Continue your existing critical illness policy

Hi Mr Tan

In your blog, you said that the premium for a critical illness policy is 10 times of a term insurance policy. I took a critical illness (living) policy two years ago. Do you advise me to cancel it, and change to a term policy?

REPLY:

The living policy combines the coverage and savings for the future. You can get a cash value from the living policy if you terminate it in the future. You can break even, i.e. get back more than the premiums paid after about 15 years. If you keep it longer, you can get a modest return of about 2 to 3% per annum.

If you have already taken a living policy, it is better to continue with you, as you can get a modest return (after 20 or 30 years) and free coverage.

If you terminate the living policy in the early years, you will suffer a loss of about half of the premiums that you have paid. This low payout takes into account the high upfront cost of the policy, which has already been incurred.

My advice of taking a term insurance policy, applies to people who have not yet taken up the critical illness policy.