Early Critical Illness vs Traditional Critical Illness

[newbie]

hi

If you have a 'as charged' shield plan with rider covering deductible and co-insurance, and you will like to purchase a whole life policy, is there a need to buy early critical illness coverage in addition to your whole life policy- death +TPD (Total Permanent Disability) ? Or is a traditional critical illness attachment good enough, given the fact that premiums for early critical illness payout are more expensive than traditonal critical illness payout.

[Dennis Ng]

hi

If you have a 'as charged' shield plan with rider covering deductible and co-insurance, and you will like to purchase a whole life policy, is there a need to buy early critical illness coverage in addition to your whole life policy- death +TPD (Total Permanent Disability) ? Or is a traditional critical illness attachment good enough, given the fact that premiums for early critical illness payout are more expensive than traditonal critical illness payout.

basically most Critical Illness plans only pay out for Cancer at later stage. Critical Illness cover pays a lump sum upfront.

Actually, if you want to cover risk of Medical Expenses related to ALL Illnesses, be it Minor, Major, Early, end stage, the best way is to cover through Medical Insurance, NOT Critical Illness Plan/Rider.

[juxstapose]

Hi all,

Thinking of reviving this topic as I was presented with 2 early critical illness plans recently. One from AIA n another from hsbc.

Anyone who bought any of these plans care to share their views?

On comparison of these 2, seems like AIA like pricier.both are 150k cover. The details I have are:
AIA: 30yo, til 75yo. Premium $2,067 per annum.
Hsbc: 30yo. Til 65yo. Premium $1,572 per annum. Death/maturity benefit 3k.

[candy_chia]

Critical illness (CI) are generally DETECTED in the LATE STAGE, therefore there really isn't a need to foot additional premium, which generally ensure the insurance agent has a handsome commission.

Below are comparison of traditional CI vs Early Stage CI for 4-years old and 11 years-old.

By purchasing traditional life insurance plan by GE Supreme Protect 20, which offered protection on Late Stage Critical Illness, the total cost savings in premium is $6780.00 for a 4 years old.

Comparison of Critical Illness Plans for 4 years old.png (13.92 KiB) Viewed 33166 times

Distribution Cost for NTUC Vivocare 1st year is $901.00, equivalent to 69% of annual premium, whereas GE Supreme Protect 20 plan is $844, equivalent to 87% of annual premium.


For a 11-years old child, the difference in cost savings for 20 years escalate to $11,520.

Comparison of Critical Illness Plans for 11 years old.png (9.82 KiB) Viewed 33166 times

AIA is among one of the costly insurer in the market, but AIA Premium Disability Cover (Disability Income Insurance) is currently the best choice in selecting disability income insurance.


Comparison of AIA, GE & Avivia disability income plans, painstakingly compiled by seowwyh:
http://www.masteryourfinance.com/forum/ ... nce#p24078

[candy_chia]

Excerpt of article on financial planner's view why Traditional Critical Illness (CI) plan that pays for Late Stage CI is SUFFICIENT for most people:

Ms Tang Yin Fong of Providend believes that the traditional critical illness plan is sufficient for most people unless one is self-employed.

This is because the traditional critical illness plan is payable only for Advanced stages of a critical illness. And it is really when we are severely ill that we may end up with not just HEFTY Medical Expenses, but also a LOSS OF INCOME, she explained.

It may seem easier to claim from an “early payout” policy because it is increasingly common to detect critical illnesses early, thanks to medical advancements and the growing popularity of periodic health screening.

However, Ms Tang highlighted that each payout is generally just a percentage of the insured sum, and therefore may prove to be relatively small.

This may not justify the much higher premium of such a plan, which may be double that of a traditional critical illness plan. “Moreover, we may well be able to manage the much lower cost for early treatment, especially so with a right H&S plan.

“A quicker recovery from early detection and treatment may also mean minimal disruption to income earning, so the provision for income replacement from an enhanced critical illness plan may not be necessary at this juncture,” she added.

