The rising cost of living in Singapore is definitely not foreign news anymore. Consequently, Critical Illness insurance holds an increasingly important role in your health insurance portfolio. But why so when you already have health insurance?
We don’t deny that Health insurance is definitely the foundation of your insurance portfolio – insuring you for hospitalisation and treatment fees. However, it usually only covers your medical expenses, and that only. Here’s the missing link – what happens when you’re too sick to work and lose your stream of income?
In a study released by the Life Insurance Association (LIA), it was found that the average working adult has Critical Illness coverage of just S$60,000, well under the LIA recommendation of S$316,000.
As a guideline by the Life Insurance Association of Singapore (LIA), the amount of CI coverage required should be 3.9x of your annual income.
However, we’ve often been asked this question: is S$316,000 in coverage for Critical Illness really necessary?
Firstly, what is Critical Illness Insurance?
Critical Illness insurance pays a lump sum if you’re diagnosed with a Critical Illness or after having undergone a type of surgery covered by the policy.
Why you need a Critical Illness insurance plan
The price of healthcare in Singapore is not cheap. While there are schemes such as MediShield Life to help you cover your hospitalisation bills as well as subsidise these costs, it does not have any components that provide significant amounts of cash payouts to tide you through the period of recovery.
This is where Critical Illness insurance comes in extra handy. As a lump sum payout in the event of an unfortunate illness diagnosis, you are able to receive additional financial support to aid your recovery.
Taking into consideration your income loss due to the inability to work, you would still be able to afford the necessities in life and provide for your family while in recovery.
The last thing we would want to worry about is the costs of supporting yourself during recovery.
Breaking down the costs of recovery
With an individual taking a minimum of 60 months to recover, one is likely to face a significant loss of income due to the inability to work. Your Critical Illness payout can help to cover important costs such as bills, domestic help, supporting your dependants, and even additional home amenities to aid your day to day life.
As a loose guide of an estimated five years of recovery, your Critical Illness policy should provide you with enough funds to support your income while you are unable to work. With that in mind, ask yourself if you are able to support your lifestyle or dependants with your current payout amount. Taking LIA’s guide of S$316,000, you would have an estimated income of S$5,260 per month, for five years in the event that you are diagnosed with a Critical Illness.
The Big Question: Do you need S$316,000 in Critical Illness coverage?
At the end of the day, there is no one-size-fits-all Critical Illness plan on the market. Ultimately, the amount of coverage suitable for you depends on your circumstances and needs.
For many, the S$5,260 per month of cash flow may be adequate for their lifestyle and needs. However, if you have younger children and/or parents to care for, the expenditure would naturally be higher – which may require you to increase the amount of coverage needed. This is especially the case for those in the Sandwich Generation. Looking into your family history may also greatly impact your decision for the amount of coverage necessary, depending on how predisposed you are to a certain type of illness.
Tip: rather than purchasing the cheapest option for Critical Illness coverage, always remember to consider your own insurance needs, and make a decision that best suits them.
The LIA guideline for suitable coverage is just a guideline after all, but something that you should definitely keep in mind when purchasing your Critical Illness coverage.
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Arrange a free teleconsulting service with PolicyPal
Because critical illness insurance isn’t one-size-fits-all, we strongly recommend speaking to us before you commit to an insurance plan of any sort. Our professional advisers can assess your budget and needs holistically, and give you personalised recommendations.
PolicyPal offers all our members a free financial portfolio review. This review will help you better understand how to create a suitable financial plan for you and your family. We will analyse life insurance products from over 20 insurers and present you solutions that are tailor-made to address your concerns.
Our advisers will be more than happy to help you understand any of these insurance policies:
- Health Insurance
- Critical Illness Insurance
- Endowment/Savings Insurance
- Personal Accident Insurance
- Term/Whole Life Insurance
To get in touch, you can WhatsApp us at 87500688 and let us know your preferred date and time for the appointment. Alternatively, leave your details below and we will contact you to help you set up an appointment.
If you would like to know more about a specific insurance product you can also let us know your preference. This is so that we can be better prepared during the appointment to present you with a comparison table if needed.
The teleconsultation can be done through a Whatsapp phone call or video call. We would recommend using Zoom as it is a free video-conferencing app that you can download for clear audio and video consulting on your computer or your phone.
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