Critical Illness Insurance

Expert Guide on Critical Illness Insurance: Why Baby/Child Needs it?

An expert’s guide on how to compare critical illness insurance and determine if you and your baby or child need it.
Author Bowtie Team
Date 2021-01-07
Updated on 2021-09-29
Does my newborn baby need critical illness insurance?How to compare critical illness insurance?Critical illnesses coverageSavings vs. Reimbursement PlansDoes the plans provide multiple claims? Compare the cost of premium

Critical illness insurance pays out a lump-sum amount when the insured is diagnosed with any of the serious illnesses or conditions listed in the insurance policy, and spending of the amount is not restricted.

Critical illness coverage is generally categorized into the following:

  • Cancer
  • Heart related diseases
  • Nervous system illnesses such as stroke
  • Major organ diseases such as kidney failure
  • Other serious illnesses

According to Hospital Authority, the major causes of hospitalization are cancer, heart disease, kidney failure, and stroke. Those with the “Three Highs” condition (high blood pressure, high cholesterol, and high blood sugar) are more likely to suffer from these critical illnesses.The condition is often developed over time from an urban busy lifestyle of unbalanced diets, insufficient rest and lack of exercises.

In the event of a serious illness which suspends you from working, critical illness insurance can provide financial support. Even if you accept treatments from a public hospital, you may still need to pay for the drugs so, treatment costs can be quite expensive. If you don’t want your savings to take a hit or burden your family with financial troubles, being prepared with suitable critical illness insurance is extremely important.

Does my newborn baby need critical illness insurance?

The short answer is if you can afford it, then yes. It is recommended to get both health insurance and critical illness insurance for your newborn baby, however, life insurance is not necessary. If a child is sick, parents are responsible to seek the best medical treatment for him or her. In the unfortunate case of a critical illness, medical treatments will certainly pose a huge financial burden on the family, therefore it is recommended to transfer the risk.

In recent years, some insurance companies have launched new products that offer protection for unborn babies with gestation periods of 22 weeks or higher, and even cover congenital diseases. Other unique selling points include premium waived for the insured in the event of both parents’ death, and if the insured is under 18 years of age and suffers from a pre-specified critical illness, parents or caregiver can receive 2% of the sum assured per month for up to 17 months.

How to compare critical illness insurance?

When comparing critical illness insurance, it’s important to keep in mind the following:

  1. How many serious illnesses are included and what is covered?
  2. Is it a savings or reimbursement plan?
  3. Does it accept multiple claims?
  4. Is the premium high or low?

Critical illnesses coverage

The wider coverage the better, but more protection also comes with higher premium. That is why the number of covered items is not the most important, especially since you cannot predict which disease you might have in the future or if you will become ill at all. In fact, most critical illness claim cases are related to cancer, stroke and heart disease, so it’s key to ensure that these conditions are well covered.

For example, there are insurance policies (most of the early policies) that exclude early-stage critical illnesses, such as “Carcinoma in situ” (CIS) and “Precancerous lesions” that are typically not within the “Cancer” coverage. CIS refers to a group of abnormal cells that have become cancerous, but are found only in the outer mucosal layer where they were first formed and have not spread. The Cancer Foundation website states that “All malignant tumours contain cancer cells. They stay in the same place when first formed, so they are called ‘carcinoma in situ’. But if they are not treated, the cancer will spread to the surrounding tissues and other organs, then become an aggressive cancer.” Although CIS has a high chance of becoming aggressive, it also doesn’t always turn aggressive, that is why it is not often covered by insurance.

In recent years, some critical illness insurance plans cover carcinoma in situ and early-stage critical illnesses. For example, if you suffer from an early-stage critical illness, you can get a percentage of the sum assured as compensation. Therefore, it is important to review the policy terms and benefit criteria before purchasing insurance, especially when choosing a plan that covers the above mentioned illness.

Savings vs. Reimbursement Plans

Critical illness insurance can generally be divided into two categories: savings and reimbursement. Savings plans offer guaranteed cash value equal to the total amount of premium paid, however, based on market average, it will take at least 15 years before the insured can recoup the premiums paid. On the other hand, reimbursement plans are expense based and do not offer any cash value, however, the premiums of reimbursement plans can be as low as only 10% of the  savings plans’ total premiums. One more consideration is the sum assured of a savings policy can be affected by the amount withdrawn from the cash value. 

Below is a summary table that highlights the differences between the two types of plans:

Savings vs. Reimbursement Critical Illness Insurance Plans
Offers Cash Value?YesNo
Includes Life Insurance Coverage?YesVary by plans
Covers Early-stage Critical Illness?YesTypically no, but some plans offer
Multiple ProtectionYesTypically no, but some plans offer
Policy TermLifetimeRegular renewal*
Fixed PremiumYesNo
Fixed Payment TermYes^No
  • *Typically between 1 to 10 years. Can be renewed up to 80 years of age (vary by individual policies)
  • ^Usually by 5 years / 10 years / 15 years / 20 years / 25 years

Does the plans provide multiple claims?

More critical illness cases have been diagnosed among the younger age groups, at the same time, medical advancements have increased the likelihood to recover. Hence, it is recommended to get a plan that accepts multiple claims, However, some plans set a 3 to 5 years waiting period on critical illness recurrence. In addition to that, different insurers define recurrence period differently – by the onset of the disease; by removal of tumour; or by full recovery from cancer. The maximum number of claims for one illness also vary depending on insurance companies or plans. Therefore, it’s important to review carefully the policy terms and conditions before purchasing.

Compare the cost of premium

When comparing premium, insurance plans should be compared apple to apple because their coverages can be quite different. It means the comparisons are based on the same type of insurance plan, savings plan to another savings plan or reimbursement plan to another reimbursement plan. Like, we could select 2 reimbursement plans with similar coverage and terms for premium comparison.

Payment period is also important. Some insurance plans offer lower premiums for the earlier terms but higher premium for later terms. To compare fairly, you need to consider the premium paid for different periods such as a 5-year, 10-year and 20-year as well as the total premium paid for the whole policy term. 

In conclusion, my piece of advice to the young readers is to start with reimbursement policy. This way, you can benefit from adequate protection without the financial burden of high premiums. It’s never too late to purchase a critical illness savings plan with a higher sum assured that offers lifetime protection as well as a way to build savings when finances become more stable.


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