I have often been asked if it is advisable to buy insurance to cover critical illness. It is difficult for me to answer this question. It is likely that the customer has been advised by an insurance agent to buy critical illness policy to cover medical bills, which can amount to $100,000 or more, and for the loss of income during the period of treatment.
The large cost of medical treatment is usually exaggerated and the chance of incurring a large bill is small, especially as there is the option to be treated in a subsidised ward.
In most cases, the medical bills can be covered by Medishield or private Shield, which pays for the major portion of large hospital bills. The patient has to pay only the deductible and coinsurance.
Some insurance agent advised on the need to insure the loss of income during treatment of the critical illness. However, you must consider the the risk of loss of income does not arise only from critical illness. It is more likely to arise from unemployment and retrenchment, which is higher than the risk of critical illness.
The best way to protect against loss of income is to have adequate savings. If you save 15% of your monthly earnings, it will take you 10 years to accumulate savings amounting to two years of earnings. This is likely to be more than the sum that you can insure under a critical illness policy.
The accumulated saving can be used not only for critical illness, but also for unemployment and other emergencies. Furthermore, you also do not have to worry about the exclusions in a critical illness policy.
If you wish to cover for critical illness, make sure that you do not pay more than 0.4% of the insured sum. If you insure for $100,000, the premium should not exceed $400 a year. If you take a critical illness term coverage for 10 years, the cost should be lower.
However, if you cannot buy a critical illness cover at a fair price. it is better for you to be uninsured. The chance of getting a critical illness during the first 10 years for a young person is quite low. The priority is to accumulate sufficient savings as early as possible. This is explained in my book on Financial Planning. Get a free copy here.
Tan Kin Lian
- ► 2013 (299)
- ► 2012 (1270)
- ► 2011 (1873)
- ► 2010 (2369)
11/15 - 11/22
- SCMP:Ex-DBS broker suspended over Lehman debacle
- Socialist Market Economy - China's Key to Success
- A better way to pay doctors
- Health care reform in the USA
- Action to cool down speculation
- Visit to INRIA, Paris
- Reforming the financial sector
- Dr. Lim Hock Siew speaks out
- How to spot an investment scam
- Globalization - some bad consequences
- Public transport in London and Paris
- Wealth manager
- Disclosing the commission earned
- Personal entertainment system on air flights
- Changi Airport can adopt the best practice
- Paying the right price for insurance
- APEC Leader's declaration at Singapore 2009
- How lawyers overcharge clients
- Consequence of widening income gap
- Marketing of holiday and spas
- CyCab - Driverless Electric Vehicle (2)
- Need to create more jobs
- Managing to survive tough economic times
- Unemployment worse than projected in USA
- Virtual wallet
- Low birth rate and immigration
- Insuring critical illness
- Choice of modes of travel
- Distributor of torchlights
- Practice your skills in financial trading with Pro...
- Fee on bank overdraft
- Cap on interest rate and bank charges
- Overdraft protection
- Low interest rate - the underlying cause
- A recovery for some
- Experience with locator torchlight
- ▼ 11/15 - 11/22 (36)
- ► 2008 (2105)
- ► 2007 (1803)
- ► 2006 (696)
- ► 2005 (159)