How much critical illness cover do I need?

“How much critical illness coverage is enough?” As cliché as this may sound: adequate critical illness coverage depends on individual coverage needs, and there is no one-size-fits-all approach. (We are sorry if you clicked in hoping to get a conclusive answer!)

Depending on who you ask, S$100,000 coverage could be too little for one individual, too much for another person, or just right for someone else. So how would you know if your current critical illness coverage is sufficient?

We may not be able to provide a conclusive answer, but let’s discuss some factors that may help you make informed decisions and determine whether your critical illness coverage is sufficient for you.

How much coverage do you need?

You may have read about the Protection Gap Study¹ commissioned by the Life Insurance Association (LIA) Singapore. Based on the study’s outcome, the critical illness protection needs amount to 3.9 times the average income of Singaporean and permanent residents.

The amount is an average representation of your financial needs for a five-year recovery period when you cannot work. Your financial needs may include household expenses for your family, outstanding debt payments and lifestyle maintenance.

To help you understand, here’s a quick example of calculations on how much critical illness protection is needed:

Note: Based on LIA Protection Gap Study 2017 ¹

The calculation above is based on the outcome of the LIA Protection Gap Study, which reflects the average across Singapore. Your individual coverage needs will be different and specific to you. Alternatively, consider reviewing your financial needs over a five-year recovery period to determine your exact financial , or seek professional advice where necessary. When you are undergoing treatment, the last thing that you would want is to worry about your financial commitments.

What is your critical illness protection gap and how to bridge it?

Understanding your protection gap is one way to determine whether you have enough financial protection to meet your coverage needs and adequately insured if something happens to your health.

The critical illness protection gap is the difference between your protection needs and resources available. To put it simply, if you stop working, would you have sufficient resources to pay for all the ongoing expenses and financial obligations for you and your family? If the answer is no, then there’s a gap.

Here’s the formula for calculating your critical illness protection gap:

Let’s look at an example. Suppose you just turned 30 years old and earn a median salary of S$4,500². In addition, you have an existing critical illness coverage of S$50,000 and have saved S$70,991³.

Note: Based on the assumptions stated above for explanation purposes only

This formula helps determine whether you need more coverage if you have existing critical illness coverage. This means that an average Singaporean like us may not be adequately covered and be ready financially in the event of an unfortunate episode.

What is the cost of critical illness treatment?

Some critical illnesses may require longer treatment duration and recovery time. For example, it is costly to treat cancer. Depending on the severity of the disease, you may need surgery, chemotherapy or more.

Hospitalisation plans, such as MediShield or Integrated Shield Plan (IP), may provide some coverage for hospitalisation and selected outpatient cancer treatments, but they may not necessarily cover all critical illness treatments.

Such plans typically require some form of co-payment, meaning you have to pay a portion of the claimable amount. In addition, MediShield often have claim limits on the benefits⁴. On the other hand, critical illness insurance pays you in one lump sum upon a successful claim, which you have the flexibility to use it for treatment or other expenses. In fact, there are more differences between hospitalisation plans and critical illness insurance.

With the recent implementation of the Cancer Drug List by Ministry of Health (MOH), only drugs in the list may be claimed under Medisave, MediShield Life and IPs. If you are diagnosed with cancer and your treatment plan includes a drug not in the list, critical illness insurance payout could come in handy for paying your drug treatment.

What critical illnesses should you get covered for?

Another key consideration when determining the adequacy of your coverage would be to review the types of critical illnesses you are covered for. Here is a loose categorisation which may help you as you consider the different types of critical illnesses.

List of 37 late-stage critical illnesses

Cancer is a widely known critical illness, but it’s not the only one. Based on the framework created by LIA, there are 37 late-stage critical illnesses⁵ that you might need to know about which include the following and more:

• Major cancer
• Heart attack of specified severity
• Stroke with permanent neurological deficit
• Coronary artery by-pass surgery
• End-stage kidney failure
• Irreversible aplastic anaemia
• End-stage lung disease
• End-stage liver failure
• Coma
• Deafness (Irreversible loss of hearing)
• Multiple Sclerosis

Coverage for these 37 late-stage critical illnesses widens your scope of financial protection, giving you greater assurance that you are well-covered in the event of a critical illness diagnosis.

Three most common critical illnesses in Singapore

Apart from knowing the various critical illnesses in Singapore, you should also know the most common types and consider getting insurance for them. These three critical illnesses make up 90% of all critical illness claims in Singapore⁶, where two of them rank among the top ten conditions for hospitalisation⁷:

• Cancer
• Heart attack
• Stroke

Some protection plans offer coverage just for these three critical illnesses, while others target just one critical illness. With these plans, you can consider enhancing your existing coverage of a particular illness.

Getting adequate critical illness coverage

FWD Big 3 Critical Illness insurance is affordable and offers financial protection for cancer, heart attack, or stroke. You can also consider FWD Cancer 2.0 insurance, FWD Heart Attack insurance and FWD Stroke insurance, which pays out 100% sum insured upon a successful claim.

Alternatively, if you would like a comprehensive plan, you can consider the FWD Critical Illness Plus insurance which is a comprehensive coverage for 37 late-stage critical illnesses, as well as early to intermediate stages cancer, heart attack and stroke.