Nevertheless, if a person’s budget allows, the “enhanced” plan can be a supplement for a portion of critical illness needs. This is particularly relevant for those who do not draw a regular income or whose income earning occurs on a daily basis and who may not enjoy any employment benefits such as medical leave. In the event of an early stage critical illness, such people are likely to be at risk of income loss while undergoing treatment and during recuperation, said Ms Tang.

Mr Tomas Urbanec, Prudential Singapore’s chief marketing officer, pointed out that the premium rates of an early stage crisis cover may be higher as they reflect the higher probability of a claim.

“The lump sum benefits from these products will cover medical expenses that the hospitalisation plan may not pay for, such as co-insurance and deductibles and reconstructive surgery unless it is medically necessary. They could also be used to pay for mortgage instalments and children’s education fees, replace loss of income, and aid in lifestyle changes to adapt to life after a critical illness,” he said.

http://www.healthxchange.com.sg/News/Pa ... laims.aspx

[juxstapose]

This means if you have a comprehensive enough H&S plan, you may not even need a Critical Illness Plan at all?

Does anyone have any comparisons of Critical Illness plans?

Thanks!

[candy_chia]

Alvin shared an insightful article on the need to buy Critical Illness (CI) Insurance. However, I don't agree on his comment that one should buy a CI with early payout option as the total cost saving for purchasing traditional (or Advanced Stage) CI is substantial.

My grandparents & father-in-law (in his early 50s) all succumbed to CI (4 contacted advanced stage cancers & my grandma passed away 6 years after suffering stroke which rendered her paralysed from neck down).

Medishield (or Hospitalisation & Surgery plan) is like baby bonus that stipulated areas that you can spend. Whereas, Critical Ilness is equivalent to Growth dividend which allows you the choice to spend or save.

Do not buy Critical Illness Insurance
by ALVIN on MARCH 3, 2009

I was quite surprised to find out that Mr Tan Kin Lian does not recommend critical illness insurance, or at least not to a large coverage.

From his website on Personal Insurance, he mentioned this about critical illness:

“There is no need to buy insurance to cover critical illness. Your Medishield or private Shield plan can cover most of the medical expenses.

The chance of making a critical illness claim is small. Less than 5% of people make this claim during their working life.

If you wish to have insurance to provide a cash payment, a sum of $50,000 should be adequate. The cost of critical illness cover is high. You should not spend too much premium on this risk, as the return is poor.”


There are 3 points in his argument from his words and I went to investigate a little further.

1. Medishield covers most of the medical expenses

Let us examine what is covered in a basic Medishield plan:

1) Daily ward and treatment charges
2) Surgical operations
3) Implants/approved medical consumables
4) Radiosurgery
5) Chemotherapy
6) Stereotactic Radiotherapy for Cancer
7) Radiotherapy for Cancer
8. Kidney Dialysis
9) Immunosuppressant drugs for organ transplant
10) Erythropoietin drug for chronic kidney failure

It is true that treatment for critical illness is indeed covered in a shield plan.

So Do you NEED a critical illness cover? I would say YES if you Do NOT Have Enough Savings.

coverage.png (19.01 KiB) Viewed 32974 times

We must always go back to the purpose of insurance when we discuss about such issue.

Insurance is to Provide the money you NEED when you encounter mishap.

Hence, a critical illness coverage provides the cash payout when you contract the illness and you can Use the Money WHEREVER you wished to.

In this case if you have a Shield plan, your treatment cost is mostly covered. Hence, do you still need a sum of money?

If the Shield plan claim is not adequate to meet hospital bills, the money may come in handy.

~~ But besides settling the bills,

~~~ it is important to note that most probably you will be out of job and lose your income once you contracted the illness.

~~~~ You will be living off your savings for the rest of your life.

~~~~~ It is safe if you have enough savings or investment returns or retirement funds for you to tap from.

~~~~~~ But if you have not been disciplined to build your savings, you would really need the payout from critical illness.


