Savings Critical Illness Insurance vs Pure Critical Illness Insurance
What is Savings Critical Illness Insurance?
Savings Critical Illness Insurance comes with an investment or savings component. The premiums for this type of insurance are relatively expensive and usually require continuous payments over 20 to 30 years. If the insured person does not develop a critical illness during the payment period, they can choose to terminate the policy after completing the payments and receive the premiums as a cash value.
What is Pure Critical Illness Insurance?
Pure Critical Illness Insurance, also known as “Consumption Critical Illness Insurance”, does not have a savings component. It does not provide any cash value upon termination of the policy, and the premiums are relatively lower.
If the insured person is diagnosed with a specified critical illness during the designated coverage period, they will receive a lump-sum compensation. However, regardless of whether a claim has been made in the past, the premiums cannot be recovered in the future.
Savings Critical Illness Insurance vs Pure Critical Illness Insurance: Which is Better for You?
The following table outlines the specific differences between the two:
|Savings Critical Illness Insurance||Pure Critical Illness Insurance|
|Investment/ Savings Component||Present||Absent|
|Coverage||Includes various illnesses|
(3 major critical illnesses, early and severe diseases, childhood diseases)
|Coverage is simpler and commonly includes limited coverage for cancer (also known as Term Cancer Insurance), coverage for 3 major critical illnesses (cancer, heart disease, stroke), and coverage for multiple diseases (3 major critical illnesses + other critical illnesses)|
|Premium Adjustment||Premiums remain unchanged during the payment period||Premiums increase with age|
|Compensation Frequency||Some plans allow multiple claims||Most plans allow only one claim|
|Payment Period||Approximately 20 to 30 years||Annual payments until the end of coverage|
|Coverage Period||Most plans provide coverage up to age 100||Common coverage periods are 1 year, 5 years, and 10 years, requiring regular renewals with an upper age limit for renewal|
Using an example to compare premiums, assuming the insured person is a 25-year-old non-smoking male, with a coverage amount of HK$1 million, the average monthly premiums for different plans are as follows:
- Annual renewable Term Critical Illness Insurance: HK$70 to HK$220
- Savings Critical Illness Insurance with a 20-year payment period: HK$1,500 to HK$2,000
Investment/ Savings Component
The difference between Savings Critical Illness Insurance and Pure Critical Illness Insurance is that Savings Critical Illness Insurance includes a savings or investment component. The insured person can receive lifelong critical illness protection, and the policy has cash value and dividends. After completing the payments, the insured person can choose to terminate the policy and withdraw dividends or interest, having surrender rights. On the other hand, Pure Critical Illness Insurance does not have a savings component. It provides critical illness coverage for a specified period and is relatively simpler in nature.
After purchasing critical illness insurance, if the insured person is diagnosed with a specified critical illness, they can receive a lump-sum compensation. This compensation is not limited to medical expenses and can be used to cover income loss due to inability to work, ensuring the insured person’s quality of life.
Pure Critical Illness Insurance has a narrower coverage scope. Common options in the market include coverage limited to cancer, coverage for three major critical illnesses (cancer, heart disease, stroke), and coverage for multiple diseases (three major critical illnesses + other critical illnesses). On the other hand, Savings Critical Illness Insurance can cover multiple diseases, including the three major critical illnesses, early and severe diseases, and childhood diseases such as carcinoma in situ, coronary heart disease, and end-stage renal failure.
Savings Critical Illness Insurance vs Pure Critical Illness Insurance: 3 Major Considerations
So, how should we choose the right critical illness insurance for ourselves?
Step 1: Assess Your Needs
It’s important to assess your protection needs before purchasing critical illness insurance. Consider your personal health condition, family financial situation, and the potential medical and living expenses you may require in the event of a critical illness. Choose a critical illness insurance product that can provide the necessary coverage.
Step 2: Understand Your Financial Goals
At the same time, understand your financial habits. Whether you choose Savings Critical Illness Insurance or Pure Critical Illness Insurance, evaluate its compatibility with your overall financial plan. Choose a product that aligns with your risk preference and financial goals.
Savings insurance has higher premiums and longer payment periods, making it more suitable for individuals with stable income. On the other hand, Pure Critical Illness Insurance has lower premiums, does not require payment for the savings component, allows annual payments, and offers more flexibility. It is more suitable for individuals who want to flexibly allocate their assets or for the younger generation.
Step 3: Compare Critical Illness Insurance Premiums Clearly
When selecting critical illness insurance, it is important to have a clear understanding of your premium budget. Before purchasing, research and understand the coverage scope of the policy, and choose a critical illness insurance plan that is reasonable for your needs.
When comparing critical illness insurance products, pay attention to factors such as premiums, coverage scope, compensation amounts, and coverage periods. Also, understand the relevant clauses regarding premium adjustments and how to avoid the impact of premium adjustments on coverage.
- 1Using the standard premiums for a 35-year-old non-smoking male insured person with HK$1 million coverage in Bowtie Term Critical Illness(Multiple Cover) and the average premiums of 6 Savings Critical Illness Insurance plans (18-20 years premium payment period) available in the market as of March 10, 2022