Early-Payout Critical Illness Plan – Where shall it stand in our Risk Management?

There are now a flood of many early-stage crit­ic­al ill­ness plans in the recent 2–3 years. This plan is con­sidered part of the suite of health insur­ance. But what is the pri­or­ity shall we give to it com­pared to the hos­pit­al­isa­tion and sur­gic­al plan? And also to the tra­di­tion­al crit­ic­al ill­ness plan that pays upon more advanced stage of the crit­ic­al ill­ness?

Being a lay­man and not a pro­fes­sion­al doc­tor, we may not be able to fully under­stand the defin­i­tion of the early-stage, inter­me­di­ate-stage and the advanced-stage crit­ic­al ill­ness. How­ever, the prob­ab­il­ity of claim exper­i­ence and the lim­it it imposes may shed some light.

First thing first, the most import­ant insur­ance plan for any­one to get is the hos­pit­al and sur­gic­al plan. This plan reim­burses the med­ic­al expenses that you incur in the hos­pit­al, regard­less of the ser­i­ous­ness of the ill­ness. You can be war­ded for obser­va­tion, dengue fever, acci­dent etc. Hence, the cov­er­age is very wide. The premi­um is also afford­able with the main plan pay­able using CPF Medis­ave. It is best to get the Private Integ­rated Shield Plan that offers the “As Charged” fea­ture. As there is the deduct­ible and co-insur­ance, you can buy the rider to cov­er these gaps using cash. It is good to get this even for young baby or even if you have com­pany insur­ance. This is the health insur­ance that requires very strin­gent under­writ­ing. You need good health to be covered com­pletely without exclu­sion.

Next, let us look in the early-stage crit­ic­al ill­ness plan and the tra­di­tion­al crit­ic­al ill­ness plan.
In gen­er­al, the early-stage crit­ic­al ill­ness plan only pay­out 25% or 50% of the Sum Assured, and there is a lim­it on the max­im­um claim, no mat­ter how big is the Sum Assured. Early-stage crit­ic­al ill­ness may be able to be treated at hos­pit­al. Patient will then most likely to be sent home to recu­per­ate for half to three months. Hence, if you are employed with hos­pit­al­isa­tion leave bene­fit giv­en by com­pany, there is no loss of income dur­ing this peri­od. There is, how­ever, long-term med­ic­a­tion, that you may need to take for a few years. The early-stage pay­out money may then be use­ful for the med­ic­a­tion.

How­ever, since the early-stage pay­outs is mostly lim­ited in value, this may sug­gest that it is not so ser­i­ous that a per­son will be out of job for a long peri­od of time, and hence to cov­er for loss of income. Not­with­stand­ing this, such plan may be use­ful for the self-employed.  This is because any num­ber of days or weeks of recu­per­a­tion with no income can be alle­vi­ated from the pay­out from such plan. Do note that early-stage crit­ic­al ill­ness plan is nor­mally 20–60% more expens­ive than the tra­di­tion­al crit­ic­al ill­ness plan, as it needs to price in the high­er chance of claim.

Next, we observe that the pay­out from the tra­di­tion­al crit­ic­al ill­ness plan does not impose the per­cent­age of pay­out on the Sum Assured. And the max­im­um cov­er­age is based on your Income Level and age. There­fore, the con­sid­er­a­tion by the insur­ance com­pany is really to assess in the event of such advanced crit­ic­al ill­ness, how many years of income would you want to cov­er yourselves before you are well enough to go back to work. It is this kind of crit­ic­al ill­ness that may derail a person’s life.
From the above, it is recom­men­ded that the pri­or­ity of get­ting the health insur­ance is to get
      • Hos­pit­al and Sur­gic­al Plan (e.g. As-Charged Shield plan)
      • Tra­di­tion­al Crit­ic­al Ill­ness Plan
      • Early-stage Crit­ic­al Ill­ness Plan

If you have the budget after get­ting the first two plans with suf­fi­cient cov­er­age, it will be good to get the early-stage crit­ic­al ill­ness plan as it plug the little gap in the tra­di­tion­al plans offered in the mar­ket. It gives you more peace of mind when an ill­ness is dis­covered, regard­less of the sever­ity of the crit­ic­al ill­ness.



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