness protection plan not only helps in paying your medical bills that your health plan doesn’t, but it also lets you ease into your recovery period without stress.
You can hire assistance, pay for expensive medications, or any diagnostic tests. It reduces a lot of monetary burden in your time of need.
Furthermore, with rapid medical advances, more and more regular reviews will be conducted in the future. This means that you risk getting even narrower critical illness definitions.
Who should get critical illness insurance?
Critical illness is not something that comes with a warning. With the stressful lifestyle, unhealthy diet, and lack of exercise, cancer is pretty common amongst Singaporeans.
How common? 1 in 4 Singaporeans may develop cancer in their lifetime.
That’s why cancer insurance exists.
Read our guide where we compare cancer insurance and critical illness insurance.
Either way, protecting yourself with a plan at an early age can prove to be highly beneficial.
After weighing your options, your routine, medical history, and any risks, you should go for a CI plan as early as possible.
You’ll never know if and when a critical illness might hit you.
A carefully chosen critical insurance protection plan can save you from spending thousands of dollars from your pocket.
To sum up
Life can be highly uncertain. You cannot stop any illnesses from entering your life, but you can certainly increase your chances of handling them well.
A critical illness plan might appear to be an additional expense, but it is an investment that you won’t regret.
Your health becomes the main priority after a certain age. Assessing your options as well as your medical history can help you figure the perfect critical illness protection plan for yourself.
Don’t wait to get to an age where your vulnerability to illnesses increases significantly. Invest in a critical illness insurance plan to protect yourself while you’re still healthy.
Our post on the best critical illness insurance in Singapore might help guide you.
If you need advice on what critical illness policy you should get, engage a financial advisor today.