Early Critical Illness (“Early CI”) insurance plans are one of the product innovations from insurance companies in recent years. Others include plans that cover pre-existing conditions such as diabetes; and multi-pay CI plans that allow for more than one CI claim.

As Early CI plans become more common, I noticed an increase in enquiries from my clients with questions such as: “Should I get an Early CI plan?” or “How much Early CI coverage should I get?”.

In this article I hope to share more about Early CI and dispel the myth that all plans are the same – because they are not. Find out if your Early CI plan is truly the best.

Tell Me More About Early CI Plan!

The purpose of insurance is to cover for catastrophic events that will severely impact our lives and our family. Examples include premature death, major (advanced stage) illnesses, long-term illnesses and disability affecting our ability to earn an income.

Early CI, by virtue of it being “early” stage condition, would be less impactful than an Advanced CI. Some of the people I know who had early-stage cancers, were able to return to work about a year later after completing their treatment. If it is an advanced cancer, the length of treatment and recovery time will be longer. In fact, the recommended number of years to plan for recovery in Advanced CI is 5 to 7 years.

I know some advisors will recommend covering the entire critical illness gap with an Early CI plan. But it is going to be exorbitant. Even if the client commits all his available resources to get a high Early CI coverage, he might still end up with insufficient CI cover. Or, he could have little budget leftover to get enough coverage for everything else.

Hence, I encourage my clients to be sufficiently and robustly covered for the major events first. If they still have budget after that, we can look at Early CI plan to enhance their coverage.

What should I look out for in my early CI plan?

The road to getting “the best Early CI plan” is fraught with caveats and conditions. Tread safely and consider the following:

Definition of Early Critical Illness

Did you know, not all early CI definitions are the same? This is because Early CI definitions are not standardized across the different insurers.

Crucially, some insurers impose a stricter definition for early cancer claim. Let’s take a look at the definitions of early stage cancer between these two companies:

Company A restricts the claim for Early CI specifically to a few organs while Company B has no restrictions at all. Imagine the horror if you have to make an early stage cancer claim!

This is just one aspect that I chose to highlight because of its significance – more than half of all CI claims in Singapore are due to cancer (close to 90% for females):

Source: General Reinsurance, 2015

Consumers should be aware of these differences (not just the premiums) before getting the plans. If you would like a thorough but non-exhaustive explanation of the different plans, feel free to drop me a note here.

Number of Special Conditions

Special conditions are additional coverage on top of all the Early CIs. The payout is usually 20% to 30% of the sum assured, capped at $20K-$30K per claim. There is a limit to the number of claims for special conditions (usually 5 to 6 times); the claims do not reduce the sum assured.

While some insurers offer a minimal 5 special conditions, some insurers offer up to 20 special conditions. Examples of special conditions include diagnosis of Insulin Dependent Diabetes, Hysterectomy due to Cancer, and Breast Reconstruction after Mastectomy.

To illustrate the benefit of special conditions: if your hospitalization plan does not cover breast reconstruction after mastectomy, you might want to consider an Early CI plan that does. Breast cancer is afterall, the top cancer affecting females in Singapore.

Premiums vs Coverage Comparison

Let’s use the example of our friend, Bryan, who is 35 years old and teaching as a JC Physics tutor. He would like $100K of Early CI whole-life coverage and asked his insurance agent with Company A to propose a plan. He decided to seek a second opinion from an independent planner because, why not? Let us take a look at the comparison done by the independent planner against the plan from Company A:

If you look at the table, you definitely do not want to get your plan from Company A! It costs almost $10K more expensive (or 17% more) than Company B, which has a better Early Cancer definition. Feeling relieved he sought a second opinion, Bryan did a skip around the room (in his mind). Phew! What a close shave.

Pay-out structure

Older Early CI plans pay out only 50% of the sum assured for an early stage claim. For instance, if you had bought an Early CI plan with this structure at a sum assured of $100K – upon a successful claim, you will only get a pay-out of $50K.

The newer plans now pay the entire sum assured, up to a maximum claim amount. However, older plans with the 50% pay-out structure are still around and continue to be sold. And, they are not necessarily much cheaper. A number of my clients bought these older plans and misunderstood that they would receive the entire sum assured at the first claim. Be sure to clarify with your advisor before committing!

Standalone ECI Term Plan or a Rider in a Term or Whole-Life Plan

We can get our Early CI plan either as a rider attached to a whole-life or term plan, or as a standalone Early CI plan. A standalone ECI plan has minimal death cover and coverage is limited to a certain age. This is likewise for an ECI rider attached to a term plan.

Your financial planner will advise which option is better for you, after considering your current financial situation and protection needs. Do speak to a financial planner about this.

Road to Your Best Early CI Plan

If you found what I shared here to be insightful, I can assure you that you will learn more by meeting up with a competent and objective financial planner. A competent planner can:

• provide you with holistic financial planning;
• clearly explain any questions you may have;
• highlight issues you might not have considered; and
• propose objective solutions that will best meet your needs adequately

If you would like to find out more about CI coverage or financial planning, I will be happy to answer your questions. Just reach out to me here:

Note: Author is a financial planner with one of the largest independent financial advisory firm that partners with most of the insurers in Singapore.