Multiple Payout Critical Illness (CI) policies:
Do I need it?
What exactly is a Critical Illness insurance policy?
In a standard critical illness plan, when a policyholder is diagnosed with a CI, they will receive lump sum payment of their sum assured and the policy will cease (note that the respective coverage differs from insurer to insurer).
This payout is meant to help finance the individual’s expenses during the treatment and recovery period in which he/she is unable to earn an income. (Common covers include major cancers, heart attack and stroke) [source]
I have an Early CI and severe stage CI policy already, is it enough?
Many people say that we can potentially earn enough through savings and investments to cover these costs and tide through. However, what we often forget is that all our work in building everything we have is not to counter medical bills, it is to give us a better life. It shouldn’t be our first countermeasure to the frailties of being human when there are solutions that could grant you both the resources needed for treatment, and ensure we come back ready to face the world unshaken.
Critical Illnesses is viewed in stages, mainly early, intermediate and severe. Likewise protection policies have been structured to address them at each individual point. Although it does provide the protection needed at each point, but is it truly enough? Here are a couple of points that would show how traditional Critical Illness protection planning isn’t sufficient.
Cancer Recurrence Statistics
(by Cancer Therapy Advisor)
– Cancer recurrence is a foremost concern of patients
– Recurrence rate vary widely between cancer types based on stage, patient related factors and treatments
– Those with high recurrence rates generally appears around ovarian (85%), bladder (50%) and even breast cancer (30%)
Click above image to enlarge.
Looking at the current statistics, it parallels the concerns of the population. After treatment, the most common concern amongst patients is whether or not the illness comes back. Likewise, I just kept thinking whether or not this was going to be the last scare in the family.
“What if it comes back despite all the treatment?”
As daunting as it is, recurrence for any critical illnesses is especially true when we are talking about a young patient mainly because younger patients have a longer road ahead of us. Taking cancer as an example, chemotherapy is meant to kill the cancer cells. However, on the off-chance there are surviving cancer cells that our body is not able to fight, tumours could develop again that might lead to recurrences that is not within our control.
“Although we cannot control the possibility of recurrence, we can control its financial impact on our lives”
The current approaches to Critical Illness protection has generally been to tackle it in singular stages. Early Critical Illness policies and Critical Illness policies (severe stage). It definitely addresses the issue of covering the cost of treatment and rehabilitation, but it is limited to providing coverage just ONCE. What if we’re less fortunate and face multiple strikes of critical illnesses? The current policies are single payout policies, once we activate a claim, not only will coverage terminate, but we wouldn’t be able to get the same coverage again for what we then need most.
Being a financial planner myself and wanting to protect my mum against potential costs has led me to realise that being categorised as someone with a pre-existing condition is the scariest position to be in. Imagine needing to tell your Mother that you cannot do anything to help in her situation feels like regardless, there’s nothing you could possibly do to better her situation.
This is why I am writing this article in hopes that I can relay my story in a way that would help you realise the importance of guarding yourself against the unpredictability of life. Why not, consider a MULTIPLE PAYOUT critical illness policy that in simple words: provides coverage while tackling the pre-existing problem”. A Multiple Payout Critical Illness policy as appropriately named, provides multiple payouts in the event of recurring Critical Illnesses, and most importantly, keeping us insured and protected even past the first claim.
Do we need this Multiple Payout Critical Illness policies?
Good to have, a MUST for some. Needless to say, there is no one product that everyone MUST have. Having a Multiple pay policy is always good to have, however, should you fall into the following categories, having a Multiple Pay Critical Illness policy is something that you must have.
(a) Family history of Critical Illness
It shows that on average, about 5-10% of all cancers have a hereditary nature. This is because if a parent has a gene fault (that could turn cancerous for eg.) it means that each child has a 50% chance of inheriting it. Ultimately this increases the risk of developing critical illnesses. It doesn’t mean that a person with family history will definitely be diagnosed with a critical illness, but it is true that they have a higher risk, more so at a younger age. Hence, ensuring you’re well covered and protected now is more crucial than ever.
(b) Larger financial obligation/responsibility
Having dependents or a family that relies on you, further reinforces the need to get the right coverage that would ensure your dependents and families well-being in the case of any critical illnesses. Much more so if you are the sole-breadwinner, making sure that our family is well provided for is pivotal especially when we are unable to work.
What’s worse is if we have to consider multiple strikes of Critical Illnesses, the need for the payouts to match the number of strikes would prove to be a much more appreciated resource compared to a single payout
How much should you expect to pay for a Multiple Payout Critical Illness policy?
More often than not, a high coverage automatically translates to an even higher premium.
Thankfully, when it comes to some Multiple Payout Critical Illness Plans, we are now facing a very unique situation where high coverage actually translates to an affordable premium. It should be noted however, that as a Multiple Payout policy pays you out multiple times, the premiums will definitely be higher as compared to traditional Single payout Critical Illness policies.
For illustration purposes, let’s consider some products from Aviva – Aviva My MultiPay Critical Illness Plan III and Manulife – Manulife Ready CompleteCare, considering a Sum Assured in the event of a Critical Illness diagnosis of $100,000, premiums per month are both below $120/month, or approximately $1,200/year.
To fresh-graduates like myself, $120/month although small, still sounds like a hassle. However, if we consider it as a proportion of our income, it actually appears to be much more affordable.
Lets imagine an income of $3000
– $120/$3000 = 4% of our income,
– 4% of our income to protect the other 96% and a potentially much larger amount
Where can a Multiple Pay Critical Illness policy fit into your portfolio?
Click above image to enlarge.
For illustration purpose only.
– As seen from above, before we actually retire, there is always a potential loss of income in the event of any critical illnesses that would affect ourselves and our loved ones and sometimes even possible loans that we still have existing
– This is where the Multiple Payout Policies could fit in to protect and provide for the time when we have the most to lose, and the most to protect
– A Multiple Payout policy before we retire would hence be the most effective to counter any risk of multiple strikes and ensuring we have enough resources to tide through any treatment costs whilst providing for our family’s welfare
Critical Illness can be a dreadful and difficult topic to consider, however knowing that there are possible solutions in the market that could alleviate the burdens we might face could make all the difference. As unpredictable and unwanted as it may be, it is that very unpredictability that requires your first steps in taking action to plan. We wouldn’t want to ever be caught in the situation where we are not only battling physically, but we also cannot be insured against the illnesses we are most concerned with.
It is only after we have taken care of the possible frailties of being human that’s where we can truly focus on achieving the financial independence that we are working so hard for. Why not take the first step in taking care of ourselves now while we have the opportunity to?
Article by Leon Lee
The writer is a Financial Services Consultant representing GEN Financial Advisory