Reasons Why Skipping Critical Illness Insurance is a Big Mistake
Is critical illness (CI) insurance necessary? When you’re young and healthy, there seems to be little need for it – especially when you have a private hospitalisation plan or MediShield Life with an Integrated Shield Plan.
The thing is, a major illness comes with expenses that extend well beyond surgery and hospital stays. According to the Life Insurance Association (LIA), it takes about 5 years for a person to recover from a critical illness1. Going through recovery also means dealing with exorbitant costs related to prolonged treatment, medication, or loss of income.
During a big health emergency, Critical Illness Insurance protects you from financial trouble and keeps you financially afloat while you recover.
Many people make the mistake of thinking that since they have hospitalisation insurance, they no longer need to worry about their finances if they fall ill. This causes them to overlook critical illness insurance, which might actually be necessary to fill the gaps in their protection.
Since I have hospitalisation, why do I need Critical Illness coverage?
You might be thinking, since I already have hospitalisation insurance, do I still need critical illness insurance?
The answer is, probably yes. According to a 2018 report1 the average Singaporean is only covered for 20% of their critical illness needs. Understanding the differences between hospitalisation and critical illness insurance is the key to figuring out if you need both.
What is hospitalisation insurance?
Hospitalisation insurance reimburses your medical bills when you are hospitalised. It can also pay for certain outpatient expenses that are linked to the condition which requires hospitalisation, such as fees for consultations leading to diagnosis and follow-up visits after getting discharged.
This kind of insurance is essential for anyone living in Singapore as it offers protection against high hospital bills.
Singaporeans and Permanent Residents who already have the basic coverage provided by MediShield Life can boost their protection with an Integrated Shield Plan (“IP”), an optional health coverage provided by private insurance companies designed to complement with MediShield Life.
Additional hospitalisation insurance frees you from having to worry about your medical bills and can also give you access to private healthcare as well as Class A and Class B1 wards at public hospitals, none of which can be sufficiently covered by MediShield Life.
What is critical illness insurance, and how does it differ from hospitalisation insurance?
Critical illness insurance offers financial support when you are diagnosed with a serious illness, but functions very differently from hospitalisation insurance.
Getting afflicted by a serious illness often leaves people unable to work, leading to great financial insecurity for themselves as well as their families. Critical illness insurance is designed to provide much-needed financial support in such difficult times.
Hospitalisation insurance won’t cover all your expenses
Similarly, a private hospital plan can cover hospitalisation stays and surgeries, and some outpatient treatments like kidney dialysis or chemotherapy. However, critical illnesses require multiple costly treatments, especially during the disease’s early stages. Because there are limits to its coverage, a hospital plan alone can’t cover all tests, treatments, and consultation fees.
A CI plan can make up for what hospital insurance can’t cover – and not just in terms of medical fees. Because you’re free to use the payout as you wish, a CI plan lets you make up for lost income, or pay for things like day care for your kids while you recover.
Critical illness plans are affordable – especially while you’re young
It seems strange to get a CI plan while you’re young, healthy, and have no immediate need for it. If that’s where you are, now is the best time to get CI insurance. Not only are premiums more affordable the younger and healthier you are; you’ll also get full coverage for the plan’s illnesses.
Getting a CI plan is trickier once you’ve been diagnosed by a health condition. While it’s still possible, you may end up paying higher premiums, or get less coverage that excludes the illness you were diagnosed with.
Given the high chance of getting critically ill in your lifetime, and the costs that come with it, a CI plan provides a valuable safety net when you need it the most.
How Critical illness insurance works
When you are diagnosed with a critical illness covered by your insurance plan:
you receive a payout based on the policy terms in the contract.
the payout can be used in any way you wish.
for example, to replace your lost income, support your household or pay for medical expenses.
Who Will Benefit Most From Early Critical Illness Plan?
1. Critical Illness Runs in the Family Blood
Given that medical conditions can be hereditary, an ECI plan is a wise decision for those with a family history of chronic disease(s). Safeguard your liabilities and costs by making advanced provisions.
Consider your role in the family nucleus, i.e. a single parent with elderly parents to support. The sole income earner of the family will benefit from added protection.
Singles have to plan proactively in providing for themselves, such as buying caregiving services, in times when they become unable to function independently.
Having a critical illness insurance alleviates financial distress in the event of major illnesses which can result in loss of income. Moreover, provide a lump sum payout for all financial needs and obligations not covered under hospitalisation plans.