Health Insurance

Introducing Critical Illness Insurance In Singapore 2022

If you’re lucky, you’ve probably never had to use critical illness insurance or even heard of it. Critical illness insurance is designed to help support you and your family financially if you’re diagnosed with a covered critical illness. There’s a common saying in Singapore that it’s better to die from a serious illness than to be burdened with exorbitant medical bills. In the event of a major health crisis, such as cancer, a heart attack, or a stroke, critical illness insurance could be the only thing protecting you from financial ruin. Choosing the right protection requires careful planning, read on to learn more about critical illness insurance and whether it’s something you and your family should consider.
Author Bowtie Team
Date 2022-10-26
Updated on 2022-10-26
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What is Critical Illness Insurance?Who needs Critical Illness Insurance?Types of Critical Illness InsuranceWhat does Critical Illness Insurance cover?How much Critical Illness coverage do I need?Factors affect Critical Illness Insurance premiumsIf I have Health Insurance, do I still need Critical Illness Insurance?How to choose a Critical Illness Insurance plan?

What is Critical Illness Insurance?

First things first, critical illness refers to a serious or debilitating illness that might affect the quality of life. Each critical illness insurance policy maintains a set list of covered illnesses. While the number of critical illnesses on the list varies from plan to plan, still, heart attack, stroke and late-stage cancer are almost always included on the list.

Critical illness insurance generally refers to a type of insurance that pays out a lump sum, also known as the “sum assured,” if you’re diagnosed with a critical illness covered by the policy. A serious illness not only threatens your physical health, it may also endanger your financial well-being. Critical illness insurance is designed to support you and your family financially, so you can focus on recovering without worrying about how the bills are paid.

Who needs Critical Illness Insurance?

The chances of getting critically ill in your lifetime is high. Did you know that in Singapore: 

  • 17 people die from cardiovascular disease (heart diseases and stroke) every day 
  • 1 in 3 deaths is due to heart diseases or stroke 
  • Each day, 39 people are diagnosed with and 15 die of cancer 
  • 1 in 4 people may develop cancer in their lifetime 
  • The incidence of chronic diseases among both the young and old is on the rise

Critical illness recovery can take years and cost money. According to LIA, Singaporeans are underinsured for critical illnesses. Whether as individuals or families, there is a real risk that a major illness could lead to financial disaster, either from bills or the loss of long-term income. The average recovery period for a critical illness or until the insured person can return to work, is five years. There is also an increasing likelihood of people surviving critical illnesses and living longer, but with more (an average of eight out of 82) years in poor health in Singapore. Over this period, a working adult needs coverage worth $316,000 (based on average income), but most adults only have $60,000—a shocking 80% protection gap.

The real benefit of a critical illness plan lies in its flexibility. Unlike health insurance, you’re free to use the critical illness payout for expenses beyond medical treatment. The payout can relieve the many, often unseen, long-term costs associated with a major illness and help you:

  • Replace your income as critically ill patients often have to take time off work, experience reduction in earnings or are unable to return to work entirely.
  • Pay for long-term care and rehabilitation expenses such as medication, prolonged treatment, purchase of home-based medical equipment or special assistance such as hiring a nurse, domestic worker or even childcare. 
  • Manage regular living expenses and financial obligations which may include household bills, home mortgages, car instalments, credit card bills and student loans. 
  • Keep your savings intact for the intended purpose whether it’s retirement, children’s higher education, investment or other long-term financial goals. 
  • Take care of dependents and preserve your family’s current standard of life

Types of Critical Illness Insurance

Single Pay Plan VS Multi-Pay Plan

Single-Pay Plan Multi-Pay Plan

Premiums

Relatively cheaper Relatively more expensive
Number of Claims 1

2 or above

Long-term Coverage

None. You can only claim 1 time, even if the critical illness recurs. Yes. Allows for more than one claim if you are diagnosed with more than one critical illness or you suffer from a recurring disease.
Product Structure Relatively simple

More complex. There are usually additional terms and conditions for 2nd or subsequent claims.

Coverage

Designated critical illness(es) specified in the policy

Term Plan VS Saving Plan

Term Plan Savings Plan

Premiums

Relatively cheaper

Relatively more expensive

Number of Claims Usually 1 to 2 times, pays out 100% of the benefit each time

Usually 5 times, pays out 100% of the benefit each time

Cash Value

  • No cash value
  • Pure critical illness
  • Accumulates cash value
  • Average guaranteed return over 30 years is approximately -0.87% per annum1
Premium Payment Monthly/annual payment

Annual payment for a specified term, such as 10, 15 or 20 years

Length of coverage

Typically 1, 5 or 10 years

Lifetime (until 100 years old)

  • 1Based on a 35-year-old non-smoking male insured of HK$1 million (around 181,700 SGD); the data is calculated based on the average of the guaranteed cash value of 8 savings critical illness plans (18-20 years premium payment term) in the market as of September 1, 2020.

What does Critical Illness Insurance cover?

The Life Insurance Association Singapore (LIA) details an industry-accepted list of 37 severe stage critical illnesses as part of their Critical Illness Framework 2019. This includes major cancer, heart attack, stroke, coronary artery by-pass surgery, end-stage kidney failure, end-stage lung disease and end-stage liver failure, among others. If you wish to check if a particular insurer’s critical illness plan is comprehensive, your best bet would be to compare it to LIA’s list.

