Some insurers advertises the value of critical illness cover. But, they do not tell you about the cost of their product.
The critical illness cover is marketd by an adviser who earns a large commission. You have to pay about 150% of your annual premium in distribution cost. If your annual premium is $3,000, you have to pay $4,500 for the advice.
The cost of the critical illness cover is additional to the above. And the profit taken by the insurance company is another significant portion.
In fact, the actual cost of the insurance is quite low (based on the percentage of people who make a claim). The expenses take away a large part of the premium.
If you buy a similar product from NTUC Income, the distribution cost is about half of the market average. We take away a very small portion as profit for shareholders.
For most of our products, we are able to pay a much higher return to our policyholder, for the same premium and amount of cover. The difference is about 15% for a 20 year policy, and can be higher, if the policy is kept for a longer period.
Thanks for the enlightening post.
ReplyDeleteI am just wondering if this critical illness cover insurance that you are talking about is from the company that guarantees no rate increase? It would be good for to know so that potential insurance shoppers would have the full knowledge when shopping for one.