How long can your savings last in the event that you are unfortunately diagnosed with a critical illness? Would your family be able to continue with their daily activities or would your lifestyle suffer drastic changes? While some may argue that critical illness plans are an unnecessary "luxury", are you really able to self-insure in the event of a critical illness? In this article, we find out how much you need in the event of a critical illness.
(See "Be Your Own Advisor with FSMOne's Insurance Discovery and Review Tool")
#1 Treatment costs
Are you prepared to pay up to $1 million for your treatment?1 With Singapore topping the charts for the highest medical inflation rate in Asia, falling ill is a costly affair.2
For instance, while there has been the misconception of Medishield Life covering for all of your medical bills, this is not necessarily true. With coverage only extending to hospitalisation charges, any outpatient and/or follow up treatments are unlikely to be covered and would have to be borne by the individual. Additionally, with the revision of the integrated shield plan riders, individuals would be subjected to a higher co-payment from 2021 onwards. This means that you may have to pay a larger sum for your treatment costs in future.
(See "How To Get Coverage With High Blood Pressure")
#2 Cost of lost income
With an average recovery period of 3.5 years3, it is therefore important for you to factor in the cost of your lost income during recovery. Using the median gross monthly income of $4,2324, this amounts to $50,784 a year. Multiply it by the average 3.5 year recovery period and it would be a loss of $177,744 in income. Would your savings then be enough to pay for your medical bills and tide you through this recovery period? In such a scenario, you may also have to make lifestyle changes or could even land yourself in debt while paying off your medical bills.
(See "Do You Really Need Early Critical Illness Insurance?")
#3 Daily Expenses
Lastly, factor in the cost needed to sustain your family's daily expenses. Take for example the average monthly household expenses of a 4-room HDB. At $5,504 a month5, this adds up to $66,048 a year or $231,168 if you were to spend 3.5 years in recovery. This means that to self-insure, you would need to have enough savings to cover your family's daily expenses in addition to your lost income and treatment costs. Do also note that this excludes any outstanding mortgage and/or loans that could further add on to your financial liabilities.
(See "Term or Whole Life - Which Should You Choose?")
Find Out If You Have Sufficient Coverage
How Critical Illness (CI) policies can help
Case study: Mr Lim, age 40, a non-smoker
As Mr Lim is worried about the costs that he may incur should he unfortunately be diagnosed with a critical illness, he purchases a critical illness policy. This gives him assurance knowing that he would receive a lump sum pay-out to serve as his income replacement in the event that he is unable to work due to a critical illness.
Three years later, Mr Lim is unfortunately diagnosed with a critical illness. Not only is he unable to work while in recovery but he also incurs bills from his medical treatments. These add up to a sizable amount that would have wiped out his entire savings. Thankfully, Mr Lim’s critical illness policy allows him to receive a lump sum pay-out from his insurer which then goes towards paying for his medical treatments and the daily expenses of his family. Without having to worry about his finances, Mr Lim is then able to focus on his recovery.
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(See "Which Is Better: Critical Illness or Cancer Plans?")
Critical Illness policies are suitable for:
- Income replacement
- Comprehensive critical illness coverage
- Paying for outpatient and/or follow up medical treatment costs, not covered by MediShield Life
Critical Illness policies are not suitable for:
- Death coverage
Click on the "Get Started" button to find out how you can safeguard your family's interests in the event of a critical illness.
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Available Products on FSMOne Insurance |
Term Life, Whole Life, Critical Illness, Annuity, Health, Endowment from Etiqa Insurance, Manulife, NTUC Income and Tokio Marine Life Insurance *Please check with our advisory team if the product you want is available on FSMOne Insurance |
1Source: http://theindependent.sg/1m-for-hospital-bill-healthcare-or-nightmare/
3Source: https://www.straitstimes.com/singapore/aia-survey-uncovers-3-gaps-in-critical-illness-coverage-here
4Source: http://stats.mom.gov.sg/Pages/Income-Summary-Table.aspx
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