What Is Early Critical Illness Insurance, and Do You Need It?

This post was originally posted on Planner Bee.

Imagine the unthinkable: you go for a routine biennial mammogram, and are unfortunately diagnosed with Stage 1 breast cancer. Thankfully, an early diagnosis often also means a higher survival rate: the five-year relative survival rate for breast cancer found and treated in the localised stage is as high as 99%.

However, treatment can be expensive and an unexpected illness can easily wipe out the savings of an individual or even a family. It can also quickly drain your medical leave allowance, forcing you to take unpaid leave. This ends up reducing your take-home income, and inevitably, could lead to issues for you at work.

In Singapore, where healthcare costs are high and the prevalence of such illnesses is growing, the need for financial protection against critical illnesses has never been more pressing. One of the most effective ways you can safeguard yourself and your family is through Early Critical Illness (ECI) insurance.

What is ECI insurance and how does it differ from Critical Illness (CI) insurance? How much ECI coverage would you need and what happens if you have pre-existing conditions? Read on to find out more.

What is Early Critical Illness insurance?

As its name suggests, Early Critical Illness (ECI) insurance is a specialised policy that pays out a lump sum upon the diagnosis of a critical illness, even at an early stage.

Unlike traditional CI insurance, which typically covers late-stage conditions, ECI insurance includes a broader range of illnesses and earlier stages of diseases. This means policyholders can receive financial support sooner, which can be crucial in managing treatment and associated costs.

Coupled with adequate health insurance, an ECI policy serves as a financial safeguard for you and your family, giving you peace of mind especially when you are recuperating from the disease.

What are the differences between ECI and CI insurance?

Even though the survival rate for most cancers in their early stage is over 90%, being diagnosed with a CI is devastating both mentally and physically. The treatment and stress arising from the diagnosis can take a toll on your body, making it difficult for you to go about everyday life smoothly.

Getting diagnosed with a critical illness at an early stage can mean you do not get a payout from your CI insurance. CI insurance typically only covers the later or more severe stages of the 37 CIs listed by the Life Insurance Association (LIA) Singapore. Some private insurers may have more than these 37 listed but they usually only provide a payout for late-stages.

Let’s suppose you have an ECI policy such as the AIA Absolute Critical Cover, Singlife Comprehensive Critical Illness, or Manulife CI FlexiCare. In this case, you will receive a lump sum payout of your coverage when you are diagnosed with an early-stage CI. You can use the payout as you deem fit, be it seeking better care and treatment for your illness, or taking a break from work to recuperate without worrying about your finances.

ECI plans also typically cover more conditions than CI policies, including diagnoses such as benign tumours, borderline malignant tumours, and Alzheimer’s Disease.

Examples of how common critical illnesses coverage are defined in the following table:

Source: HSBC Life Treasure III

Read more: Five Common Myths About Critical Illness Insurance

How much ECI and CI insurance do I need?

According to the LIA’s Protection Gap 2022 Study, the CI protection needs of Singaporeans and Permanent Residents sit at S$22 billion. However, the CI coverage is estimated to be only S$2 billion, which means there is a gap of 91% in terms of CI protection needs.

The CI Protection Gap represents the financial gap to cover family needs during the assumed CI recovery period of five years, until the insured can return to work.

For ECI, it is good to have coverage of one to two years of income until the insured can return to work comfortably. This is because an early-stage CI diagnosis is less likely to incapacitate a person from their job, but many would prefer to take a break from work or take up less tiring roles, which can mean taking in less income.

Take, for example, Alex, a 45-year-old man who is diagnosed with Stage 1 prostate cancer. While he is believed to be cancer-free within one year after undergoing the various treatments available, he does not believe that he can go back to his demanding job in sales during the treatment period.

Thankfully, he took up an ECI insurance plan with S$200,000 coverage when he turned 40. Alex had come up with this coverage amount based on his salary. Making an average of S$6,000 a month, he knows that he requires at least S$72,000 – S$144,000 in ECI coverage to comfortably undergo his treatment without financial worries.

With this early-stage cancer diagnosis, Alex can now quit his job and focus on treatment as he will receive the S$200,000 payout. Alex can rely on the payout to pay for his bills and other personal expenses while undergoing cancer treatments (paid for with his Integrated Shield Plan) without additional financial worries.

In hindsight, if Alex had only purchased CI insurance instead of an ECI policy, he would not be able to receive any payout since it is a Stage 1 diagnosis.

What options are available for people with pre-existing conditions?

If you are someone suffering from pre-existing conditions such as diabetes or high blood pressure, you might find it difficult to purchase certain types of insurance. However, do not give up hope. Many ECI and CI insurance now cover pre-existing conditions, so you should talk to your insurance agent to find one that includes coverage for your condition(s).

Alternatively, you can also purchase standalone cancer policies, which offer a lump sum payout in the event of a cancer diagnosis. A hospital cash insurance plan can also provide a daily payout if you are hospitalised, aiding with the payment of some expenses.

In Conclusion…

From 2017-2021, an average of 46 people were diagnosed with cancer and 16 people died of cancer every day in Singapore. It is also estimated that 1 in 4 people may develop cancer in their lifetime.

The prevalence of critical illnesses has been a significant concern in recent years, especially with an ageing population and increasing healthcare costs in Singapore. Having adequate protection against early critical illnesses is important to safeguard your finances and have peace of mind while undergoing treatments to ensure full recovery.

By offering coverage from the early stages of illness, ECI insurance ensures that individuals can access necessary treatment promptly, potentially improving their prognosis and quality of life.

To learn more about ECI insurance, feel free to contact Planner Bee at [email protected] today.