Most policies should cover the 37 illnesses defined by LIA, however, some plans offer extensive coverage and a wide range of benefits which may include:

  • Pre-existing medical conditions such as high blood pressure, high blood sugar, high cholesterol, or diabetes. 
  • Family and Juvenile (child) coverage for immediate family members. 
  • Special conditions that are not commonly insured in Singapore, such as osteoporosis, severe rheumatoid arthritis, dengue hemorrhagic fever and diabetic retinopathy, to name a few. 
  • Total and permanent disability when an individual is no longer able to work due to being permanently disabled. 
  • Death and Terminal Illness if the insured is diagnosed with terminal illness (meaning the illness is expected to lead to death within the next 12 months) or passes on. 
  • Value added services—some insurers offer complimentary benefits such as biennial health checkups, free child cover, health and wellness programmes and tools to help customers stay healthy and manage their existing medical conditions.

How much Critical Illness coverage do I need?

According to a 2018 news report, the LIA recommends that the average Singaporean has critical illness coverage of about $316,000, which works out to about 3.9 times the average annual pay at the time of the report. To adapt this figure to your own circumstances, you can multiply your annual salary by 3.9. 

However, that may not be enough for some people. Another statement made by the LIA was that people should ensure that their coverage can pay for their family’s needs over a recovery period of 5 years. So, you might also want to ensure that your coverage is enough to cover 5 years’ worth of your contribution to your household’s spending.

That being said, these are just recommendations, and they are not carved in stone. You might have other ways to replace your income and pay off your mortgage if you fall sick. So, it would be best to do the maths yourself to work out how much you would actually need if you were unable to work for 5 years. 

If you can’t afford that much critical illness cover at the moment, just go with a basic plan that’s within your budget, rather than having no protection at all. When choosing the coverage amount, it’s important to consider inflation in the future as treatment costs for critical illnesses are constantly rising. Generally, the higher your coverage (or sum insured), the higher your insurance premium.

Factors affect Critical Illness Insurance premiums

Insurance premium prices are very specific to the insured’s profile and are based on a number of factors: 

  • Age: The older you are when you take out the policy, your risk of getting ill increases. 
  • Health: If you’re in good health or have pre-existing medical conditions 
  • Family medical history: If you have a genetic risk for certain medical conditions 
  • Smoker/non-smoker: Whether you smoke or have previously smoked 
  • Occupation: If you have a risky job 
  • Lifestyle & hobbies: If you take part in dangerous sports or hobbies 
  • Level of coverage desired: The number and stages of illnesses covered, the length of the policy, the coverage amount and the features you choose e.g. multi-claim option for recurring illnesses.

If I have Health Insurance, do I still need Critical Illness Insurance?

If you fall ill, you might well qualify for payouts from both your health insurance and critical illness insurance plans. But these plans actually function quite differently. 

Health insurance pays for your medical costs if you end up getting warded in a hospital. It is considered essential due to the relatively high cost of healthcare in Singapore, particularly private healthcare. 

It’s important to note, however, that if you are using an Integrated Shield Plan (which is the most cost-effective type of hospitalisation insurance for Singaporeans and PRs) you will always need to co-pay a portion of your bill. The plan will not cover 100% of your medical fees and you will always incur some out-of-pocket costs. 

Critical illness insurance, on the other hand, offers you a lump sum payout when you are diagnosed with a relevant illness, regardless of the treatment you seek or the amount of medical fees you have incurred. You can use the money however you like, for instance, to pay for your out-of-pocket medical costs not covered by your hospitalisation plan, or as income if you have to stop working.

How to choose a Critical Illness Insurance plan?

When shopping around for critical illness insurance, other than comparing the list of illnesses, the sum assured and the payout terms, here are some questions that can help you find a plan more closely tailored to your needs. 

Do I want a critical illness rider or standalone plan? 

In order to receive critical illness protection, you can either buy a standalone critical illness plan or a critical illness rider or optional add-on for a life insurance plan.

How long do I want to be insured?

When you first sign up for a critical illness plan, you will need to think about the age up to which you wish to be protected. Do note that standalone critical illness insurance premiums rise with age. As you get older, your chances of getting hit with a critical illness rise drastically, and so do your premiums.

Do I really need coverage for all the critical illnesses?

Critical illness insurance policies can vary considerably depending on how many illnesses they cover. If you’re on a budget, you may want to decide between comprehensive critical illness coverage or settling for a (likely cheaper) plan that offers coverage for a smaller list of diseases.

Am I willing to pay more for early critical illness coverage?

Critical illness insurance, in its most basic form, offers coverage for late-stage diagnoses. But these days, many plans (likely at a higher price point) offer payouts at early and/or intermediate stages, too. 

Am I willing to pay more to cover relapses?

As mentioned above, there are multi-pay critical illness plans which enable you to make multiple claims if you suffer from a relapse or recurrence of an illness. The multi-pay feature is nice to have but costs more. So, you’ll need to look at your finances and decide whether you can afford such a plan.

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The above information was provided by Bowtie Team. It is for reference only. In no event shall Bowtie be liable to you or to any other party for any loss or damage whatsoever or howsoever caused directly or indirectly in connection with your access to or use of the content thereon.

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