Critical Illness (CI) insurance has often been touted as the "expensive" insurance due to its higher price point as compared to other types of coverage. As such, those looking for critical illness coverage may instead opt for a CI rider due to the lower prices of a rider. However, does a CI rider really give you the same coverage as a critical illness policy? In this article, we highlight the differences and factors to consider when deciding between a standalone policy and rider.
(See "Can You Really Afford To Not Have Critical Illness Coverage?")
#1 Flexibility
The first factor to consider is your desired coverage amount and duration.
A critical illness policy offers more flexibility with you able to choose your desired coverage term and sum assured. Therefore, should you require a higher amount of coverage, consider using a standalone critical illness policy.
On the other hand, a CI rider offers less flexibility. With CI riders an add-on to a main plan, the coverage term and amount are dependent on your main plan. This means that coverage amount for the CI rider cannot exceed the sum assured of your main plan. Additionally, once your main plan terminates, your CI rider will cease as well.
As such, opt for a standalone critical illness policy should you require more flexibility and a higher coverage amount.
(See "The Fundamentals Of Protection Planning")
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#2 Cost
The next factor to consider is the cost of coverage.
CI riders are an affordable alternative for critical illness coverage. With a limited pay option for CI riders, premiums are only required for a shorter period of time as compared to a standalone policy where premiums are paid for as long as your policy is enforced.
For the budget conscious, CI riders would therefore be the low-cost option for critical illness coverage. However, rather than to simply purchase the cheapest option, instead draw up a budget that you are comfortable with. This allows you to work towards maximising your budget to obtain your ideal coverage levels.
(See "Is Insurance Really A Waste Of Money?")
#3 Multiple coverage
An important factor to consider would be the coverage offered. Would you prefer to be able to make multiple claims or would a one-time claim for a critical illness suffice?
With Singaporeans worried about becoming uninsurable after one critical illness1, a standalone critical illness policy resolves this problem with its multiple coverage benefit. This allows your coverage to restart after a critical illness thus eliminating the problem of insurability after a critical illness.
However, CI riders only provide coverage for one critical illness with a single pay-out made in the event of a critical illness. The rider and main plan then terminates once the sum assured of the main plan reduces to zero.
Therefore, a standalone critical illness policy offers a peace of mind by ensuring that you will remain covered even after a critical illness.
(See "3 Reasons To Avoid An Early Retirement")
#4 Early critical illness
With medical advances, we are now able to detect and treat critical illnesses at an earlier stage thus increasing our chances of survival. However, it is important to note that not all critical illness insurance provide coverage for these early stage treatments. To receive protection from the beginning, you would require Early Critical Illness (ECI) coverage.
Critical illness standalone policies are embedded with ECI coverage in their policies. This means that pay-outs would commence from the diagnosis of a critical illness thus ensuring that individuals are protected from the costs of their early stage treatments.
Riders on the other hand only provide ECI coverage with an ECI rider. However, ECI riders are only available for whole life insurance. Hence if you were to attach a CI rider to your term insurance, this would not provide coverage for early critical illness.
To receive coverage for an early stage diagnosis, consider using a standalone critical illness policy.
(See "Do You Really Need Early Critical Illness Insurance?")
#5 Benefits
Lastly, as shown in our previous article "Comparing Critical Illness Policies", a standalone critical illness policy also offers additional benefits such as higher pay-outs or a fixed sum for specified critical illnesses or conditions. Free health checks and child covers are also included in some of these policies. Future premiums may also be waived in the event of a diagnosis. However, CI riders only provide critical illness coverage without any additional benefits.
As such, you may wish to choose a standalone critical illness policy should you wish to enjoy these benefits.
(See "Be Your Own Advisor with FSMOne's Insurance Discovery and Review Tool")
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