3 Major reasons why Singaporeans are underinsured for critical illness
Critical illness cover is a type of insurance in which the policy holder receives a lump sum payout if they are diagnosed with one or more pre-listed critical illnesses. This payout can be used to meet the financial obligations of the insured person and their family as they receive treatment for their illness. Critical illnesses that are usually covered under this insurance include different types of cancer, limb paralysis, coma, bacterial meningitis, kidney failure, certain heart diseases, deafness, blindness, Alzheimer’s disease, and Parkinson’s disease among others.
Given the noticeable importance of having critical illness insurance, it comes as rather a surprise that most Singaporeans do not have sufficient critical illness cover. In some cases, they lack this cover completely. A study by Life Insurance Association Singapore (LIA) noted that the average working Singaporean has a critical illness cover gap of S$ 256,826. That is certainly not the kind of money one has lying around should the need arise.
So, why does this gap exist? Let’s look at 3 major reasons why Singaporeans are so underinsured for critical illness.
1. Insufficient understanding of critical insurance options
The good news is that there is a wide choice of critical illness plans available to choose from in the insurance market. On the flip side, many Singaporeans are unaware of the differences between these plans. So, even when a plan is chosen, it might not be the right one as per the policyholder’s needs. There are some critical insurance covers that can be claimed only once and others that offer many payouts. Certain other critical illness covers only provide a payout for a late stage of a critical illness, while some offer compensation even for an early stage illness. It is imperative to thoroughly read the terms before taking your pick.
2. Wrongly assuming health insurance will suffice
Most people assume that their health insurance will prove sufficient if they are diagnosed with a critical illness. This is a misconception. The health insurance will cover you for hospital treatments as well as pre- and post-hospitalization care. However, it will not take into account the other expenses that you may incur due to critical illness. For instance, it will not cover the loss of your own income here as you may need to be forced to quit your job. This is when a critical insurance payout truly proves its worth as you can focus on what matters — getting well — without needing to worry about finance. Health insurance and critical insurance really work complementary to each other. The health insurance plan finances your medical expenses while critical illness insurance plans cover the rest of your financial responsibilities are met.
3. Lack of awareness of the financial ramifications of critical diseases
A critical illness is usually not one that gets healed in a couple of days or weeks. On an average, a patient with a critical illness could take around 5 years to recover. This is especially true in the case of critical illnesses such as cancer. During this period, one needs to consider how their family members can cope with recurring expenses (mortgage loans, school fees, and so on), and funding the added expense for healthcare to treat the illness. It is also important to understand that if the breadwinner is the one diagnosed with the critical illness, the monthly income of the family might come to a halt, albeit temporarily. Many people forget to make a thorough calculation of their actual financial shortfall should they be diagnosed with a critical illness.
A critical illness policy is one of the most important financial products you will invest in. Remember that this plan is an investment in your physical and financial health. The payout will get you access to the best in medical treatment while also ensuring that you can take a much-needed break from work to recover without worrying about any expenses that may ensue. Explore the various options of critical insurance in the market and choose the one best suited to your needs. Take care.
