5 Independent Areas of Coverage

There are 5 independent areas of coverage. Anyone that comes to me looking for comprehensive coverage and I will begin first with explaining their independence before deep diving into any further conversation. Their independence also means it is important that one compares appropriately because comparing a hospitalisation plan against a critical illness plan is akin to comparing celery versus a watermelon (oh multiple analogies do apply).

Death.

Coverage for this is usually in the form of whole life or term policies. Features like limited premium, decreasing term, and level term; are for discussion in another post. The sum assured is dependent on a few factors like years of income replacement sought, amount/percentage of income to be replaced and whether adjusted calculations to be used. Death is quite self explanatory.

Disability.

Definitions of disability have evolved over insurance Singapore history. Back when I first started out in Yr2001 it generally meant 6choose2 in simple terms. 2 eyes, 2 arms and 2 legs; loss of either any 2 will qualify. Some required severance, some only required loss of use. Other definitions include whether or not, the insured is unable to work in OWN occupation, in some cases, unable to work in ANY occupation. Of recent years, it has evolved to ADLs (Activities of Daily Living – Mobility, Transferring, Dressing, Feeding, Toiling and Washing) where a doctor has to certify the insured being unable to perform 2, in some cases, 3 ADLs before a claim can be admitted. As of this point of writing, a new category may be birthing – Long Term Care, which is probably a continuation/innovation from disability category.

Critical illness.

This category might be confused with hospitalisation coverage but a hospital stay due to appendicitis will not trigger a critical illness payout for sure. In financial planning theory, critical illness coverage is meant for income replacement for the 2-3 years post hospitalisation living expenses. Usually, such medical conditions are of such severity that renders a person to be temporarily unable to work for a couple of years. Initially, the various insurers had different definitions, especially for cancer, to qualify a claims payout; which was quite problematic. MAS (Monetary Authority of Singapore) had to standardise the definitions and differences between insurers became easier to compare. Whether as a rider that accelerated the basic plan or claim payout be on top and above the basic plan, are features with its own pros and cons (for discussion another time). Of recent years, this area of coverage began covering early/intermediate stages of critical illness, and some even have multi-pay features. Definitions on early/intermediate stages vary from insurer to insurer. Differences in waiting periods apply too.

Hospitalisation.

Back then it was just medishield and H&S (hospital and surgical plans). There are medical reimbursement plans and HB (hospital benefit) ones too. There are concepts of co-payment, deductibles and co-insurance tied to shield plans as a category. But there is also the concept of scheduled benefits (H&S) versus medical blank cheque up-to-the-stated-insured-amount medical reimbursement benefits too. There is also the coordination of benefits clause which stipulates that one cannot be reimbursed more than your medical bill. Only HB is excluded from the clause due to its income replacement nature. HB is particularly applicable for self employed persons like hawkers and taxi drivers, as each day lying on the hospital bed means daily loss of income. Outpatient treatments like dialysis and chemotherapy are also covered in this area of coverage, not to be confused with critical illness cover.

Accidents.

The identifiable characteristic of accident plans is a percentage breakdown schedule of partial disablement due to accidents based on a principal sum assured. For example, the accidental loss of use of a thumb can qualify a 10% payout of the chosen sum assured. The loss of use of a thumb is not likely to trigger a disability payout so not to be confused with above as described. Historically the definitions of accident varied between insurers such that food poisoning may not be claimable but insurers have evolved to accommodate, also to accept loss of use as opposed to requiring severance. This area of coverage has different underwriting considerations too, more towards occupational considerations than medical.

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I obtained my Diploma in Life Insurance alongside my NUS Mechanical Engineering Degree in yr2004. I write with personal experience and historical understanding how the landscape developed and came to be today. History also shows that there is no best of all time, only the best at that point in time, and the concept of what is best is actually quite different from person to person. You need a steward to help facilitate your decision making.

There you have it. These are the 5 (possibly 6 in future – Long Term Care) independent categories of coverage without deep diving too much on associated features. Features in each category are not standardised between insurers for them to display their own competitive advantage.

Which features are more meaningful and relevant to you, depends on that unique you right? This is where a design driven approach will help you with your choices. Make an appointment with Isaac.

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