Putting the E In CI

We all know someone who has fallen seriously ill and it can happen to the fittest and healthiest one of us. And when one person falls sick, the entire family journeys along this emotionally draining period. This is made worse by the drain on finances: high medical bills coupled with the loss of income. Worries about paying mortgage loans, children's tuition fees or maintaining standard of living, could affect the recovery, worsening the cycle.

While many of us have the more common Critical Illness coverage, how many of us know that insurers distinguish between Critical Illness (CI) and Early Critical Illness (ECI)? How many of us actually differentiate our coverage between the two? This inaction could result in an unintended protection gap. A comprehensive critical illness plan where you will receive a lump sum pay complements a good hospitalization plan which covers the cost of treatment.

What Is The Coverage

Hospitalisation needs are covered by Medishield Life, Integrated shield Plans and/or employee benefits. This provides coverage for treatment in a hospital. Such plans do not protect you from the sudden loss of income if you stop working. That is the gap that CI and ECI plans serve to cover.

Critical Illness (CI) coverage offer lump-sum payouts to people who are diagnosed with late stage illnesses.There are 37 severe-stage illnesses listed down by the Life Insurance Association (LIA), which can be referenced here. (There is some changes to the framework, which is available here)

An Early Critical Illness (ECI) policy extends CI coverage, typically across early and intermediate stages of illnesses and also other illnesses. The definitions and range of protection is broader than CI plans, and differs across insurers. This expands the scope and reach of the policy, resulting in you enjoying greater protection.

To better understand the difference, here is an example of the definition of cancer in CI and ECI coverage:

As you can see, there is a significant difference between the two. ECI is far broader, which increases your coverage breadth.

Both ECI and CI policies are lump sum payouts. ECI pays out earlier compared to CI, and having early access to the funds provides the insured an opportunity to take no-pay leave or going for alternative medical treatments not covered by hospitalisation insurances.

The insurance industry constantly innovates, and a new development to this sector is the multi-pay critical illness (CI) insurance coverage. Unlike traditional CI or ECI policies where coverage lapses upon successful claim, coverage continues in multi-pay. With such plans, claims can be made multiple times across different CI stages. This provides reassurance to the insured as they remain covered by insurance despite having claimed under a previous critical illness. There are variants in the market, and every insurer has a different approach to this.

Should I Get It?

CI and ECI cover can be bought as a standalone CI plan and it can also be bought as a rider to supplement benefits attached to a base life insurance plan, which includes a whole life or term plan.

Based on your needs, here are 4 types of critical illness plan:

1. Early stage plans or riders that provide payout for critical illnesses diagnosed at an early stage

2. Critical illness plans or riders that provide payout for severe-stage critical illnesses

3. They could be single-payout plans that provide a lump sum payment upon diagnosis and/or

4. Multi-pay plans that provide multiple payouts upon diagnosis.

Premiums are much cheaper when one is younger and deemed physically healthy. A younger person purchasing CI or ECI policy will be classified as low near term risk for critical illnesses such as cancer and heart diseases. The risk of getting illnesses increases with age, hence premiums will increase with age.

As ECI policy comes with a wider scope of coverage, it comes also with a heftier price tag. Aside from it being more expensive to purchase when one is older, you will run a risk of developing conditions such as high blood pressure, high cholesterol and diabetes which can also lead to higher premiums, exclusions of conditions or having the insurer decline your protection altogether.

ECI and/or CI insurance coverage should be part of your insurance planning, as mentioned in our 8 Aspects of Financial Planning article. We must not focus only on just CI or ECI alone, but recognise that the importance of a holistic cover cannot be underestimated.

Food for thought - let us know how much coverage do you think is sufficient for you? Comment in the comment section, we would like to hear from you.

Photo Source: (https://tcc.sg/services/treatment/chemotherapy/)

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