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Multiple Payout Critical Illness (CI) policies


Over the years we’ve seen how critical illness can financially cripple an individual with non-stop bills from medical treatments which can accumulate to tens and hundreds of thousands. Supposedly this is where CI policies come in to alleviate those costs right? No. These costs can actually be covered by your hospitalization policies that cater for treatments such as chemotherapy, radiotherapy and immunotherapy. So where and how do CI policies fit in?

Critical Illness affects us on another level: we are put in a position where we might not be able to work due to the severity of the illness, or worse so, we must work in order to pay off our everyday bills despite being critically ill. Critical Illness policies then comes in to play an important role, to provide a lump sum of money big enough to replace the income we could have earned should we stop work. Critical illness is thus not the main policy to pay for the medical bills and treatments, but it provides an income replacement so that we can take time off from work to focus on what matters: getting better. 

Most of us are familiar with the standard terminology of critical illness policies. For the purpose of illustration, I’ll be using cancer as an example.

  1. Early/Intermediate stage Critical Illness (Stage 1 and Stage 2 cancer) 
  2. Severe Stage Critical Illness (Stage 3 and Stage 4 cancer) 

Based on the above, most people would be equipped with either a severe stage CI policy, or even better, an early CI policy that protects you from all stages of critical illness. Would that be enough? 

The question comes from how the traditional policies (Early/Severe CI policies) are structured. They are essentially single payout policies, meaning that once a claim has been made on any critical illness (Heart attack, stroke or cancer), the policy will STOP, and you cannot make a second claim. So, what if a critical illness strikes again? Or what if there is a recurrence of the same condition? 

The more common concern amongst critical illness survivors is whether there will be a relapse of the illness and if there is a relapse, are we financially ready to face it again? The main concerns are, “What if it comes back despite all the treatment and all the time taken away from work? Can I buy some more coverage?”

As daunting as it is, recurrence for any critical illness is especially true when we are talking about younger patients mainly because we have a longer road ahead of us. Taking cancer as an example, chemotherapy is meant to kill the cancer cells. Although it works more often than not, the possibility of a relapse is often not within our control. However, although we cannot control the possibility of a relapse, we can control the financial impact on our lives. 

As seen above, the traditional approaches to Critical Illness protection have been to tackle it in singular stages (Early/Severe Stages). Although our hospitalization policies are there to tackle the continuous costs of treatment should our illnesses come back, the traditional policies only replace our income ONCE and we’re no longer protected after.

So, what is the modern approach towards critical illness planning then? I’m sure by now we’ve all seen the adverts from different insurance companies talking about Multiple Payout Insurance policies. How do they work, and do you need it? 

The above illustrated is just a simple illustration of how a Multiple Payout CI (Multi-pay) policy works, although between the different insurers there will be slight differences in the features. The main point in all of them, is in how after the first claim, the policy remains IN FORCE (meaning it is still valid for a claim).

A Multi-pay looks better compared to the traditional ones as they cover early to severe stages as well, but does it fit into your insurance portfolio? There will never be a one size fit all Critical Illness policy, but let’s look at some instances in which a Multi-pay Critical Illness policy should be in your portfolio for the future.

The above are some instances where a Multi-pay should absolutely be considered. Typically, people are more worried about the demise of the breadwinner as that is often the main cause for the inability to pay the house mortgage. However, experience has shown us that there are more people out there who lose their homes because the breadwinner contracts a critical illness and the family’s income is disrupted. Multi pay critical illness

As for others, a Multi-pay is generally slightly more expensive as compared to a traditional CI policy due to its possible multitude of claims. However, for the millennials reading this, it fits well into your portfolio as the cost is still very manageable as a one stop solution for your critical illness needs. Furthermore, for millennials in the workforce who have potentially much more to protect in future, and a longer road ahead for anything to happen, a Multi-pay helps to counter those risks in a more effective manner compared to the traditional CI policies.

Though a Critical Illness payout is meant to be an income replacement as mentioned above, there are other benefits that a CI payout can provide in some cases:
Funding for important financial milestones: 

Children’s University Education

Expensive Alternative Treatments: 
These treatments are often paid out of our own pockets as hospitalization policies do not cover treatments that are yet to be approved by Health Science Authority


Early Retirement
In some cases, a CI payout can allow one to access early retirement after making a complete recovery

Together with medical advances in the area of diagnostics, Multi-pay CI policies are gradually being considered an integral part of one’s risk management planning. To know which one suits you the best or to complement your existing portfolio, contact me for a non-biased consulting session. Remember, planning is about bringing the future to the present, so that you can do something about it now.

Written by Leon Lee (Financial Services Consultant from TN Advisory Group)

At TN Advisory Group, our services and expertise can be used to assist interested parties in relation to the various fields of financial planning. Should you decide to not seek advice, do consider if the product in question is suitable for you.

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