Getting diagnosed with a serious illness is something none of us want to think about, but did you know that critical illnesses like cancer and heart disease are hitting people at younger ages than ever before?
That’s why early critical illness insurance is so important — it can give you financial protection when you need it most.
In this post, you’ll learn:
- What early critical illness insurance is all about
- The key features to look for in a plan
- How to choose the right coverage for your needs
- Whether early critical illness coverage is worth it
If you’re curious about how this type of insurance could protect you and your family, keep reading to find out more!
What is early critical illness insurance?
Early critical illness insurance is a type of policy that provides financial support if you are diagnosed with a critical illness in its early stages.
Unlike traditional critical illness plans that typically cover more advanced stages, early critical illness insurance kicks in sooner, often at the first signs of a major illness, such as cancer, heart attack, or stroke.
One of the key features of this insurance is the lump sum payout you receive upon diagnosis.
It gives you the financial freedom to not just focus on paying the medical bills, but also to take care of daily living expenses and ensure you don’t have to dip into savings or borrow money to cover costs.
Some features of early critical illness insurance plans
Lump Sum Payout
One of the most attractive aspects of an early critical illness insurance plan is the lump sum payout upon diagnosis.
This means you get a lump sum of money right when you need it most – before things potentially get worse.
The payout can be used however you see fit.
Multiple Payouts Option
Sometimes critical illnesses can sometimes recur or you may develop a different illness altogether.
For instance, someone might recover from early-stage cancer, only to face another critical illness a few years later.
With a policy that offers multiple payouts, you don’t have to worry about exhausting your coverage with the first claim.
The policy remains active for other future diagnoses, ensuring you’re protected throughout different stages of your life and recovery.
Why is early critical illness coverage necessary?
Increasing life expectancy and rising risks at a younger age
As life expectancy improves, more people are living longer.
That’s great news, right?
But here’s the thing: with longer life expectancy comes a higher chance of being diagnosed with a serious illness at some point in your life.
What’s even more concerning is that we’re seeing critical illnesses like cancer, heart disease, and stroke affecting individuals at younger ages.
For example, in Singapore, cancer remains a leading cause of death, and the likelihood of developing some form of it earlier in life is increasing.
Heart disease, once thought to be an ailment of older generations, is now becoming more common among younger people due to lifestyle factors like stress and diet.
So, while it’s easy to think, “I’m young and healthy, I don’t need to worry about that yet,” the reality paints a different picture.
Early critical illness insurance steps in to provide financial protection long before these illnesses reach advanced stages, allowing you to access treatment and support early on.
Financial preparedness
We often hear that medical expenses are rising – and it’s true.
Healthcare costs can be overwhelming, especially when faced with a critical illness.
But what many people don’t account for are the non-medical costs that pile up during a health crisis.
Early critical illness coverage ensures that you have a financial buffer, meaning you don’t need to tap into savings or take on debt when life throws you a curveball.
Early detection and medical advancements
Over the years, the advancement of medical technology has dramatically improved the chances of surviving a critical illness — but only if it’s caught early.
Early detection of illnesses like cancer, heart disease, and stroke has become a game-changer, giving individuals a better shot at successful treatment and long-term recovery.
While it’s reassuring to know that medical advancements are helping people live longer and healthier lives, the reality is that getting diagnosed early often comes with a hefty price tag.
And if you’re not financially prepared, the stress of managing costs can impact your ability to fully focus on your recovery.
This is where early critical illness insurance steps in, providing financial relief right from the start.
Financial relief for medical costs not covered by health insurance
You might be wondering, “I already have Medisave and health insurance. Why would I need early critical illness coverage?”
The answer lies in the gaps in your existing coverage.
Most health insurance plans focus on covering hospitalisation, surgery, and basic treatments, but there are often several costs that go beyond what’s typically covered.
Take alternative treatments, for instance, or consultations with specialists – they can quickly add up, and many health insurance plans don’t cover them entirely.
Then there’s the cost of ongoing outpatient care, follow-up tests, medications, or even rehabilitation services, which could be needed for months or years post-treatment.
Additionally, health insurance may only cover a portion of your hospital bills, leaving you responsible for the rest.
Early critical illness insurance helps cover these additional expenses that can arise during treatment, which otherwise would come out of your own pocket.
Financial relief for non-medical costs
When people think about the costs associated with critical illness, the first thing that comes to mind is often medical bills.
But the reality is, there are many non-medical expenses that can quickly add up, putting significant strain on your finances.
Early critical illness insurance is designed to help you with more than just hospital or treatment fees – it provides financial relief for the everyday costs that aren’t covered by health insurance but are equally important during your recovery.
Types of early critical illness insurance plans
Standalone early critical illness plans
As the name suggests, a standalone ECI plan is a dedicated policy that specifically covers early-stage critical illnesses.
It operates independently from any other form of insurance you may have, designed to offer a lump sum payout upon the diagnosis of a covered condition, allowing you to manage treatment costs, non-medical expenses, or even supplement lost income during your recovery.
Whole life plans with an ECI rider
On the other hand, whole life plans with an early critical illness rider offer a broader form of protection.
A whole life plan provides life insurance that lasts for your entire lifetime, and when you add an ECI rider, you’re enhancing that protection with critical illness coverage as well.
This way, you get both death and critical illness benefits under one policy.
