Is Critical Illness insurance necessary?
Is critical illness insurance important, and how much critical illness cover do you really need in Singapore?
The Life Insurance Association (LIA) 2017 Protection Gap Study shows that Singaporean working adults have an average critical illness (CI) coverage of S$59,776. In short, an average Singaporean faces an 80% CI protection gap.
Based on guidelines from the LIA, Lorna Tan, Head of Financial Planning Literacy at DBS Bank, suggests that you get insured for about nine times your annual income in case of death. As for critical illness insurance, get about five years of your gross income covered, as that is typically the amount of time the average person needs to recuperate 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 common critical illnesses defined by LIA. If you are diagnosed with a CI that’s covered by your CI plan, you will receive a lump sum payout from your insurer.
For a more in-depth understanding of CI insurance, check out our Understanding Critical Illness Insurance article.
Why is Critical Illness Insurance Important?
1. Chances of getting a critical illness in Singapore: The odds are higher than you think
Research1 shows that over 90% of severe stage claims for CI insurance fall into one of these five categories: Major cancer, heart attack of specified severity, stroke with permanent neurological deficit, coronary artery bypass surgery, and end stage kidney failure.
According to the National Registry of Diseases Office (NRDO), critical Illness statistics in Singapore show that more are falling ill, and more are surviving2, thanks in part to better medical technology, and faster treatment start-times:
- Cancer: While 1 in 4 to 5 Singaporeans will develop cancer in their lifetime, more are surviving it, with many adding at least 5-10 years in life expectancy3. This is due to enhanced medical technology, better awareness, and earlier detection of cancer.
- Heart attack: Although severe heart attack cases increased from 6,796 in 2009 to 11,887 in 2018, fatalities fell from 1,021 to 842 in the same period. The improvement in survival rates is likely due to higher rates of revascularisation surgery and pharmacotherapy treatment.
- Stroke: The number of strokes increased from 5,760 in 2009 to 8,326 in 2018, but 30-day case fatality rates decreased significantly from 8.4% in 2009 to 6.4% in 2018. The improvement was likely due to a faster start of stroke treatment5.
2. When to buy critical illness insurance: Youth invincibility is a myth
If you think your youth is a safeguard against CI, don’t bet on it. Just because you are young doesn’t mean that CI won’t be knocking on your door.
More young people are getting CIs such as cancer and stroke, according to the same NRDO critical illness statistics reports:
- Cancer: Overall increase in the number of teenagers and young adults (15-34 year olds) being diagnosed with cancer, especially since 1993. Among the 35-64 year olds, cancer diagnoses picked up since 20033.
- Heart attack: Significant increase in heart attacks among those aged 30-69 years since 20094.
- Stroke: Significant increase in strokes among 15-29 year olds, 40-49 year olds, and 50-59 year olds since 20095.
Given the likelihood of surviving a critical illness, it makes sense to start your CI coverage early so that you can focus on recovery should anything unfortunate happen to you. Starting early while you are in the pink of health means you do not have to worry about potential exclusions for existing health conditions.
3. Critical illness insurance vs. Health insurance: Hospitalisation insurance isn’t a substitute for CI insurance
You might be wondering: why bother getting CI insurance when you already have a hospitalisation & surgical insurance plan?
Hospitalisation insurance covers your hospitalisation expenses and treatment costs. While it does mitigate your medical costs to some extent, there are limits to it. For instance, you usually can’t claim for anything outside of your medical expenses or treatment such as loss of income. Moreover, treatment cost claims from hospitalisation insurance is also on a reimbursement basis.
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.
4. 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 so that you can focus on recovering.
For example, some CI plans may cover your Intensive Care Unit (ICU) stay. With eCriticalCare, upon staying in an ICU for a total of 5 consecutive days (including High Dependency Unit (HDU)6 if required) due to unforeseen conditions such as illnesses, accident, unknown diseases, or as medically required, 30%7 of the coverage amount will be paid to you.
5. Cost of Critical Illness cover: CI coverage is not as expensive and complicated as you may think
If cost is the reason why you aren’t thinking about getting CI insurance, you might be surprised. Be it a standalone CI policy or a term policy with CI rider, CI coverage doesn’t need to be out of your budget or complicated.
With eCriticalCare, you have the option to build a straightforward and budget-friendly CI plan. You can build your own cost-effective CI insurance that factors in your number of dependants and current financial situation. The comprehensive coverage and no health check-up requirement make it even easier to close your CI protection gap if you have one. It doesn’t get simpler than that.
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 NAV Planner will come in very handy. All you need to do is key in your number of dependents, savings, and existing insurance. NAV Planner then crunches the numbers for you, to produce a personalised report for you that includes your critical illness protection gap (if any).
If you know how much CI coverage you need, simply head over to eCriticalCare to craft your CI protection plan.
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 NAV Planner 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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1Life Insurance Association Singapore Media Release (29 August 2019): Life insurance industry refines Critical Illness definitions for clarity on intended scope of coverage in light of medical advances in recent years.
2Speech by Mr Gan Kim Yong, Minister for Health, at the Ministry of Health Committee of Supply Debate 2019, on 6 March 2019.
3Singapore Cancer Registry 50th Anniversary Monograph (1968 – 2017). Published November 2019.
4Singapore Stroke Registry Annual Report 2018. National Registry of Diseases Office.
Published 9 June 2020.
5Singapore Stroke Registry Annual Report 2018. National Registry of Diseases Office.
Published 9 June 2020.
6High Dependency Unit (HDU) is one level of care below that of an Intensive Care Unit (ICU).
7This benefit can only be claimed once. The coverage amount will be reduced by the amount paid under the Recovery Care Benefit. Please refer to Sample Policy Contract for more details.
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