Making Sense of Critical Illness Insurance Part 1

Contributed by Michelle Ee, Wealth Management Director, Financial Alliance Pte Ltd
and MK Chan, Corporate Development Director, Financial Alliance Pte Ltd
(The contributors can be contacted at michelleee@fa.sg and mkchan@fa.sg)

Why take up critical illness insurance when you’re healthy and experiencing no sign of anything “critical”?

The short answer is to guard yourself against the potential loss of insurability. Even though it is often heard that insurance is sold and not bought, it is always the insurer’s decision whether to cover and what to cover – and insurers don’t cover existing conditions.

The moment one is informed one has a critical illness, it will be too late to get critical illness cover. Even if one insurer does grant such cover, which might be very rare, its cover will exclude any existing critical illness and possibly its related critical illnesses as well. Therefore, should one come to this unfortunate juncture, one might have to find out the hard way that obtaining new critical illness insurance is no longer an option. Therefore, getting critical illness insurance when you’re free from critical illnesses is not only advisable, it is the only way.

Financial Alliance’s Wealth Management Director Ms Michelle Ee advises that critical illness insurance should be an integral part of one’s wealth protection endeavors as the payouts would help to cushion financial impacts from expenses related to protracted or costly medical attention, hospitalisation and surgery as well as from the loss of income or employability, which could be temporary, or permanent.

Over the next few articles, Michelle will share her detailed take on critical illness cover and how to approach it with your eyes open. For now, let’s get a basic understanding of critical illness insurance.

What is critical illness insurance?

A critical illness policy pays you a lump sum in cash when you are diagnosed with a critical illness as defined in the policy, or when you have had any of the surgeries as defined in the policy.

Here are two main points to note:

1. The lump sum critical illness insurance payout you receive does not depend on your admission into hospital or on your actual medical expenses. It’s just pure cash – you decide how you use it. This characteristic makes critical illness insurance a good complement to hospitalisation and surgical insurance (which pays on a “reimbursement basis” up to its policy limits).

2. Your claim will only be entertained if the critical illness or surgery is as defined in the policy’s fine print, not as “titled” in the policy. For example, although “Major Cancers” is the title of one of 37 standardised definitions of critical illnesses¹, it does not mean that you can claim the moment “cancer” is mentioned on the diagnosis. Tumours that the layman might think of as “cancer”, such as carcinoma-in-situ, tumours with borderline malignancy, malignant melanoma that has not caused invasion beyond the epidermis, etc., are specifically excluded.

More commonly-encountered conditions and characteristics of critical illness insurance you should be aware of are described in future articles, so do stay tuned to find out more.

The critical illnesses covered may vary across insurers. However, almost all insure against most of the critical illnesses and major types of surgery – which include major cancers, heart attack, coronary artery bypass surgery, stroke, and kidney failure.

You can acquire critical illness insurance as a stand-alone plan, as a benefit packaged into a life policy, or as an optional rider attached to a life policy.

Click here to learn more about critical illness insurance!