Do you need S$316,000 in Critical Illness coverage?

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 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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Read More:

7 Critical Illness Insurance Plans in Singapore (2020)

Breaking down the age-old dilemma: Do I need Critical Illness coverage?

Escaping The Squeeze of The Sandwich Generation: Three Important Rules

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