Thursday, October 18, 2007

Adequate cover for critical illness

Someone argued against my suggetion to insure $50,000 for critical illness. He said that the correct cover should be determined by a financial needs analysis.

In my view, $50,000 in critical illness coverage is adequate for most poeple.

Most illnesses do not cost a lot of money to treat, especially if they have access to subsidised wards in Singapore.

If they need more than $50,000, they can draw down on your savings from other sources. They should invest a large portion of their savings in more productive assets, and not over-commit all their savings in a low return, critical illness cover.

If a financial adviser tell you that you need more than $100,000 for critical illness coverage, you should ask the following questions:

1. What percentage of people make a critical illness claim?
2. What is the average cost of treating the critical illness? (Do not allow them quote you an isolated case that occurs once in 20 years)?
3. How much commission do they earn by selling a big critical illness policy to you?
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1 comment:

Anonymous said...

Mr. Tan is right to say you only need $50K for critical illness. If possible buy a term to cover you up to 65. If you are kiasu you can buy term up to 100 years old. This is the most sensible means of addressing your needs . It is affordable and low cost.If an insurance salesman tells you that you need more than $50k and not only that, you need a whole life you tell her to fly kite. He or she does not want you to buy term because there is little commission for them.

October 22, 2007 5:39 PM

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