Read a critical illness definition and tell whether early-stage or multi-pay cover changes when you get paid.
Jun Hao's first job is to find out how each critical illness (CI) policy pays for the same condition, and to check that in the policy contract before looking at price. Two policies with the same sum assured can pay very different amounts, at different times, for one diagnosis.
One evening Jun Hao got two CI quotes. Both were for S$150,000 (an example figure), and one was noticeably cheaper. Ryan, the adviser who gave him the quotes, called the dearer one "early-stage" and the cheaper one "severe-stage only", and said the dearer one "pays earlier". Jun Hao asked how much earlier, for which conditions, and how much. Ryan couldn't answer and said he would check.
Before standard wording existed, two policies could both list "stroke" and mean different things by it. The LIA (Life Insurance Association) now publishes standard definitions for a set of the main severe-stage critical illnesses, and insurers in Singapore use the same LIA wording for those conditions. A major cancer, a heart attack of specified severity and a stroke resulting in permanent damage should mean the same in any policy that uses the standard list. You can read the current standard definitions on LIA's website.
There are three cautions. The standard definitions cover severe-stage conditions only. Early-stage and intermediate-stage definitions are generally each insurer's own, so they can differ between policies. LIA has also revised the definitions over time, so an older policy may still use older wording. Finally, a policy can cover conditions beyond the standard list, defined in the insurer's own words. The policy contract states which wording applies to each condition.
A severe-stage policy pays only when a listed condition reaches the severity set out in its definition. It pays nothing before that. Severe-stage cancer definitions typically require a malignant tumour with invasion of tissue, and they exclude specified early forms, such as many tumours found at a pre-malignant or very early stage. Severe-stage heart attack definitions typically require evidence such as specified changes in heart tests and blood markers.
A condition can be serious, frightening and expensive to treat and still fall short of the severe-stage definition. Suppose screening finds an early cancer and a short operation removes it. Severe-stage cover may pay nothing, even though most people would still call it cancer.
An early-stage policy also pays at an earlier, less severe stage of listed conditions, usually a portion of the sum assured. Some add an intermediate stage between early and severe. In many designs the early payment is deducted from the total, so a later severe-stage claim on the same condition pays the remainder. In other designs the early payment is extra, paid on top of the total. The policy states which design it uses.
Take Jun Hao's S$150,000 cover, paying 25% at early stage and deducting that from the total. These terms are invented and aren't any insurer's. Screening finds an early cancer, so he receives 25% of S$150,000, which is S$37,500. If the cancer later progresses to severe stage, he receives S$150,000 - S$37,500 = S$112,500. Across both claims he gets S$37,500 + S$112,500 = S$150,000.
Under severe-stage-only cover he would get S$0 at the early diagnosis and the full S$150,000 at a later severe diagnosis. So early-stage cover usually changes when you are paid, and the total stays about the same. It costs more because the insurer pays out more often and sooner.
A multi-pay policy can pay more than one claim, either when the same condition recurs or when a different condition appears. A single-pay policy ends after the first claim. Multi-pay policies typically have a waiting gap between claims, limits on claims for the same condition or a recurrence, conditions sorted into groups with one claim allowed per group, and a cap on total payouts set as a multiple of the sum assured.
Say Jun Hao's multi-pay policy pays him S$150,000 for a severe cancer. Three years later he has a heart attack that meets the definition. Under these invented terms, the policy pays again if the gap between claims has passed and heart conditions sit in a different group from cancer. A single-pay policy would have ended after the cancer claim.
Multi-pay is the most expensive of the three structures. It is worth more to someone who would be badly hurt by a second illness than to someone whose first payout would already cover their recovery.
Compare policies on the same condition first, and leave prices until after. Waiting periods and survival periods differ by policy and by condition. You'll find them in the contract; brochures usually leave them out. If a cheaper policy has a long waiting period or a narrow definition, it may cost you less without giving you cheaper cover for what it actually pays on.
Choose one condition, and for each policy find:
the definition of that condition at each stage it covers, in the policy contract the share of the sum assured paid at each stage, and whether early payments reduce later ones the waiting period for that condition, counted from the start of the policy the survival period after diagnosis any rules on recurrence or a second claim
Jun Hao picked cancer, the condition his family worries about most, and asked Ryan for both contracts. The dearer policy pays a portion at early stage and deducts it from the total. The cheaper one pays only at severe stage. He concluded that the price gap pays for getting money sooner if a cancer is caught early. It doesn't buy a larger total payout.
You'll do the same with one common condition, writing down how a severe-stage, an early-stage and a multi-pay policy would each pay for it.
Pick one common condition. Write down how a severe-stage policy, an early-stage policy and a multi-pay policy would each pay for it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).