Is Critical Illness insurance necessary?
Is critical illness insurance important, and how much critical illness cover do you really need in Singapore?
The latest Life Insurance Association (LIA) 2022 Protection Gap Study shows that each Singaporean working adult has an average critical illness (CI) protection gap of 74% or $264,586.
The recommended critical illness protection you should get is about 4 times of your annual income.This helps you with household expenses and outstanding debt payments during the period of recovery from a critical illness.
What is Critical Illness insurance?
Critical illness (CI) insurance typically insures you for the risk of developing any of the 37 specified critical illnesses defined by the LIA, such as major cancer, heart attack and stroke.
If you are diagnosed with a CI that’s covered by your CI plan, you will receive a lump sum payout from your insurer.
|Industry list of all 37 critical illnesses
|1. Major Cancer
|20. Fulminant Hepatitis
|2. Heart Attack of Specified Severity
|21. Motor Neurone Disease
|3. Stroke with Permanent Neurological Deficit
|22. Primary Pulmonary Hypertension
|4. Coronary Artery By-pass Surgery
|23. HIV Due to Blood Transfusion and Occupationally Acquired HIV
|5. End Stage Kidney Failure
|24. Benign Brain Tumour
|6. Irreversible Aplastic Anaemia
|25. Severe Encephalitis
|7. End Stage Lung Disease
|26. Severe Bacterial Meningitis
|8. End Stage Liver Failure
|27. Angioplasty & Other Invasive Treatment for Coronary Artery
|28. Blindness (Irreversible Loss of Sight)
|10. Deafness (Irreversible Loss of Hearing)
|29. Major Head Trauma
|11. Open Chest Heart Valve Surgery
|30. Paralysis (Irreversible Loss of Use of Limbs)
|12. Irreversible Loss of Speech
|31. Terminal Illness
|13. Major Burns
|32. Progressive Scleroderma
|14. Major Organ / Bone Marrow Transplantation
|33. Persistent Vegetative State (Apallic Syndrome)
|15. Multiple Sclerosis
|34. Systemic Lupus Erythematosus with Lupus Nephritis
|16. Muscular Dystrophy
|35. Other Serious Coronary Artery Disease
|17. Idiopathic Parkinson’s Disease
|18. Open Chest Surgery to Aorta
|37. Loss of Independent Existence
|19. Alzheimer’s Disease / Severe Dementia
Why is Critical Illness Insurance Important?
1. Chances of getting a critical illness in Singapore: The odds are higher than you think
- Cancer: From 2017-2021, cancer was the #1 cause of death in Singapore, accounting for 28.2% of all deaths. Cancer incident rates have risen over the years with 1 in 4 Singaporeans expected to develop cancer in their lifetime.
- Heart attack: Ischaemic heart disease was the second most common cause of death in 2021. Heart attack, is a type of ischaemic heart disease. In Singapore, the number of heart attack episodes increased from 8,014 in 2011 to 12,403 in 2021.
- Stroke: A stroke occurs when there is a disruption of blood flow to the brain, depriving the area of blood & damaging it. The number of stroke episodes in Singapore has increased from 6,143 episodes in 2011 to 9,680 episodes in 2021.
2. Critical illness insurance vs. Health insurance: Hospitalisation insurance isn’t a substitute for CI insurance
You might be wondering: why get CI insurance when you already have MediSave, MediShield Life or your own private/company hospitalisation & surgical insurance coverage?
Hospitalisation insurance covers your hospitalisation expenses and treatment costs, including relapses. While it does mitigate your medical costs to a great extent, there are some limitations. For instance, you usually can’t claim for anything outside of your medical expenses or treatment such as loss of income. Integrated Shield Plans typically cover post-hospitalisation only for up to a year. For MediSave, there are also caps to how much you can utilise it for each type of procedure.
On the other hand, CI insurance is a lump sum payout that gives you the flexibility on how you want to use it. For example, you can use it for your family’s living expenses while you take a break from work during your recovery phase. You can also use it to pay for medical needs that are not covered by your hospitalisation insurance. Some CI insurance may provide multiple payouts in the event of a CI relapse.
3. Critical Illness insurance benefits: It lets you focus your mind on recovery
Dealing with a CI isn’t just physically and emotionally exhausting. It can also be financially draining. With critical illness insurance, the payout helps take care of your finances and loss of income so that you can focus on recovery. Some CI plans may cover your Intensive Care Unit (ICU) stay.
4. Cost of Critical Illness cover: CI coverage is not as expensive and complicated as you may think
If cost is the reason why you are not getting CI insurance, you might be surprised by its affordability. Getting CI coverage does not need to be out of your budget or complicated. You can start with getting a standalone CI policy or a term life policy with CI rider to cover your working years first.
For a more in-depth understanding of CI insurance, check out our Understanding Critical Illness Insurance article.
How much Critical Illness coverage do you need: Where to begin
The first step is to understand what is your personal CI insurance gap is.
If you are not sure how much coverage you need or need a refresher, the CI calculator in your Plan & Invest tab in digibank will come in very handy.
All you need to do is key in your number of dependents, savings, and existing insurance. Plan & Invest tab in digibank then crunches the numbers for you, to produce a personalised report for you that includes your critical illness protection gap (if any).
DBS has partnered with major insurers in Singapore to make health insurance easily accessible online for purchase. You can now independently learn, compare and buy a plan most suited to your own needs. Find out more on DBS Health Marketplace.
You may also wish to speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
Alternatively, check out Plan & Invest tab in digibank to analyse your real-time financial health. The best part is, it’s fuss-free – we automatically work out your money flows and provide money tips.
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