Critical illness policy and early stage vs IP hospitalisation plan

Jes , 0 Comments

My insurance agent sends me a newsletter every month to talk about insurance coverage and the events they held. This was done privately by them and not by the insurance company. I was pleasantly surprised this time when I found a very honest yet important piece on critical illness.

Many people have been asking if they need critical illness plan. Isn't it similar to hospitalisation plan?

No, of course it is different.
Can die but cannot be sick? It doesn't have to be this way.

Let's zoom in on hospitalisation plan first. 
There is MediShield Life for everyone, and to cover the cash portion, the Integrated Shield Plans (IP or riders). I have compared the prices for the different IP before in my previous post so please consider it before making any purchase. For any hospitalisation stay in the hospitals, the hospitalisation plan will cover them.

Integrated Shield plan covers all medical bills provided you are warded.

Top critical illnesses in Singapore. Source : MOH

How about Personal Accident plans?
Even if you go A&E, if you are not staying overnight in the ward, there is no coverage. For that, you need accident plans. Just a brief mention, accident plans do cover TCM consultations and any clinical expenses.

Accident plan covers all medical claims when you are not warded. 

What about critical illness (CI) plans?
It covers around 37 main illnesses in Singapore. They include the top 10 most common illnesses in Singapore, taken from the MOH website. Do take a closer look if your plans cover Urinary Tract Infections (UTI). Some of them classify it under a different policy, for example PRUlady, which requires additional top out for the coverage.

The probability of getting a CI before the age of 65 is 10 to 20% for a non-smoker, and doubles that for a smoker. The main question boils down to how much you want to pay to insure against it. When you receive the pay out varies too. Some will give you a lump sum payment, some will stagger them depending on the stages of the illnesses.

Why do you need critical illness plan? 

Critical illness plan is to replace loss of income! 

Thanks to advance medical treatment, we are increasingly getting great recovery rates from illnesses but you may take a long time for a full recovery. For example, stroke is the leading cause of long term disability in Singapore. It is a long rehabilitative process and may affect the mobility of your limbs, affecting work. For this, critical illness would be very useful in covering your daily expenses for a period of time. It will also be useful in hiring additional help for the time being.

How much do you pay?
It is around $60 per month for $200,000 coverage for a 30 years old non-smoking male.

How about multiple claims? 
Most policies do not allow for multiple claims. For example, Aviva has a Multipay CI plan for people who are interested. It cost around $80 per month for $100,000 coverage for a 30 years old non-smoking male.

How about early stage? 
Due to frequent health screenings, more illnesses get detected early. Critical illness mostly cater to late stage and does not cover early stage illnesses.

How much do you pay for early stage?
It is around $70 per month for $100,000 coverage for a 30 years old non-smoking male. I think the price is too steep for early stage. Early stage illnesses means you most likely will still be mobile so there is a high chance you will still be able to work and plan accordingly.

A rule of thumb is spending 2% of your annual pay on insurance. Term insurance is a must-buy if you have dependants. The very last insurance to buy is early stage plan. It is very much dependent on your pay and savings.

Insufficient coverage or overpaying, both are no good
Indicative insurance premiums per month for a 30 year old non-smoking male
Term insurance - $20.50 for $500,000 coverage
Hospitalisation plan (IP) - $30 for Ward A in government hospitals
Accident plan - $20 for $100,000 coverage
Critical illness - $60 for $200,000 coverage
Early stage - $70 for $100,000 coverage
Monthly premiums for all - $200.50
Annual premiums - $2,076 (2% of your annual pay)
Annual pay to cover these premiums - $100,000

If you are paying more than $200 a month, ask yourself if you are buying the right insurance. Most likely you are buying Investment Linked Policies which are for investment and not just insurance. Whole Life insurance is for savings and not just insurance. My stand on ILP is very clear: Stay away unless you know what you are buying.

My personal opinion
For singles who do not have to provide for your family - Hospitalisation plan
For people who have to provide for your family - Term + Hospitalisation plan
Depending on your income - Accident / CI
Really high income - Early stage

For me, I only bought term insurance and hospitalisation plan. I rather spend $600 a month into STI ETF to invest for my future. You see how I like to separate insurance from investment.

Take a look at your policies and always know what you are buying.
Why are you trusting a stranger and my calculations? Do your own calculations, it's your hard-earned money. Like me on Facebook to get more updates on personal financial matters.


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