Buying Life Insurance in 2020? You May Want to Relook at Your Critical Illness Coverage.
Insurance | 30 Aug 2019
HOT OFF THE PRESS: The Straits Times reported that definitions of critical illness will be changed from 26 August 2020 onwards. How does this announcement by the Life Insurance Association Singapore (LIA Singapore) affect Singaporeans who plan to get critical illness coverage after August 2020?
Critical illness coverage will encompass more rigid terms
Moving forward, the requirement of eligibility for critical illness payout is higher with the re-assessment of definitions. This will affect mainly individuals under 35 years old, the age range most suitable for critical illness plans, or even just a rider on top of a term life insurance plan.
Definition changes (including but not limited to):
1. Deafness (Loss of Hearing)
LIA Singapore amended “loss of hearing” to “irreversible loss of hearing”. Policyholders are eligible for payout only if their hearing loss is permanent and irreversible. This is also under the condition that future medical treatments are unable to restore the policyholder’s hearing ability.
2. Heart Attack of Specified Severity (Death of heart muscle due to obstruction of blood flow)
LIA Singapore amended “death of heart muscle due to obstruction of blood flow” to “death of heart muscle due to ischaemia”. Meaning, only heart attacks due to Type 1 Myocardial Infarction and Type 2 Myocardial Infarction are covered.
Changes will be implemented from 26 August 2020 onwards. This update will not affect individuals with existing critical illness coverage.
Top 5 severe-stage critical illnesses in Singapore
Major cancer, heart attack of specified severity, stroke with permanent neurological deficit, coronary artery bypass surgery, and end-stage kidney failure are the top 5 critical illnesses eligible to receive a payout in Singapore. 90% of critical illness lump-sum payouts are to policyholders diagnosed with these medical conditions.
Understandably, the revision in critical illness coverage is to mitigate ambiguity in claims.
Wait a minute, do I need critical illness coverage?
You receive a lump-sum of money when you are diagnosed with a critical illness (see above for the top 5 most common severe-stage critical illnesses eligible for payout in Singapore). Your policy wording will include the illnesses covered and the definitions for claim eligibility.
Lump-sum paid out to you will help pay off miscellaneous fees you spend on treatment. It could also alleviate costs incurred from managing your health. Overall, the payout will lighten your financial stress and possible emotional toll.
Always review your insurance policy before purchasing a critical illness plan or adding on to your term-life plan as a rider. Even more so for now, we encourage you to review the differences in the policy wording and coverage types before 26 August 2020. Get the best bang of the buck – even for your insurance coverage!
“How much critical illness coverage do I need?”
Estimating the costs for critical illness coverage is much simpler than you think. A simple calculation goes a long way. Never buy more than what you need for life insurance. Cancelling your life insurance or critical illness plan because you cannot afford them is one of the worst things that can happen.
The recommended coverage you need for the respective critical illnesses:
Early critical illness: 3.5x of your income
Normal critical illness: 5x of your income
Death critical illness: 10x of your income
Calculate the amount you need to protect yourself based on the critical illness type. Let’s say you’re earning $5,000 a month, the amount payout you need will be the type of critical illness multiplied by your annual income.
If you have an early critical illness, you need a minimum payout of $210,000 ($5,000 x 12 months x 3.5) to sustain financially for the period you are out of a job.
If you have normal critical illness, you need a minimum payout of $300,000 ($5,000 x 12 months x 5) for financial sustenance during your rehabilitation period.
Going through major lifestyle changes when dealing with a critical illness doesn’t mean it should be a financial burden. Critical illness coverage will give you financial security in the phase of changes – so you need not worry about finances. Plan early and plan smart to have the worst-case scenario settled for you.
Want to find out more about critical illness coverage? Email us at [email protected]!
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