Term plans with an early critical illness (ECI) rider
Another option for those looking to secure early critical illness coverage is to add an early critical Illness rider to a term insurance plan.
Term plans are known for their simplicity and affordability, offering pure protection for a fixed period, typically 10, 20, or 30 years.
By adding an ECI rider, you can enhance the basic coverage of your term plan to include protection against critical illnesses diagnosed at early stages.
How to select an early critical illness plan?
Here’s a breakdown of what to look for when selecting an early critical illness plan:
Number of ECIs covered & their definitions
The number of early critical illnesses covered by a plan varies from insurer to insurer.
While some plans may cover a basic list of conditions, others offer comprehensive coverage that includes a wide range of illnesses.
When evaluating a plan, make sure to carefully review the list of covered conditions to ensure you’re getting sufficient protection for a variety of scenarios.
For example, cancer is one of the most common critical illnesses, and early detection greatly improves survival rates, so ensuring that your plan covers a wide range of cancers, including less common types, is essential.
You should also take note of what the insurer defines as a claimable event – especially for conditions that you’re more worried about.
Some insurers have stricter definitions while others are more lenient with it.
By choosing a plan that offers broad coverage for a wide range of early-stage illnesses, you’ll ensure that you’re protected against a variety of health risks, giving you and your family the financial security you need during difficult times.
Coverage amount
This refers to the sum of money you’ll receive if you’re diagnosed with an early-stage critical illness.
The coverage amount should be carefully evaluated to ensure that it meets your financial needs, both in terms of medical costs and the non-medical expenses that can arise during your illness and recovery.
The guidelines by the Life Insurance Association Singapore recommend that your ECI coverage be sufficient to replace at least 2 to 3 years of income, depending on your risk factors and family responsibilities.
While a guideline is useful, I prefer to know exactly how much insurance coverage I need, especially since I want to have sufficient coverage without overpaying.
This is why I created the ECI coverage calculator, available in The Financial Toolkit.
The calculator takes into consideration how much you need monthly based on your current expenses and liability, any existing assets you have, and of course the dreaded effects of inflation.
This way, you don’t rely on just rule of thumbs that might be too little or too much for you.
All these done by taking into consideration every aspect of your life.
However, if you want to calculate this on your own, here’s our guide on determining the amount of early critical illness coverage you’ll need.
Number of payouts
When selecting an early critical illness (ECI) insurance plan, the number of payouts is a key feature to consider.
Traditionally, many critical illness plans offer a single payout, where you receive a lump sum upon diagnosis of a covered illness.
However, some plans now offer multiple payouts, allowing you to claim more than once for different critical illness diagnoses, or even for the recurrence of the same illness.
Understanding the differences and implications of these options can help you choose a plan that fits your long-term needs.
Duration of coverage
The length of time you’re protected under the policy can significantly affect both the cost of premiums and the level of financial security it provides.
Whether you want coverage for a specific period or for your entire life, it’s important to understand how the duration of coverage impacts your plan and what option suits your needs.
Claim conditions
When selecting an early critical illness (ECI) insurance plan, understanding the claim conditions, such as survival periods and waiting periods, is crucial.
These conditions determine when and how you can make a claim after being diagnosed with a critical illness.
They can vary across different insurers and policies, so it’s essential to read the fine print and know exactly what you’re signing up for.
Survival Periods
A survival period is the minimum number of days you must survive after being diagnosed with a critical illness before a claim can be made.
The purpose of this condition is to ensure that the policyholder has a chance to recover or seek treatment after diagnosis before the payout is made.
If the policyholder passes away before the survival period ends, no payout will be made under the early critical illness coverage.
Most ECI plans have a survival period of 7 to 30 days after diagnosis.
Waiting Periods
A waiting period is the time you must wait after purchasing your early critical illness insurance before you can make any claims.
This period is typically 90 days from the start of the policy.
If you’re diagnosed with a critical illness during this period, you will not be eligible for a payout.
The waiting period is usually in place to prevent people from purchasing insurance when they are already aware of an impending diagnosis or illness.
Is it worth buying early critical insurance coverage?
The decision to purchase early critical illness (ECI) insurance coverage often comes down to weighing the potential benefits against the cost.
While no one likes to think about the possibility of being diagnosed with a serious illness, the reality is that early-stage critical conditions are becoming more common, even among younger individuals.
The protection it offers against rising health risks, the flexibility in using the payout, and the peace of mind it brings make it a valuable addition to any financial plan.
It’s particularly important if you want to ensure that you and your family are financially secure during the difficult times that can follow a diagnosis of a critical illness.
Ultimately, it’s about balancing your financial security and health protection.
The peace of mind that comes from knowing you can handle whatever comes your way without disrupting your finances is often worth the investment in early critical illness insurance.
Conclusion
In conclusion, early critical illness insurance offers valuable financial protection when life throws you a curveball.
We’ve covered how it provides lump sum payouts for medical and non-medical costs, allows you to focus on recovery, and gives peace of mind with coverage that kicks in at the early stages of illness.
Whether you’re looking at standalone plans or adding a rider to a term or whole life policy, there’s flexibility to find what works best for your needs.
Ultimately, it’s all about being prepared for the unexpected and ensuring that you and your family are financially secure, even if a health crisis arises.
If you’re still feeling unsure or have questions about which early critical illness plan is right for you, why not chat with one of our trusted financial advisor partners?
They’ll help you navigate your options and it won’t cost you a thing.
