Do I Need Critical Illness Insurance?
Critical Illness Insurance is great to possess. With just several hundred or thousand pesos, you can get a critical illness rider attached to your life insurance
JUST what is critical illness all about? It is a type of insurance rider or product that provides a lump-sum cash payment to the insured if found to have one of the life threatening illnesses covered in the insurance policy contract. The insured does not have to be disabled and he or she can spend the lump sum in any way—such as medical bills, renovation of house, medicines, groceries, or even vacation. In this way, the insured can avoid financial strain, while he or she can focus more on recovering from the major illness.
Some of the illnesses covered by critical illness insurance are Alzheimer’s disease, aortic surgery, bacterial meningitis, benign brain tumor, blindness, brain injury, cancer, cerebral palsy, coma;
Congenital heart disease, coronary angioplasty, coronary artery bypass surgery, cystic fibrosis, deafness, ductal carcinoma in situ of breast, heart attack, heart valve surgery, HIV infection, kidney failure;
Loss of limbs, loss of speech, malignant melanoma, motor neuron disease, multiple sclerosis, muscular dystrophy, organ failure, organ transplant, paralysis, paraplegia, parkinson’s disease, prostate cancer, severe burns, stroke and type 1 diabetes mellitus.
Conceptually, critical illness insurance is great to possess. With just several hundred or thousand pesos (rate depends on your policy coverage), you can get a critical illness rider attached to your life insurance.
Reality wise, well…try to ask around some of your friends if they ever encountered the need to avail themselves critical illness and what their experiences were. No doubt, you would hear lots of horror stories.
You may be wondering, so what is the truth? You may have received sales pitches from insurance agents telling you wonderful stories and benefits of critical illness rider. Yet now, you are hearing another aspect.
Here is one real-life situation that you can judge for yourself. For confidentiality’s sake, let us refer to the person as Mike.
From 2013 to the middle of 2014, Mike’s memory has noticeably gone worse from week to week. To the point that, when Mike was told of something, he forgets it and keeps bringing up the topic over and over again.
A doctor was consulted and was determined that Mike was suffering from benign brain tumour. The memory loss is one of the effect as size of the tumour has been increasing, affecting some of the nerves. In order to restore Mike to his previous healthy self, he needs to be operated on the head.
Let us stop for a moment and think about this. If you will be operated on the head, is this a typical illness or a life changing one? Or maybe a better question to ask is, after head surgery, what are the chances the person can have normal life?
Upon applying for a critical illness claim of benign brain tumour, Mike’s claim was declined. Why? The insurance company invoked one of the countless highly technical exclusions involving benign brain tumour, cranial vault, cranial nerves, and pituitary gland.
So why are critical illness claim declined a lot of times? As mentioned earlier, answer is in the “exclusions” of each illnesses. There are a number of exclusions for most illnesses, and unfortunately, when you start accounting the exclusions, you will notice that the probability of claiming for the illness will go down even more dramatically.
Given what we have discussed, maybe you are now wondering is having critical illness useful or not? There are various ways to look at this:
• If you have extra money, adding a few more bucks will not hurt. Who knows, maybe you might one of the lucky ones that can claim it successfully in the future.
• If, however, money is tight, you can consider, skipping the critical illness rider.
• If health coverage is your objective not life, it will serve you better if you avail either short-term or long-term health insurance, depending on your needs.
• Go for short-term health insurance if your aim is to get covered for the year on check-ups or other illness that may arise within the year, as short-term insurance helps minimize out-of-pocket payments.
• If you prefer to have health coverage during your retirement years, you can opt to get long-term health insurance instead. This is because short-term health insurance normally only covers individual below 60 or 65 years old.
If you have questions or need financial consultation, you can get in touch with me on my e-mail limchrc@gmail.com.
Christopher Lim is a Registered Financial Planner of RFP Philippines. He is a co-founder of www.pinoyFIQ.com and an investor on Financial and Real Estate industries. He is also a Coach and Resource Speaker on Financial Management, Investments (such as Bonds, Mutual Funds, Stocks, and Derivatives), Estate Planning, and Real Estate.
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