Is Your Critical Illness Coverage Enough? What Happens If You Are Under-Insured

This post was originally posted on Planner Bee.

Life is unpredictable and you never know when an illness might strike.

A debilitating illness threatens both your physical health and financial health. However, proper financial planning can help you feel more in control should the unexpected happen, so you can concentrate on getting well without worrying about hefty hospital bills.

How do you know if your critical illness coverage is enough for you? What happens if you are under-insured? Read on to find out more.

What is a critical illness?

Critical illness (CI) insurance is a type of policy that pays you a lump sum of money if you are diagnosed with a form of sickness that the policy covers.

As suggested by its name, critical illness refers to a serious illness that affects your quality of life.

According to the Life Insurance Association (LIA) of Singapore’s framework, 37 critical illnesses are covered under CI policies. This payout is intended to cover costs that health insurance may not. This could include lost income, home modifications, travel expenses incurred for treatment, and other non-medical expenses.

The essence of having adequate critical illness coverage lies in its ability to absorb the financial shock that accompanies severe health issues. Without sufficient coverage, you may find yourself struggling to manage medical bills, ongoing living expenses, and the cost of specialised treatments, all of which can quickly deplete your savings and lead to financial instability.

As the type of critical illnesses covered by various insurers may vary, it would be best to speak to your insurer to check on your coverage.

Signs that you may be under-insured

1. High out-of-pocket medical costs: If your current coverage does not adequately cover medical treatments, you may have to dip into your savings or incur debt to pay for necessary care.
2. Insufficient lump sum payout: The lump sum payout from your policy should align with your financial needs, including your income, debts, and anticipated medical expenses. If the payout falls short, you might not have enough to cover these costs.
3. Rising medical costs: Healthcare costs are continually increasing. If your policy has not been updated to reflect these changes, you could be at risk of being under-insured.
4. Life changes: Significant life events such as marriage, having children, or purchasing a home can alter your financial responsibilities, necessitating a reassessment of your coverage.

What happens if you don’t have enough coverage?

1. Not all your expenses will be covered by hospitalisation insurance

There are limitations to your hospitalisation insurance.

A private hospital plan will cover you for your surgeries and hospital stays, as well as certain outpatient treatments including kidney dialysis.

Previously, Integrated Shield Plans (IPs) also covered cancer drugs that were not included on the Cancer Drug List (CDL). This meant that patients will be responsible for paying a deductible and a certain percentage of the co-payment, while IPs will cover the remaining costs of outpatient cancer drug treatments in full.

However, as of 1 April 2023, a change to Medishield Life Coverage for cancer treatment has altered the way insurers handle cancer treatment expenses, with a sub-limit on outpatient cancer treatments listed on the CDL. The coverage for each drug will be set as a multiple of MediShield Life (MSHL) limits. For drugs beyond the CDL, coverage will be limited too, depending on your riders.

Moreover, if you get diagnosed with a critical illness, you would usually have to undergo several expensive treatments. Since hospitalisation insurance has coverage limitations, it will not be sufficient to cover you for all consultation fees, tests and treatments.

This is where a CI policy comes in handy. With the flexibility to use the payout as you wish, a CI policy allows you to pay for important things such as daycare for your children or as a way to make up for your lost income as you recover.

2. You may run out of MediSave and MediShield Life coverage

This is a myth: MediSave and MediShield Life can cover all medical expenses. As Singaporeans, we are fortunate to have these schemes to take care of our healthcare needs. However, they can only cushion the financial blow of hospitalisation and some outpatient treatment, and there are still limitations to these schemes.

For example, MediSave can only cover you for up to S$800 for daily hospital limits below Class B2 wards. Since hospitalisation usually costs more, especially if you prefer a better ward class, you will have to pay for the rest out of your own pocket.

MediShield Life offsets the more expensive class B2/C hospital stays and selected outpatient treatments such as kidney dialysis and chemotherapy. The balance will still have to be withdrawn from your MediSave or your personal savings.

