The best product for major Illness is?

(Posted Saturday, 7pm)

Financial risk management is the study of financial impacts affecting an income earner in the unfortunate event of temporary or permanent loss of income of self, a loved one, siblings or dependants. One method of risk management is risk transfer. Without the client realizing a financial impact, the planner cannot proceed.

For e.g. the loss of potential income for a breadwinner, age 35, He has a wife and a child age 1. The family saves 35% (CPF and 15% cash savings). Supposing his annual income is S$40,000 a year. In the unfortunate event of premature death, he does not want his wife, sibling or loved ones to shoulder his burden. His potential loss of income for the next 25 years (cost of seeing his child through education and he also plans to retire at age 60) is 40k times 25 years. That’s a whopping S$ 1 million. My responsibility as a financial doctor is to ask if this would be a financial impact. If he does, my next step is to ask for his agreement and I’ll proceed.

Let’s get to the concern upon diagnosis of a major illness. Others would term major illness as dread disease or critical illness, etc. Let’s use Cancer for discussion. Assuming you understand the policy schedule and definition for benefits payable upon the diagnosis of major cancer.

Upon diagnosis of major Cancer, the benefits are payable. I highlighted major because this event is critical, is a dread disease and is grave. Imo, this would seriously impact the potential income of the earner.

Otherwise, I would term this stage of Cancer as ‘not’ major, not critical, early stage. The impact could be resolved by looking into hospital and surgical insurance (a cost reasonable solution), outpatient Cancer treatment or early stage critical illness coverage.

Imo, the confusion comes from the last 2 paragraph, if the insurance agent or financial planner does not get his fact finding right! The client will be paying additional premium.

The client agrees that upon diagnosis of a major illness he wants a solution. As being matured, professional, he shares his concern and financial impact. Upon early diagnosis, he would like a comprehensive hospital and surgical (H&S) plan. He figures that early stage diagnosis would not warrant a loss of income and the H&S plan would cater for his pre, in and post hospitalization expenses. They have emergency funds to see them through for early stage recuperation and other expenses.

Hence, I offered 4 different types of solution from 4-5 insurers. This would provide him an unbiased solution as compared to just one insurer. A preferred insurer may NOT provide choice of cost/premium, yield, features, and benefits from a range of 4-5 insurers. You may be ‘blinded’ by the frog that lives in an island without knowing what the global world is offering! But that’s not the point!

The following is the comparison for Sum assured S$ 300,000, Age 35, Smoker until age 65 (Would most of the audience still earn an income after age 65?)

A: Term plan with critical illness benefits

B: Whole life plan with accelerate/enhanced critical illness benefits

C: Whole life plan with additional critical illness benefits

D: Whole life with embedded critical illness benefits

E: Endowment plan with accelerated/enhanced critical illness benefits

Annual premium  / Type	A	B	C	D	E
Basic plan	1652.25	6743.95	6743.95	3963.30	11624.55
Enhance CI		2049.15		(embedded)	1623.40
Additional CI			4783.65
Total	1652.25	8793.10	11527.60	3963.30	13247.95

Please note that the benefits payable for (A) and (D) is exactly the same if death or diagnosis of major illness were to occur before age 65. Actually, A pays more than D in the event of TPD!

We are human ‘machines’. Like it or not, with the food we are eating, the pressure we face in our daily lives and at work, death is a sure thing, but major illness will certainly accelerate the death benefits.

I am NOT going to dwell into Whole life or Endowment has cash values. But which would you pay for the risk transfer upon diagnosis of a major illness for possible loss of income. The cards are laid upon the table. You, as the client is deemed to be informed, which would you, decide?

Would you choose ‘A’ or one of the others because it has cash values? If you are choosing the one with Cash Values, than the whole fact find / diagnosis has to go back to the beginning to change your priority to cash values instead of risk transfer upon diagnosis of a major illness. You can’t have the whole pie and just eat it!


Finally, the best product for major illness coverage (in my opinion) is ADVICE! Similarly, in the medical field, it is not the medication that addresses your concern but you seek the doctor's advice for the right prescription, am I correct?

If you find the post beneficial in risk management or insurance matters, please feel free to visit my blog at seettpat.blogspot.com and choose the categories: Evergreen or risk management. If you find the post beneficial to your friends, siblings, loved ones, dependants, please feel free to forward such that it could reach out to a wider audience.

Please note. NO recommendations are made. The choice is yours. My primary responsibility is to lay the cards on the table such that you are informed to make a wise decision!