Adding CI rider to an existing term plan basically doubles the cost of the term plan.
If you tell the agent you want Term plan, agent will persuade you to get whole life. If agent unsuccessful, he'll try to persuade you to add CI rider to Term plan.
Please see Tan Kin Lian's blog on CI insurance:
http://tankinlian.com/Admin/File.aspx?ID=552&Frame=1
"what people may not know is that the illness must have reached a critical stage before a claim can be approved"...
In other words, CI rider, for double the premium, just lets you have the money a few months earlier, just before you die.. according to TKL - stage 1 cancer - no payout.
So if you insist on CI, the CI should be a smaller amount than the full coverage since your family will eventually get the remainder a few months later when you die from the CI.
"If the illness reaches a critical stage, the insured person will die
within a few years of receiving the payout." - quoted from Mr Tan's blog.
I'm not sure how Mr Tan define critical stage, but I would like to show people what are the common misunderstanding in Critical Illness.
Critical illness (CI) in term/life policy usually cover 30-31 items. It will include
Terminal illness which means
"The conclusive diagnosis of an illness that is expected to result in death of the insured within 12 months from the date of diagnosis. This diagnosis must be supported by a specialist and confirmed by XXXX appointed Registered Medical Practitioner.
Terminal illness in the presence of HIV infection is excluded."
Also
End stage liver Disease/Failure
"End stage liver failure as evidenced by all of the following:
permanent jaundice; Ascites; and Hepatic encephalopathy.
Liver disease secondary to alcohol or drug abuse is excluded."
also
End stage lung disease/failure
"End stage lung disease, causing chronic respiratory failure.
This diagnosis must be supported by evidence of all of the following:
FEV1 test results which are consistently less than 1 litre; permanent supplementary oxygen therapy for hypoxemia; arterial blood gas analyses with partial oxygen pressures of 55mmHg or less (PaO2 ≤ 55mmHg); and Dyspnea at rest.
The diagnosis must be confirmed by a respiratory physician."
These above are few of those that IMO, patient might passed on after a fews (even with treatment)
But what about the rest of the 27-28 of critical illness specified?
Most common misunderstanding is the major cancer definition.
Firstly we got to understand a little more about cancer. It is mainly categorize under 2 form, benign and malignant. Under Benign, there are 3 stage call Carcinoma-in-Situ (CIN) level 1, 2 and 3. Under benign, all levels, are not claimable. Recall the famous lady, with 3 pru policy and no payout? These conditions are also known as early stage cancers, which are not covered. So lets look at what are covered.
Major cancer
"A malignant tumour characterised by the uncontrolled growth and spread of malignant cells with invasion and destruction of normal tissue.
This diagnosis must be supported by histological evidence of malignancy and confirmed by an oncologist or pathologist.
The following are excluded:
tumours showing the malignant changes of carcinoma-in-situ and tumours which are histologically described as pre-malignant or non-invasive, including, but not limited to: Carcinoma-in-Situ of the Breasts, Cervical Dysplasia CIN-1, CIN-2 and CIN-3;
hyperkeratoses, basal cell and squamous skin cancers, and melanomas of less than 1.5mm Breslow thickness, or less than Clark Level 3, unless there is evidence of metastases;
prostate cancers histologically described as TNM Classification T1a or T1b or Prostate cancers of another equivalent or lesser classification, T1N0M0 Papillary micro-carcinoma of the Thyroid less than 1 cm in diameter, papillary micro-carcinoma of the Bladder, and chronic lymphocytic leukaemia less than RAI Stage 3; and
all tumours in the presence of HIV infection."
The definition "A malignant tumour characterised by the uncontrolled growth and spread of malignant cells with invasion and destruction of normal tissue."
The keywords are malignant, uncontrolled growth and spread (of bad cells), destruction(of gd cells). It did not state the level of cancer in order to be claimable. It is commonly thought that only a 3rd or 4th stage cancer patient will match the criteria.
Usually, I would let client know that once its malignant, and he/she required to go for chemo or radiotherapy, it will be claimable. This doesn't means that the patient will die after a few years. Please do some research or ask people around you (working in hospital as nurse or doc NOT coroner), how many survived. With ever advancing medical science, do you think the survival rate will goes up or down?
Most importantly, we only look at 4 items so far. what are the rest? Will patients dies after afew years after, for example,
COMA - persist for at least 96hrs,
Deafness - Loss of at least 80 decibels in all frequencies of hearing,
heart attack, HIV, Kidney failure (we all know patients can live very long on this), Loss of speech, Major burns -3rd degree, 20% of the surface, Muscular dystrophy, parkinson, Stroke (People can recover from this), etc.
Do check out
NTUC Income | Singapore Life Insurance | Term Life Insurance - NTUC Income LUV, definition from NTUC (where Mr Tan work previously) for the details.
Next, from the post,
"Invest your savings in a low cost investment fund to earn an attractive yield. For example, if you invest $500 a month over 20 or 30 years and earn a yield of 4% per annum, the accumulated savings will be $179,000 and $336,000 respectively. This is likely to be much more than the amount that can be covered under an expensive critical illness policy."
If a usual person man/woman, starts their career at 25-27. They would likely to be in their 50s or 60s soon. This also means that they should be retiring soon. So if such funds are for retirement AND medical, IF, it something bad do happened, what will happen financially? A significant amount will be used for medical, then what is left for retirement? Not to mention, if your investment failed, or not performing up to standard?
With proper financial planning, just a portion of that savings, to be used for protection insurance, it would not affect your overall target significantly, at the same time, it provide an additional payout shall such event happen.