When you are diagnosed with a critical illness, the last thing you’d want is to let your financial woes become an additional burden. With a CI policy, you can use the payout to make up for your MediShield Life payout limits, or MediSave shortfall.

3. Inadequate care

Financial limitations might force you to compromise on the quality or extent of care you receive. This can result in choosing less effective treatments or foregoing necessary medical procedures, adversely affecting your recovery and overall health outcomes.

4. Your savings may deplete quickly in the wake of a critical illness

The consequences of a critical illness can be far reaching. On top of costly treatments required, the illness may possibly even leave you with a disability that necessitates long-term rehabilitation. For instance, if you suffer from a stroke due to a critical illness, you may require multiple procedures to regain mobility.

Recovery is a long process and you may face physical restrictions post-surgery, with everyday routines such as walking and showering becoming challenging. A full recovery may require the help of other specialists not covered by your health insurance.

5. Impact on quality of life

The stress and anxiety of managing finances during a critical illness can take a toll on your mental and emotional well-being. Moreover, without sufficient coverage, you may struggle to maintain your lifestyle, affecting not only your personal comfort but also the well-being of your dependents.

Why should you get CI coverage as early as possible?

1. The chances of getting critically ill are high

The chances of getting critically ill in your lifetime are high, and the associated costs can be overwhelming without a CI policy.

In fact, research findings reveal that more than 90 per cent of advanced stage claims fall into one of the following five critical illnesses:

• Major cancer
• Stroke with permanent neurological deficit
• Heart attack of specified severity
• End stage kidney failure
• Coronary artery by-pass surgery

2. Critical illness policies are affordable, especially when you are young

When you are healthy and young, you may feel it is not necessary to get a CI policy. However, the truth is that illness can strike at any time, and it is always better to be prepared. If you are healthy and young, the premiums are more affordable and you get to enjoy the full coverage for the policy’s illnesses.

On the flipside, things can get tricky if you have been diagnosed with an illness. While you can still purchase a CI policy, you may have to pay higher premiums or not be eligible for coverage of your diagnosed illness.

3. Critical illness may have multiple stages and may happen more than once

Critical illnesses typically come in multiple stages. For instance, stage 0 means that the cancer is still situated in the body part where it started and has yet to spread to nearby tissues, while stage 4 indicates that the cancer has spread to other body parts.

CI policies used to only cover advanced stages, but have since been enhanced to allow people to claim a payout at different stages, including the early, intermediate and advanced stages.

Also, there is a chance you could suffer a relapse a few years down the road, so it is crucial to protect yourself with a CI policy.

Learn more about the illnesses that your CI policy should cover.

Are you sufficiently covered?

To answer this question, you must first find out what your personal insurance gap is.

Start by assessing your current needs – evaluate your current financial situation, including your income, debts, and monthly expenses. Consider the potential costs of treating critical illnesses and how long you might need financial support.

If you are unsure of the coverage you need, fret not. Planner Bee’s Insurance Needs Calculator can help you crunch the numbers on how much early critical illness (ECI) and CI coverage you need, based on your current average monthly expenses.

See more at Planner Bee’s Insurance Needs Calculator.

Regularly review your critical illness insurance policy to ensure that the coverage amount aligns with your current needs and the rising costs of healthcare. Consider factors such as inflation and changes in your personal circumstances.

Nothing in life is more valuable than good health

Healthcare costs in Singapore are continuously rising, and battling a critical illness can be very stressful. However, you can assuage your financial burden by getting familiar with CI policies and protecting yourself in advance.

Don’t wait for an illness to strike – the best time to get a CI policy is now.

Consult with an insurance advisor to tailor your coverage to your specific needs. An expert can help you understand the intricacies of different policies and recommend the most suitable options. If you need further advice, don’t hesitate to reach out to us at [email protected]!