The Basics Of Critical Illness Insurance

Did you know that the average Singaporean spends a tenth of his life in poor health? While critical illness coverage can provide income replacement and alleviate financial concerns in the event of a critical illness, many Singaporeans still lack coverage with there being an 80 per cent critical illness protection gap among Singaporeans.¹ With the complexity of critical illness insurance plans, we feel that a main reason for this gap in protection is due to the lack of understanding of critical illness insurance. In this article, we explain what is critical illness insurance and how this coverage works.

Why do I need critical illness coverage?

Providing a peace of mind, critical illness insurance plans are an insurance product whereby a lump sum payment will be given to the policy holder in the event that he/she is diagnosed with a specified critical illness. These plans are non-participating and will not accumulate any cash values as they are purely meant for protection purposes.

With an average of 3.5 years required for treatments, the pay outs from critical illness coverage can help to reduce your financial burden should you be diagnosed with a critical illness.² This could also prevent you from missing out on the opportunity for treatments due to the high costs involved.

(See "Best Critical Illness Insurance Singapore 2020")

Scope of coverage for critical illnesses

Did you know that critical illness covers for more than just cancer? Covering for up to 129 medical procedures and conditions, some of the common critical illnesses covered include cancer, heart attack and stroke. Other conditions such as dementia, blindness, deafness, kidney failure and paralysis are also covered under critical illness insurance with the list of critical illnesses covered differing slightly between insurers and/or plans.

With different insurers offering coverage for varying medical conditions and procedures, the Life Insurance Association (LIA) has drawn up a list of 37 standard critical illnesses definitions. This seeks to offer clear and consistent coverage across the industry for the intermediate to advanced stage critical illnesses as defined in the list. The list for the 37 standard critical illnesses definitions by Life Insurance Association (LIA) can be found here.

However, do note that most early critical illness insurance plans offers coverage for more than just these 37 medical conditions and/or procedures. As such, while all critical illness plans will cover for LIA’s 37 critical illness insurance, there may be slight differences between insurers and/or plans for the total number of critical illness conditions and procedures covered.

(See "3 Reasons You Need Cancer Insurance")

Basic critical illness vs Early critical illness (ECI)

Basic critical illness refers to coverage for the 37 LIA standard definitions of critical illness and mainly covers for the advanced stages of these critical illnesses.

Early critical illness (ECI) on the other hand covers for a wider range of illnesses with coverage for up to 129 critical illness conditions and procedures. These includes early, intermediate and advanced stages of critical illnesses.

In today's context, basic critical illness coverage does not come as a standalone plan. Instead, basic critical illness coverage may be offered as a rider for specified plans. A rider can be seen as an "add-on" coverage that is attached onto a main plan.

Early critical illness coverage however, is available in the form of a standalone plan and/or a rider. Examples where an early critical illness rider can be attached to include term and whole life insurance plans.

(See "Do You Really Need Early Critical Illness Insurance?")

How do critical illness plans work?

Providing for the replacement of a loss of income, critical illness insurance offers a lump sum pay-out in the event of a successful claim. Claims can be made for various specified critical illnesses with coverage ranging from early to intermediate and advanced stages of your medical condition.

While hospitalisation plans such as MediShield Life and Integrated Shield plans will help to offset our hospital related expenses, coverage is given on a reimbursement basis. This means that claims can only be used for hospital related expenses.

Critical illness insurance however will provide a lump sum payment upon a successful claim. With no restrictions on how this amount is to be used, these pay outs can be used for other expenses such as follow up treatments, long term medication and daily expenses during the recovery period.

(See "Are Riders The Cheaper Alternative To Critical Illness Insurance?")

In our next article, we touch on the various ways to get critical illness coverage.

On understanding critical illness coverage:

Choosing the right critical illness coverage. Part 1

Choosing the right critical illness coverage. Part 2

Cheap Critical Illness Cover For Those In Their 30s

Comparing Critical Illness Coverage 2020

Critical illness coverage on a budget for age 40 and above

Promotion: From now till 31 October, receive 1,000 Reward Points* when you transfer your shield plan into FSMOne. *Terms and Conditions apply. Click here to find out more.

Interested to learn more? Check out these articles:

Are Integrated Shield Plans Necessary?

3 Reasons To Not Get Basic Critical Illness Insurance

Don't Make These 3 Mistakes With Your Home Insurance

Is Your Term Insurance A Costly Mistake?

How Much Can I Receive From An Annuity?

----

^{1Source: https://www.todayonline.com/singapore/singaporeans-lack-80-critical-illness-protection-needs-life-insurance-association}

^{2Source: http://www.straitstimes.com/singapore/aia-survey-uncovers-3-gaps-in-critical-illness-coverage-here}