The old name “Dreaded Disease” policy conveys the fear we all have of the critical illnesses like cancer and heart attack and their serious consequences on the patient and his/her family. How useful and necessary are critical illness policies and what do you have to look out for in the many offerings by life insurance companies…
There are two important things to note about critical illness insurance.
Firstly, the list of critical illnesses upon diagnosis of any, of which the insurance company pays the insured sum. The insurers in Singapore have agreed on a total of 30 critical illnesses, but the list of 30 illnesses differs slightly from insurer to insurer.
The second important point to note is that it is a benefit policy paid upon diagnosis of the illness. It is not the same as medical policies which reimburse the expenses paid. Being a benefit policy, it will be paid irrespective of the other medical plans and other possible critical illness plans. However, some insurers impose an industry limit.
Critical illness insurance can be purchased in several ways:
- As part of a whole life policy, the benefits are accelerated when the person is diagnosed with one of the critical illnesses. Once this is paid, the policy ends.
- As a rider to a policy.
- Paired with a term policy.
The critical illness cover usually ends once a claim is made. There is, however, a product which has a recovery benefit that will cover the remaining 29 illnesses for a slightly reduced sum assured.
Critical illness premiums are relatively higher than the other products, but the probability of claims is high.
From a financial planning viewpoint, critical illness policies, though relatively higher priced, have high probability of claims. A lump sum payment is given, which can be used at the client’s discretion.
It is important to ensure that the client has at least another policy which will continue to cover the rest of his life, since the chances of recovery from a critical illness are good.
Read More : Common definition of 30 critical illnesses (Source : www.lia.org.sg)