The Importance of Critical Illness Insurance in Singapore

A new report reveals that one in four Singaporeans lack critical illness (CI) coverage, despite efforts to narrow the protection gap.

Price sensitivity and value consciousness are significant factors influencing Singaporeans’ decisions regarding insurance premiums, according to Irma Hadikusuma, AIA Singapore’s chief marketing and proposition officer. While there has been progress in reducing the CI protection gap from 81% in 2017 to 74% in 2022, many still underestimate the necessary coverage amount.

Economically active individuals, including platform workers, face substantial mortality and CI protection gaps, with efforts to strike a balance between affordability and adequate coverage remaining a challenge for insurers. However, the introduction of comprehensive yet affordable plans like AIA UCC aims to encourage more Singaporeans to obtain sufficient CI coverage. Regulatory developments and increased awareness of health-related risks are driving rapid expansion in the CI insurance market, with significant projected growth in the coming years.

What is Critical Illness Insurance

Critical illness insurance is a type of insurance policy that provides financial assistance in the event of a serious illness. In Singapore, where the cost of healthcare is high, critical illness insurance has become increasingly important. According to a 2021 critical illness insurance study by the Life Insurance Association Singapore (LIA Singapore), the average critical illness claim amount in Singapore is S$160,000. The top 5 critical illnesses that resulted in claims are:

1. Cancer (40%)
2. Heart attack (20%)
3. Stroke (15%)
4. Kidney failure (10%)
5. Multiple sclerosis (5%)

The study also found that the number of critical illness claims has been increasing in recent years. In 2017, there were 10,400 critical illness claims in Singapore. This number increased to 12,000 in 2018 and 13,600 in 2019.

The increase in critical illness claims in Singapore is likely due to several factors, including:

• The aging population: The average age of Singaporeans is increasing, and this means that there are more people who are at risk of developing critical illnesses.
• The rising cost of healthcare: The cost of healthcare in Singapore is rising, and this means that it can be more difficult for people to afford the treatment they need if they develop a critical illness.
• The increasing awareness of critical illness: People are becoming more aware of the risks of critical illnesses, and this is leading them to take out critical illness insurance.

Critical Illness Statistics in Singapore

A study commissioned by AIA Singapore shed light on the concerning trend of consumers underestimating the necessary amount of critical illness (CI) coverage they require. This knowledge gap was particularly pronounced among individuals without CI plans, smokers, and younger demographics. The study found that respondents deemed a median CI payout of $100,000 to be sufficient, falling short of the recommended average minimum amount of $300,000 or 3.9 times one’s annual income by the Life Insurance Association (LIA) of Singapore.

Additionally, while CI cases have been on the rise in Singapore, the recurrence rates of CI have also been alarmingly high. For instance, in Singapore, 1 in 3 heart attack patients may experience a recurrent cardiac event. Similarly, stroke patients face a 5% to 15% chance of stroke recurrence annually, and common cancers like glioblastoma, ovarian cancer, and bladder cancer have high recurrence rates.

The financial strain of being inadequately protected against critical illnesses can be significant for both patients and their families. The survey highlighted a concerning trend where one in four respondents with family members suffering from cancer lacked a CI plan to rely on during such critical times. Moreover, the survey revealed that affordability and perceived high insurance premiums were the top reasons cited by individuals for not purchasing additional CI insurance. This underscores the need for accessible and affordable CI coverage options to alleviate the financial burden during critical illness situations.

Why Buy Critical Illness Insurance

Critical illness insurance provides a safety net for individuals who are diagnosed with a serious illness. In Singapore, the cost of medical treatment can be exorbitant, and without insurance, individuals may find it difficult to afford the necessary treatment. Critical illness insurance provides financial assistance, which can help to ease the burden of medical bills and other related expenses. This is especially important for individuals who are the sole breadwinners of their families.

Secondly, critical illness insurance can provide peace of mind for individuals and their families. Knowing that they are protected in the event of a serious illness can alleviate stress and anxiety. This can be particularly important for individuals who have a family history of serious illnesses or who work in high-risk jobs.

Thirdly, critical illness insurance can help individuals to maintain their quality of life. Serious illnesses can often result in a loss of income and increased medical expenses. This can lead to a significant reduction in an individual’s standard of living. Critical illness insurance can provide financial assistance, which can help individuals to maintain their lifestyle and pay for necessary expenses.

