My First Case on Early Critical Illness
My First Case on Early Critical Illness
How The Case Came About
After joining my company in late August, my first case came from a Lawyer who was concerned about his coverage for Early Critical Illness (ECI). A quick search on Google would show that critical illness insurance was introduced in 1983 by a South African cardiac surgeon, Dr. Marius Barnard. Critical illness back then was also known as “dread disease insurance” and was sold under Life Insurance.
In 2019, Life Insurance Association (LIA) of Singapore wanted to standardize the critical illness definitions that were implemented by insurers. All policies sold from 26 August 2020 had to adopt this new set of definitions which help guide insurers on qualifying successful claims. This was done to avoid confusion among the insurers in Singapore in view of the medical advancement in the country.
Why the need to purchase critical illness coverage you may be wondering? Let’s pause for a minute to think.
If one day down the road, you went to the doctor and receive the news that they found an illness in your body for example cancer. How would you feel? What would be your first reaction?
Would you have the drive to continue working? Even if you did have the drive, will your body be able to continue to perform at its peak? My guess is no. None of us is superman sadly. That is why the critical illness benefit is there to provide a payout, which can be used as a form of income replacement while we take the time to recover. Sounds great, doesn’t it?
Forming The Game Plan
As an independent financial broker, I have access to 17 different life insurers to select the best plan to suit my client’s needs, preferences, and budget. I started the search with three objectives (1) determining the amount of coverage, (2) Whole of Life policy versus Term policy, (3) competitive pricing and benefits. During my search, I began to uncover new information which guided my approach in determining the right plan. These were some of my discoveries that I feel can help guide you in the future should you decide to search for critical illness policies.
1. Waiting Period
Insurers put in place a “waiting period” of 90 days from which they will not pay out any claims regarding critical illness until the period has ended. Just because your policy is in-force, does not mean you can claim for critical illness right away.
2. Maximum Critical Illness Cover Limit
The max CI you can claim is up to S$3 million for critical illness per life inclusive of all other policies issued by other insurers (information as of November 2021). Any higher amounts are subjected to underwriting.
3. Maximum Early / Intermediate Critical Illness Cover Limit
Insurers differ in the amount of claim regarding early and intermediate critical illness ranging from S$250,000 to S$350,000. Some insurers allowed claiming twice but depending on the time interval between the claims and the type of early critical illness. The table below does not show an exhaustive list of insurers and is just a basic guide that I have put together (information as of November 2021).
4. Limited Pay Premium Term Option
Traditional life insurance policies have premium payment term for as long as you decide to keep the policy in-forced. By having the limited pay option, you are able to pay premiums for that stated number of years before your policy is determined to be “fully paid”. The longer the limited payment term, the cheaper the premiums will be. A common limited payment term option ranges from 10 years to 30 years, depending on the insurer.
5. Whole of Life Policy Plans
Some insurers’ “WholeLife” coverage refers to whole of life which means until the insured has passed away. There are a few insurers whose “WholeLife” covers until age 99/100. This means that your policy will not cover you after passing that age (congratulations on living such a long life!). Not to worry! When you reach those ages, your policy will be considered as “matured” and the remaining cash value will be paid out to the policy owner.
6. Total Permanent Disability
Similar to WholeLife, certain insurers have an expiry age for their TPD cover even though the policy is a WholeLife policy.
7. Multiplier Option
For WholeLife policies, you are able to add this multiplier option to boost your base sum assured coverage.However, this boost only lasts for a specified period ranging from age 65 to 80 depending on the insurer. This is can be used as an affordable method to increase your coverage.
E.g. a 1 time multiplier option (or 100%) will boost your based sum assured from S$100,000 to S$200,000. However, the additional S$100,000 has an expiry.
In summary
Selecting the right plan isn’t always simple due to the vast amount of information available on the web.
Here’s my process when deciding the right plan for my clients.
Step 1: Determining the amount of coverage
- a. Discuss with your financial adviser about the amount of coverage. You may use your current annual income and multiply it by the number of years for an income replacement should a critical illness occur. This number is not fixed and may vary as you can always get more coverage should you feel the need to!
Step 2: Looking through the existing policies
- a. Check the coverage they offer by looking at the sum assured portion and reading the terms & conditions for making a claim.
Step 3: Finding the shortfall
- a. Shortfall = Coverage needed – existing coverage
Step 4: Understanding the type of plan you wish to have
- a. WholeLife vs term policies
- b. Rider or no riders
- c. Multiplier option or without
- d. Max amount for ECI claims
- e. Premium payment term (whole of life or limited pay)
Step 5: Comparing quotes
- a. Generating quotes from the different insurers and comparing them based on features & premiums
Step 6: Summarizing all the information gathered into something simple for my client to make an informed decision
I hope that what I’ve shared will be useful in assisting you in your financial journey. Should you have any questions or feedback feel free to drop me a message!
Disclaimer
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customized to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Any views, opinions, references, assertions of facts and/or other statements that I may set out on this social media account or otherwise are personal views and not necessarily the views held by Financial Alliance Pte Ltd.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek unbiased financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Published By:
Gabriel Lim
Helping you make sense of your finances, without sales pressure.
Gabriel provides clear, unbiased advice to help you take control of your financial future. Guided by honesty, integrity, and transparency, he focuses on solutions that truly fit your life.
A Bachelor of Business Management graduate from Singapore Management University, Gabriel has chosen to dedicate his career to financial planning. He continually hones his skills to help clients take meaningful steps toward their financial goals, with confidence and peace of mind.
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