What to Consider When Purchasing a Critical Illness Policy

An edited version of this article was published in the 19 August 2018 issue of ZaoBao.

Below are our original interview answers in English, by Shawn Lee, Assistant Vice President of GYC

1. What are the key differences between early stage critical illness coverage and traditional critical illness coverage?

Traditional Critical Illness (CI) coverage provides protection for medical conditions that are typically considered to be more serious and of an advanced stage. Whereas early stage CI coverage provides protection for most of the ‘traditional’ CI (also known as Advanced Stage CI) conditions at a less severe or early stage, as they have definitions that will be easier to claim.

There is a list of 37 standard Critical Illnesses definitions from the Life Insurance Association which all insurers use for their CI protection plans and riders. Most insurers will include most of the 37 conditions in their critical illnesses protection products. Hence, there will be fairly similar types of traditional CI coverage amongst most insurers.

However, there is currently no standard early stage critical illnesses definitions across all the insurers, hence there is a need to look at the respective products more closely.

2. Would you recommend early stage critical illness coverage?

As medical science advances over time, there are increasingly better diagnostic tests resulting in earlier detection of serious illnesses. In addition, greater public awareness of the benefits of regular health screening will likely lead to more early diagnosis of serious illnesses. However these are not covered by the traditional or advanced stage CI plans.

Hence, early stage critical illness protection is fast becoming popular in one’s insurance portfolio.

However, one should still consider his or her own financial situation and needs before committing to an early stage CI cover. While premium rates are decreasing with more insurers entering this space and more products being designed and marketed, they are still more costly compared to the advanced stage CI protection (due to the comparatively lower requirement to make a claim).

It is more important to have adequate traditional CI cover versus a lower amount of early stage CI coverage if one has a limited budget. The financial impact and consequence of an advanced stage CI will be significantly higher as compared to an early stage CI, as the latter typically has a relatively shorter recuperation period, which also means shorter time out of work and a lower drain on one’s finances.

3. What should you look out for when choosing an early stage critical illness coverage? How different is it from choosing a normal coverage?

More effort is definitely required to choose a suitable early stage CI cover. Things to look out for include:

  1. Definitions:
    As mentioned earlier, the definitions vary from insurer to insurer, plan to plan. And when it comes to claims, definitions matter the most. Diagnosis of a covered illness does not automatically mean a claim will be paid. An illness must be certified by a doctor to have met the policy’s definitions, terms and conditions as spelt out in the policy document for the claims to be admissible.
  2. Exclusion clauses:
    Look into and understand the general exclusion clauses, especially the exclusion clauses for individual Early Critical Illnesses.
  3. Survival Period:
    Some Critical Illness plans or riders have a survival period of between 14 to 30 days. It means the insured has to survive that stated period after the diagnosis for the Critical Illness claims to be admissible.
  4. Waiting period:
    Between the inception and first claim, for those with multiple claims. There is typically a waiting period of 90 days from the inception or reinstatement of a critical illness cover for some of the listed critical illnesses.

There are plans in the market now that provide for multiple CI claims. These are definitely more expensive as compared with a one-time-claim early CI plan. There will usually be a waiting period in between claims as well as a string of conditions to be fulfilled.

4. Will it be too late for a 50yo to start a coverage?

Early CI cover is good to have, but whether one should buy at 50, or at any age for that matter, depends largely on their own current financial situation and needs. The cost of such plans will definitely be much higher for someone in their 50s, so affordability can be an issue. Early CI plan premiums for a 50 year old can be as much as more than double that for a 30 year old. If your budget doesn’t permit it, don’t stretch it.

It is more important to ensure that one has a comprehensive medical protection (eg. hospitalisation plan), adequate advanced stage CI protection, and to go for regular health screening. Early diagnosis of a serious illness usually has a better prognosis, relatively simpler treatment and shorter recovery period. All these means a significantly smaller financial impact as compared to an advanced stage CI, especially if there is a good comprehensive medical protection in place.

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