Dear Mr. Tan,
What is a fair premium to pay for critical illness insurance?
The claim rate is less than 0.3% a year for people between 35 to 60 years. To insure $100,000, the pure cost should be $300. If you add the administrative cost, a fair premium should be $450 a year.
Many people have to pay more than $2,000 a year under a critical illness policy. This is too much, as compared to the true cost of the risk.
Although some of the premium is used as savings to accumulate a cash value, the return from this saving is quite poor. A large part of the saving is used to pay expenses of the insurance company, including the commission to the agent.
For a child or baby, the risk of suffering a critical illness is very much lower.
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