Fourthly, critical illness insurance can also help to protect an individual’s savings and investments. Without insurance, individuals may have to dip into their savings or sell their investments to pay for medical expenses. This can have long-term financial consequences. Critical illness insurance can provide a safety net, which can help individuals to protect their savings and investments.

Finally, critical illness insurance can also provide tax benefits. In Singapore, premiums paid for critical illness insurance are eligible for tax relief. This can help to reduce an individual’s tax burden and provide additional financial benefits.

How Critical Illness Insurance Works

Critical illness insurance typically provides coverage for diagnoses of late-stage illnesses. However, some plans offer payouts for early and/or intermediate stages, albeit at a higher cost. Early-stage coverage provides a lump sum payout upon diagnosis of a critical illness. While advantageous, it’s essential to consider affordability and long-term budgeting when opting for early critical illness coverage.

Payout Assurance

Upon diagnosis of a qualifying illness listed in the Critical Illness Framework, most plans offer a lump sum cash payout, known as the “sum assured.” For instance, with a sum assured of $200,000 and coverage for heart attack, you’d receive a lump sum of $200,000. Some plans have intricate payout terms, including multi-pay features, allowing for multiple claims and potential payouts exceeding 100% of the sum assured.

Riders

Critical illness coverage can also be offered as a rider to term or whole life insurance plans. These riders extend the protection of your life insurance by enabling you to receive the sum assured if diagnosed with a covered critical illness, a benefit previously payable only upon death or total permanent disability. While critical illness riders are often more cost-effective than standalone plans, receiving the payout may affect the coverage for death or permanent disability under the policy.

Popular Critical Illness Plans in Singapore

In 2024, several critical illness plans in Singapore have gained popularity, offering a range of features to cater to diverse needs:

FWD Big 3 Critical Illness plan is favored for its affordability and coverage of the top three critical illnesses – cancer, heart attack, and stroke – with a lump sum payout. Optional riders are available for those seeking additional coverage. However, it may have limited coverage for other critical illnesses and does not provide payouts for early stages of critical illnesses.
https://www.fwd.com.sg/critical-illness-insurance/big-3-critical-illness/

Etiqa 3 Plus Critical Illness plan is another budget-friendly option covering the top three critical illnesses with a lump sum payout. It also offers additional coverage for children and higher payout percentages for two specific critical illnesses. Similar to FWD’s plan, it has limitations in coverage for other critical illnesses and lacks payouts for early stages.
https://www.tiq.com.sg/product/3-plus-critical-illness

Singlife Comprehensive Critical Illness plan stands out for its comprehensive coverage of 175 critical illnesses and multiple payout options. While it offers optional riders for additional coverage, it may be more expensive compared to other plans and may not be necessary for everyone.
https://singlife.com/en/critical-illness-insurance/comprehensive-critical-illness

Income Star Secure Pro, coupled with the Advanced Life Accelerator rider, is a whole life insurance plan covering 56 critical illnesses along with additional benefits for terminal illness and total permanent disability. However, it tends to be pricier than term critical illness plans and may not suit everyone’s needs.
https://www.income.com.sg/life-insurance/star-secure-pro

Tokio Marine TM MultiCare provides flexible coverage options and covers multiple critical illnesses, with optional riders available for extra coverage. While it offers versatility, it can be costly depending on the chosen options and may not offer as comprehensive coverage as other plans.
https://www.tokiomarine.com/content/tokiomarine/sg/en/life/products/personal/protect/critical-illness-insurance/tm-multicare.html

It’s important to recognize that this list is not exhaustive, and there are numerous other critical illness plans available in Singapore. Potential buyers should compare different plans meticulously, taking into account individual requirements and financial considerations before making a decision.

Is Critical Insurance Necessary?

When you’re young and healthy, critical illness insurance might not be a priority. You might rely on MediSave, MediShield Life, and integrated shield plans. However, critical illnesses entail expenses beyond what these plans cover, necessitating additional insurance premiums. To make an informed decision, consider the following:

With healthcare costs rising in Singapore, dealing with a critical illness can be daunting. Given the unpredictable nature of such illnesses, it’s crucial to understand them and safeguard your family with a comprehensive critical illness plan like Star Secure Pro, easing the financial burdens associated with such situations.

Critical illness insurance is an essential form of insurance in Singapore. It provides financial assistance, peace of mind, and protection for individuals and their families in the event of a serious illness. With the rising cost of healthcare and the increasing prevalence of serious illnesses, critical illness insurance has become more important than ever. Individuals should consider purchasing a critical illness insurance policy to protect themselves and their families.