4 Considerations When Buying a Critical Illness Plan

Published in March 2021

Article Summary

A critical illness plan can be crucial in helping to tide you over a serious illness such as a stroke, heart attack or cancer. Besides paying for your medical bills, you might also have to hire a caregiver or account for your family expenses if you have to stop work while being treated.

But not all plans are created equal. Here are 4 questions you should ask yourself when you buy a critical illness insurance plan.

4 Considerations When Buying a Critical Illness Plan

For basic hospital bills, your insurance policy has you covered. But if hit by a life-threatening illness, a critical illness plan is best.

In the wake of a serious illness such as a stroke, heart attack or cancer, few things can bring more relief than knowing that your hospital bills are being covered by an insurance policy you purchased — especially if at the time you bought it, it felt like a burden to pay for.

Critical illness plans are designed to pay out a lump sum at a time when you really need cash on hand. For example, based on the Singapore Ministry of Health’s hospital bill statistics, during the period of 1 August 2015 to 31 July 2017, the cost of treating serious complications caused by pneumonia at the Singapore General Hospital could run up to S$31,406 for the 90th percentile. What this means is that one in 10 patients paid more than this amount when seeking treatment for pneumonia.

Worse still, beyond hospital bills, there may be additional costs to think about. For instance, if you are unable to immediately return to your day job, the sudden loss of income may be a cause for concern. You might also need to hire a caregiver or require help to take care of household chores.

But before you rush out to buy a critical illness plan, here’s a question you need to ask yourself: which critical illness plan is right for you?

Unlike socks or medication we can buy over the counter, when it comes to a critical illness plan, there is no one-size-fits-all solution. A critical illness plan that works for a friend may turn out to be the worst possible option for you. Here are a few things to consider when purchasing a critical illness plan.

  1. 1. How much is enough?

    The amount you need is dependent on your monthly living expenses. As a rule of thumb, experts recommend covering a minimum of 60 months, as this is roughly the amount of time the average person would need to recuperate from a critical illness. The types of illness and treatment matter too. Some illnesses, like cardiovascular diseases and cancer, may require longer recovery periods.

  2. 2. What type of critical illness plan should I choose?

    No matter the company, there are a few types of critical illness plans to consider: early-stage plans, basic plans, single-pay plans and multi-pay plans. Essentially, early-stage plans allow policyholders to claim payouts regardless of the stage of the illness, while basic plans provide coverage only during more severe stages of an illness. Single-pay plans provide a lump-sum payment upon diagnosis — but the policy ends right there and then. In contrast, multi-pay plans provide multiple payouts upon diagnosis, a feature that is especially crucial for longer-term illnesses that may relapse.

  3. 3. Does your family have a history?

    A medical history, to be exact. For example, if there is a high incidence of cancer in your family, you might want to look into a multi-pay plan, as cancer is a critical illness that can recur.

  4. 4. Does the plan stipulate a waiting and/or survival period?

    Some critical illness plans come with waiting and/or survival periods. As the name suggests, a waiting period means that the benefits will only come into effect after a certain period of time has passed since your diagnosis. Similarly, a plan with a survival period may only pay your claim if you can survive a period of seven, 14 or 30 days after being diagnosed (depending on the terms of the plan). Such limitations are not favourable at all. In general, the shorter the waiting period and/or survival period, the better.

Whatever the illness, the earlier it is diagnosed, the easier it is to manage and the higher the chances of a full recovery.

This article is brought to you by UOB in partnership with Prudential. It was first published on Prudential Singapore’s blog Life Matters.

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