Critical illness insurance, as its name suggests, enables you to protect yourself financially if you are diagnosed with a critical illness. Typically, you receive a payout if you are diagnosed with an illness that is covered by your policy. Commonly covered illnesses include major cancers and stroke.
The benefits of critical insurance are thus quite straightforward. But the tricky question, just how much critical insurance cover do you need? More specifically, how much do you want to receive if you get diagnosed with a critical illness?
Here are the factors you should consider.
Income and savings
When you fall seriously ill, you might not be able to work for quite some time until you recover, so you should factor in the possibility of losing your income for a period of, say, five years.
Consider how the loss of your income would impact you and your family, and to what extent your savings would be able to cushion the blow.
For instance, if you earn an income of $50,000 a year and spend $30,000 of it annually, you would need a sum assured of $250,000 in order to replace your income for 5 years. A sum assured of $150,000 would be barely enough to cover your everyday expenses, not considering any rises in expenses due to your illness.
Debts and loans
No matter what happens to your health, you still need to continue repaying your loans as well as other types of debts like credit card or car loans.
So, consider your loan repayments when deciding how much critical illness protection you need. For instance, if you make about $2,000 worth of home loan repayments every month, that adds up to $120,000 over five years, a sum which you should consider when working out how much critical illness protection you need.
Family and lifestyle
Ensuring that you have enough money to continue to support your lifestyle and that of your family’s is key to keeping illness-related stress at bay and being able to concentrate fully on your recovery.
So, take an honest look at you and your family’s current and expected living expenses and ensure that these can be adequately covered by your critical illness payout. Other than your day-to-day expenses, you might want to factor in future expenses that could arise during your illness, such as your children’s university fees or support for your elderly parents.
Medical expenses will have to be paid if you wish to have a chance of recovery. Getting hospitalisation insurance is highly recommended as such a plan can cover the bulk of your expenses. However, typical hospitalisation plans in Singapore do not cover 100% of your medical expenses. Your critical illness plan should thus be able to cover any out-of-pocket sums you will have to pay for your treatment.
There may also be other additional expenses that you might have to bear if you fall ill. For instance, if you usually commute by public transport, you might instead need to use a car or taxi to get around when you are ill. You might want to consider these extra costs in your assessment of your critical illness needs.
HL Assurance’s Early Protect360 offers critical illness coverage for a range of conditions including cancer, heart attack and stroke. Give yourself the financial protection you need to focus on your recovery. Click here to find out more.