SG Budget Babe
Asked on 02 Dec 2019
Is it better to have an insurance that offers recurrent multiple payouts (e.g. payout for early stage illness, late stage cancer etc) instead of an insurance that only allow one time payout or payout up to certain cap, even though the premium is a lot higher (E.g. AIA Power Critical Illness)?
Why not both?
Firstly make sure you're covered for 5 X your Annual Income in the event of illness. This is your income protection and it pays you and your family should you fall ill and need to stop work and recover.
I'd make sure I have a base cover of a single pay CI policy for whole of life first that adjusts for inflation. I'd pay this off in 20 years.
Next, I'd top up a term policy with multi claim CI till about 65/70/75. Also because these plans make you pay throughout the policy term as well.
This helps you reduce your overall premium plus still give you some recurring payouts should you be unlucky and have certain conditions haunt you even after you recover once or twice.
I prefer an insurance that has a one time pay out but covers for life or up until the age of 60, where I will stop working. The fundamental purpose of Insurance is meant to be as a contigency plan to sustain your dependents in the unfortunate circumstances you as a breadwinner is unable to work.
Follow this basic philphosy and you will find the answer
From a buyer's perspective, and not a insurance provider/financial consultant, If you can only choose one, I would go for the one time payout, and go for Whole Life so that you are covered, even while you are 70 years old. That's what I did for mine. Ask if the premium can be paid out only while you are working and capped at a certain age; most insurance policies do this.
Coming from a healthcare perspective, if you can afford early CI, it's definitely a bonus to go for early CI as prevention is better than cure!
I would first have coverage via an insurance that allows a one time payout but covers me for life. This will take the form of a Whole Life Limited Payment plan with a boosted coverage in my prime years. So I only have to pay when I'm working, and can have coverage for the rest of my life. In old age, I will have peace of mind.
After that I would consider topping up coverage with a multi pay plan. Such plans do require me to pay every year, and hence I would just ensure that it is an amount that I can afford to pay, till perhaps the age of 75.
If I could fit both in my budget, then I will. Claims wise, I would claim from the multi pay plan first, leaving my Whole Life plan to continue to build bonuses for the future.
I think it is good to have a single payout one as a rider to a whole life and supplement with a multipay one. You should prioritise the single payout one first to ensure you have sufficient coverage.
I think the ideal situation is to be able to have both as options, because like what I believe most have mentioned is that at the first instance of it happening, you definitely need a lump sum to tide you through the treatment phase of the condition. However with the advancement of medicine, battling the illness and eventually recovering is a possibility. And the other policy with a multi-pay option will definitely help with the make-up income to fulfill the needed obligations in life.
Like what has been suggested, it would be good to have both a Whole Life and also a term so that you have coverage during every phase of your life; you might want to look at higher coverage during your active years, where you are in your prime to get wealth, and we definitely want to protect that the full potential of what you are able to earn till retirement.
Just for knowledge, the average mortality age in SG is now 85-87 years old, of which the last 10 years, we are not in our most optimal health condition.
In terms of whether lump sum or multi-pay, I believe that can be arranged with the insurer to meet your needs.
I think an insurance that covers for life is certainly important. In terms of early CI, there can be different school of thoughts - some might say that early CI is certainly treatable and it wont really disrupt one's earnings at least not for a long period of time. But if one can afford. I'll recommend early CI or those multipay plans like you mentioned.
Hi Tay, there are many critical illness plans available, and each insurer tries to outdo the other in marketing their plan in an attractive way. I can understand how this can be confusing and even overwhelming for the consumer.
For me, I think it is best to cut through all the noise and marketing speak by firstly understanding what you yourself need / want, and can afford to purchase. Then work backwards to see which plan is most suitable.
Once a person is struck with critical illness, he / she cannot buy any more insurance. So I prefer to implement as soon as possible, 10 years worth of what my client would need for living expenses and to cope with the illness. E.g. the critical illness cover needed could be 10yrs × $40,000 = $400,000. Of this $400,000, I would allocate part of the cover to come from an early critical illness plan.
Why 10 years? The first 5 years worth is for the first instance where the person has to rest, seek treatment, recover from the critical illness. The other 5 years worth is if it happens again.
The important part about insurance, is not just about getting adequate covers. Often people overlook management of the claimed amount, to ensure that it is used for the intended purpose and that it stretches as planned. So in the event you ever have to make a big insurance claim and receive a lump sum payout, this is the other time to engage your trusted financial consultant to check back on what you had planned together and to work out the management of your claimed monies.
It depends on your budget and how you wish to plan for your future.
For instance, will you prefer to have one big payout or to split it into a few smaller payout?
Then we will also need to consider the probability of relapse and whether we can stay financially strong.
All these require detailed understanding about yourself, family history, alongside with how you wish to plan for your own future. Speak with a consultant that you trust and understand how he or she is able to assess your situation and to give you the advice with the best value.
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