Critical Illness Coverage and It’s Value in our Portfolio


Written By: Paul Wong

The Critical Illness Survivability Problem

As Singapore continues to mature as a society by means of globalisation, resulting in a growing emerging affluent middle class, habits and lifestyles have evolved from a generation of founding Singapore, where frugality was the common mindset in consumption, to one of instant gratification and sometimes overconsumption because of rising incomes. Along side this growth is also the rapid advancements of medical sciences and technology. Singapore has made itself into the medical tourism centre of Asia, mainly attributed to its high quality medical services. These services range from acute treatment in our leading hospitals to cellular growth research in the laboratories.

When these two factors are combined into a single generation’s growth, it results in Singaporeans suddenly facing a different set of questions when life throws them an unexpected event to deal with such as critical illness. It is not about counting down the days till end of life anymore, but instead, what happens after? Medicine has progressed so much that mortality rates have decreased and instead, the question has then turned onto the individual’s quality of life after treatment. According to a cancer research, there is a direct correlation of higher cancer survival rates in higher incomed countries. Take a moment to ponder, when was the last time you heard of somebody dying unexpectedly after being diagnosed with an illness? However, there is a higher possibility of you knowing someone who has survived critical illness and is there to tell the story.

Getting diagnosed with critical illness is basically hitting the brakes on your life goals. You suddenly must devote a significant amount of time listening and taking care of your body or it might fail again. Whatever you’ve set out to achieve; that senior position you’ve been slogging so hard for, that retirement fund you’ve been working so hard to save or your children’s education fund you just started, all will have to take a back seat so that you can focus on being alive and healthy for your loved ones. Your job security gets called into question because there is a chance you will not be performing at the same capacity if it is a demanding position. Your future earning potential also becomes compromised and you eventually find yourself having to amend your goals or settle for something less. It is safe to say that your quality of life will not be the same after critical illness.

The Developed Nation Conundrum

According to the a Straits Times Article in 2015, Singapore has the 2nd highest proportion of diabetics among developed nations. It said that almost 11% of Singaporeans will have chronic diseases in their lifetimes, behind only to the United States. This number has increased ever since. It reported that Singaporeans are becoming less active and eating more high-calorie diets, both of which increase the risk of diabetes. Singaporeans are also the 2nd most overworked population in the world, resulting in lack of nutrition and exercise which is usually aggravated by smoking and drinking. All of which create the perfect concoction of a critical illness cocktail.

As we continue to prosper, our lives become more dependent on debt; mortgage, car loan, credit card loan, and increasingly, also face the risk of becoming a sandwich generation; having to care for our elderly parents while taking on the responsibility of starting our own family. The stakes are sky high! A dual income family perspective is almost necessary, if not, compulsory to ensure we continue walking this fine and delicate trap wire we call Adulting.

If we do not have a plan B, it is with certainty that all of the above mentioned will either be burdened by your loved ones, go to complete waste, or worst, be carried on by your family where they are forced to make compromises of their own.

Critical Illness Insurance: Cover vs No Cover

To answer the question; what is the value of critical illness insurance in our portfolio? We must examine what is in our portfolio and its importance. Each of has a unique portfolio; they consist of our loved ones and our aspirations. Each of them hold a unique position in our lives and it is the reason why you’re adulting so hard.

Take for example John, age 35, married with 2 kids who are aged 2 and 5. Both John and his wife are currently working and have a combined income of $12,000 a month. They live in a 4-bedroom HDB in Sengkang together with a domestic helper and they drive a Japanese MPV. Both the HDB and the car have outstanding loans with a 20 and 5 years tenure remaining respectively.

One morning, John could not get out of bed as he usually does for work. His wife notices something amiss and she immediately calls the ambulance. It turns out that John has experienced a stroke overnight and that has resulted in him being incapacitated on his left side. From here, there are 2 likely scenarios based on:

  1. Scenario #1: John only purchased the basic necessities of his Integrated Shield Plan and personal accident insurance because he does not believe in critical illness insurance
  2. Scenario #2: John purchased critical illness coverage, in addition to his basic necessities, when he first started working and progressively upgraded it when his agent does a periodic review following life milestones

In scenario #1, John will most likely:

  1. Rely on his Integrated Shield Plan for bills reimbursement
  2. Exhaust all of his hospitalization leave and eventually go into no pay leave
  3. Not able to contribute to household income reduces due to no pay leave
  4. Be replaced at work due to prolonged absence
  5. Need to hire additional help such as a night nurse
  6. Dip into his children’s educational savings
  7. May have to find less stressful employment

John will likely have to adjust his family lifestyle and be more frugal. The entire family’s quality of living is affected and he might not be able to send his children to their university of choice in future.

In scenario #2, John will most likely:

  1. Receive multiple lump sum benefits from all his critical illness insurance policies he purchased over the years
  2. Resign from his job as the stress might have been a resulting factor of his stroke
  3. Have a choice of more expensive treatments which are not covered by insurance
  4. Take the opportunity to make a lifestyle change to healthier organic food with the family
  5. Hire professional help to aid him in daily living until he is independent
  6. Start another education fund with the excess money
  7. Create a stream of passive income with his Financial Advisor

John’s quality of living does not suffer and in fact, he has plenty of choices because he is not restricted by cost. He is able to make provisions for his current situation and his children’s future are not affected. He also does not have to worry about future career choices as he has the ability to create multiple income streams after benefitting from the insurance pay outs.

From the above, we can see that John’s portfolio consists of his Wife, Children, HDB and Car. All delicately balanced on the assumption that the regular income he receives through his employment will be uninterrupted. In fact, the better question from this is, how could John not afford not to have critical illness coverage.

That is just one assumption.

It does not matter if you’re John, married with 2 kids or Jane, who is single and have elderly parents dependent on her, everyone has a portfolio. Question is, how do you protect your portfolio?