A critical illness insurance plan, also known as dread disease policy or critical illness cover, is a type of insurance product in which the insurer is contracted to generally make a lump sum money payment if the policyholder is diagnosed with one of the particular illnesses from a predetermined list. The policy may require the policyholder to live a minimum number of days – called the survival period – from when the illness was first diagnosed. The survival period insurers use varies from country to country. However, 14 days is the most typical survival period used, while in Australia, for instance, survival periods are set between 8 to 14 days.
If you’re thinking about getting a critical illness insurance plan, here are some things you should consider.
Who needs a critical illness cover?
Various individuals will require different critical illness covers for a variety of reasons. If you’re single, you might go with a policy to ensure your mortgage is paid, and some kind of cover is usually a requirement in the mortgage application process. In case you have children, you might want to make sure your family is provided for if you can’t work due to ill health. The recovery from a critical illness can also mean added expenses for you and your family. For example, making changes to your car or home. The payout from the cover can be used to cover such costs.
Cancer-specific insurance policies
Cancer is, without a doubt, one of the most widespread critical illnesses in the world. Take Singapore, for instance. In 2018, there were over 26,000 new cancer cases, according to the Global Cancer Observatory. If your family has a history of this grave illness, you could think about having enough financial protection against cancer. In other words, about a cancer-specific insurance policy. A typical example of this kind of policy can be seen in cancer insurance in Singapore, where insurers cover all stages and types of cancer, while the policyholder can remain covered until age 85. Most plans give you a percentage of the sum when you’re diagnosed with cancer early, and usually, this payout cannot affect the assured sum.
Claim Settlement Ratio and survival clauses
It is essential that you consider the Claim Settlement Ratio – CSR – of your insurance provider. CSR explains how many claims the insurer settled in any previous financial year. It will give you a vague idea of how likely your claim will get approved or rejected. The bigger the CSR of an insurance provider, the better.
The survival clauses, on the other hand, specify which policy features can remain in effect after a critical illness was diagnosed. As a future policyholder, you’ll have to survive for a particular duration after the diagnosis to register your claim. Typically, this duration equals one month.
The amount of coverage you should be looking for
Just like with life insurance, it’s important to define how much coverage you might need. If you’re worried about having too high premiums for critical illness cover, remember that it’s better to have some level of insurance rather than having none at all. You could even start with a small sum assured, then build it up later on when you have more cash.
If you have a bigger budget, the sum assured for your critical illness insurance can cover the projected loss of income from being unable to work, pay for your living costs, offset your financial obligations, and take care for any dependents you may have during your recovery.
Diseases covered by critical illness insurance plans
Not all insurers cover all kinds of illnesses, so it’s crucial to check the details of the policy before you purchase it. Policies will typically cover diseases such as some types of cancer, coronary artery bypass surgery, strokes and heart attacks, and could include optional add-on illnesses. Some other conditions that can be classified as a critical illness include:
- Alzheimer’s disease
- Aortic surgery
- Kidney failure
When selecting your critical illness insurance plan, take care and research your options thoroughly. Looking at your family history of illness, claim settlement ratio and diseases covered by a particular insurance plan will enable you to find the policy that suits you the most.