Any thoughts on Critical Illness Plan Insured Value Appreciation?

Hey there!

You're absolutely right. In fact with inflation, medical costs and bills will also rise while the payout will depreciate in value with time alongside since your payout is fixed. On the insurer's end, this usually means the rising of premiums. That's partially why the Change of CI definitions is happening: with the tightening of definitions, insurers don't necessarily have to increase policy premiums.

If inflation is at 1.5 - 2%/year, this may mean you will need other ways to make your money work for you. If your money is left idle, you will effectively become poorer with time.

Inflation rises alongside, investment works the same way over the long term too, when done properly and intelligently. It's the power of compounding that allows our money to grow over the long term. And there has to be avenues to be able to self insure yourself because the payout may run out while covering your medication/bills at some point since you may not even be able to work in the event CI strikes.

You might want to explore ways to grow that cash. Because protecting your income is another thing but planning for your retirement in old age (where CI is also susceptible) is another.

There are many ways for you to do so. Whether it's through an RSP, stock picking, robos or engaging a Financial Advisor to manage your investments, the options are varied depending on your needs, budget, risk profile and time horizon.

All the best!
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Hi there,

In theory, you are not wrong with regards to inflation. Logically, as time passes, the value of money today will diminish, as the costs of goods continue to rise. A very accurate indicator of this inflation figure you are looking for is the CPI. If you look at this historical graph stretching back 40 years with reference to your point of view, prices have risen around 45% since then.

Now take a close look at the past 7 years, you will realise there is almost no change in the CPI. In a macro context, there is a price ceiling which we have set for our inelastic goods which is also tied to our income. For your scenario to come into fruition, 2 things must happen. Our cost of living must go up, which in turn will cause our wages will also rise in tandem. In the near term, such a scenario should happen based on inflation, but if its still kept in check, the 80% devaluation of today's dollar is not so probable.

It is always good to do investments, even conservative ones, to hedge against inflation. As long you have funds in the market, growing at an acceptable rate, it will be beneficial to yourself.

The role of insurance, has always been to transfer your personal risk to the insurers. In your hypothetical scenario, if you choose not to purchase insurance, and you want to cover your risk on your own end via investments, you will end up with a net -ev in your case, where your personal liquidity is sacrificed when you drawdown your investments during a event such as disability or critical illnesses.

There are policies that take into account inflation, with the coverage rising up YoY, but as such, your premiums rise in tandem as well. Most strategies out there, always have a insurance factored in. You can explore the BTIR concept, and see whether it makes sense to you.

Hopefully i was able to address your queries. Have a great day ahead!​​​