2. Low probability of claim

Based on 2007 statistics from Ministry of Health website, we have a population of 4.5 mil. Here are the top 10 conditions of hospitalization:

1) Accident, Poisoning and Violence
2) Cancer
3) Ischarmic Heart Disease
4) Pneumonia
5) Obstetric Complications
6) Chronic Obstructive Lung Disease
7) Other Heart Diseases
Cerebrovascular Disease (including stroke)
9) Intestinal Infectious Disease
10) Complications related to pregnancy

You may want to compare to the list of critical illness that is claimable here.

Hence, I would say only (2), (3) and (8) qualify for claims. Doing some calculations, the probability is about 1.1% of the population. Of course, this is a very rough estimate since it does not consider all the diseases that are claimable under the critical illness list. However, out of the top 10 conditions, I am quite surprised critical illnesses take a small proportion.

But it is still important to remember Low Probability Does NOT equate to “it will not happen”.

probability.png (167.53 KiB) Viewed 32974 times

3. Poor return

You cannot buy critical illness cover by itself. It has to tag along a life policy (either whole life or term). A whole life policy usually have a return of 3%-5% per annum. For 10-20 years, a 8%-9% return from a low cost fund can give you much more returns.

I believe if you do not have enough savings, covering yourself with critical illness is important, especially when you just began your work life. It is important to plan well and determine your true needs. Do not under insure or over insure. How about sharing your take on critical illness?

Clarifications from insurance agents:

I guess I draw alot of negativity from insurance agents when I wrote this post. Anyway, I should also give a side of what one of them thinks. I have 2 good friends who are also insurance agents and they read all the posts on insurance on this blog. They gave good comments and since I have a very open mind, I do agree with what they said (don’t get me wrong, it does not mean I am easily convinced). Hence, I decided to share it here.
The issue with critical illness is that it usually payout in the final stages of cancer. Hence, if a person is likely to die, he does not really need the money for treatment. Moreover, if he dies, his life policy which the critical illness is attached to will cash out, which his family can use. So what is the point of paying critical illness cover? Then GE came out with an Early Payout scheme which makes more sense to a critical illness cover. The scheme will payout even the cancer is discovered at stage 0. This means that the patient will receive the money and use it to treat the illness from the onset. The drawback is that the additional premium for this scheme is high.

Another friend commented that critical illness may not be terminal. For e.g., coma or Parkinson’s disease. Although each of them has terms and conditions regulating claims, they are likely to be paid out when they are diagnosed and need not wait till the end stage. His point is that critical illness cover is important, especially for such non-terminal cases.


http://www.bigfatpurse.com/2009/03/do-n ... insurance/

This means if you have a comprehensive enough H&S plan, you may not even need a Critical Illness Plan at all?

Thanks!

[candy_chia]

Dennis shared why is there a need for critical illness & how much coverage is sufficient, in addition to an extensive medical insurance.

hi

If you have a 'as charged' shield plan with rider covering deductible and co-insurance, and you will like to purchase a whole life policy, is there a need to buy early critical illness coverage in addition to your whole life policy- death +TPD (Total Permanent Disability) ?

Or is a traditional critical illness attachment good enough, given the fact that premiums for early critical illness payout are more expensive than traditonal critical illness payout.

basically most Critical Illness plans only pay out for Cancer at later stage. Critical Illness cover pays a LUMP SUM upfront.

Actually, if you want to cover risk of Medical Expenses related to ALL Illnesses, be it Minor, Major, Early, end stage, the best way is to cover through Medical Insurance, NOT Critical Illness Plan/Rider.

medical billing.png (60.32 KiB) Viewed 32914 times

As mentioned in my seminar, generally, one only needs about S$50,000 to S$100,000 Critical Illness coverage, then top up with Comprehensive Medical Insurance.

critical illness.png (62.41 KiB) Viewed 32914 times

In my opinion, Critical illness cover is to cover the time period that you might have to go for medical treatment and cannot work, thus, just enough coverage to cover 12 months of expenses would typically suffice.

While the risk of Medical Expense for Critical Illness is covered by Comprehensive Medical Insurance instead.


What I share is NOT generally what Financial Planning textbooks teach and what Financial Planners/Insurance Agents would say. But anyway, I found out that many of the things taught by Financial Planning textbooks might NOT work in real life as well.

Hope above clarifies.