Exposed: the truth about critical illness plans

Superhero or scoundrel? Help or heartache? Saver or squanderer ? Bad boy or badly needed?

Critical illness (CI) plans are often overlooked as they are seemingly entangled in complexity and misconceptions, leaving Singaporeans confused about what they are and whether they are needed.

Here, we examine 6 common myths about CI plans.

#1: It’s meant for older people

While the elderly are more susceptible, critical illnesses such as cancer and stroke are increasingly known to strike younger individuals, even healthy people in their 20s and 30s with no family history of critical illness.

According to Aviva’s claims experience, individuals aged 31 to 40 form the fastest-growing group of critical illness claimants. In the span of just one year, from 2016 to 2017, claims from those aged 31 to 40 has increased by 73%. 1 in 5 claims are now from this relatively-young segment.

Moreover, insurance should typically be purchased while young and healthy, to ensure full coverage. Once you’ve been diagnosed with an illness, it may become difficult for you to be covered as you may be seen as high risk to insurers. You may either have to pay higher premiums, or be offered lesser coverage that excludes certain conditions, or, worse, your application could be declined altogether.

#2: I already have health insurance, so a CI plan is redundant

Health insurance plans help to pay hospital and surgical bills, as well as certain outpatient treatments such as kidney dialysis and chemotherapy.

A CI plan, on the other hand, is designed to give a lump sum payout if you’re diagnosed with any of the dread diseases covered in your plan. The money can be used as you choose. It’s not unreasonable to expect that you won’t be working while undergoing treatment for a major illness. The payout from a CI plan will help you cope with expenses such as outstanding mortgage and loans, day-to-day household expenses, or cost to hire a domestic helper.

#3: If I fall prey to critical illness, my life hangs on a thread anyway!

Critical illness shouldn’t be confused with terminal illness which is incurable and highly likely to result in death within a short time. By contrast, common critical illnesses, as scary as they sound, are now seeing higher survival rates, thanks to the wonders of modern medicine. The survival rate for cancer, for instance is 48.5% (men) and 57.1% (women)¹, while there’s a heartening survival rate of >90% for first-time heart attacks.

Higher survival rates also mean you’ll need to be more financially prepared to tide through a period of increased expenditure while potentially not working and generating any income. A CI plan is designed to provide that financial safety net.

#4: The plan will be terminated after the first claim

Depending on the terms of your chosen CI plan, this could actually be true, which could be worrisome for a CI survivor as it may be difficult to get another plan once you’ve had a critical illness. However, insurers are continuously evolving their products to give customers greater coverage and security. Aviva’s MyMultiPay Critical Illness Plan, for instance, continues to stay in force after a first claim, and in fact allows you to claim up to five times, even for re-diagnosed cancer, or recurring heart attack or stroke.  
 

#5: CI plans are useless because they only cover end-stage critical illness

It’s true that some CI plans are designed to cover just end-stage CI, especially older plans. There are also plans that are designed specifically to cover early-stage CI. Your financial adviser representative will be able to recommend which is more suitable for you, depending on what other cover you already have and what your financial concerns are.

And if you’re kiasu and want to be sure your cover is comprehensive. These days, there are also plans in the market that actually cover all stages of CI – whether early, intermediate or severe stage. An example of such a plan would be Aviva’s MyMultiPay Critical Illness Plan.

#6: I already have a CI rider so I don’t need another CI plan

With riders, the key thing to understand is: Is it an additional or accelerated benefit?

What an additional benefit means: As its name implies, the rider benefit is on top of your main cover. For example, you have $500,000 death cover, and a CI rider that offers an additional $300,000 benefit. If you make a CI claim, you get a $300,000 payout and your $500,000 death cover remains intact.|

What an accelerated benefit means: It “accelerates” the payout to an earlier point. For example, you have $500,000 death cover, and a CI rider that offers an accelerated $300,000 benefit. If you make a CI claim, you get a $300,000 payout but you’re left with $200,000 in death cover. Premiums for accelerated benefits are typically cheaper, but it may leave your dependants in a vulnerable state if you’ve not planned properly.

A rider is a good start. But depending on your financial responsibilities and whether you have dependants , a standalone plan may still be needed to plug some gaps. This is something that a financial adviser representative will be able to help calculate and advise on.